Mature industry leaders...Poor quarter. Bad fundamentals or deferred maintenance??

[Cabin111]

I've been chewing on this one for awhile. Thought I/we could get a thread going on how to tell what is going on with a company. Over 10 years ago I was working as an outside contractor at a Hershey (HSY) plant in California. Every line was falling apart...They were using duck tape and glue to keep the plant going. Management wanted/needed to make their numbers on that quarter...I get it, bonus. At the start of the next quarter they threw tons of work into the plant and got each line functioning smoothly. The next quarter you saw a large loss. But you knew what was going on.

So your mature companies that have a large share of a product/market (HSY, ADM, HD, LOW), that is not losing market share, how can you tell if you are dealing with bad fundamentals?? Lowe's was closing down Orchard Supply Hardware (a regional hardware chain they owned...cannibalized). If their debt remained fairly close over the years, would it just be a 1 or 2 quarter thing.

And again, would you buy a company knowing they have retained market share and are just doing tons of deferred maintenance?? You know the sky is not falling, but there is great (though boring) value there. Warren Buffet type of moves...

 

[Stockolio]

I've been chewing on this one for awhile. Thought I/we could get a thread going on how to tell what is going on with a company. Over 10 years ago I was working as an outside contractor at a Hershey (HSY) plant in California. Every line was falling apart...They were using duck tape and glue to keep the plant going. Management wanted/needed to make their numbers on that quarter...I get it, bonus. At the start of the next quarter they threw tons of work into the plant and got each line functioning smoothly. The next quarter you saw a large loss. But you knew what was going on.

So your mature companies that have a large share of a product/market (HSY, ADM, HD, LOW), that is not losing market share, how can you tell if you are dealing with bad fundamentals?? Lowe's was closing down Orchard Supply Hardware (a regional hardware chain they owned...cannibalized). If their debt remained fairly close over the years, would it just be a 1 or 2 quarter thing.

And again, would you buy a company knowing they have retained market share and are just doing tons of deferred maintenance?? You know the sky is not falling, but there is great (though boring) value there. Warren Buffet type of moves...

Buffet seems to like to invest in Monopolies... If you are gonna buy and hold, buy a solid Monopoly, good leadership that pays dividends

 

[tommcginnis]

Buffet seems to like to invest in Monopolies... If you are gonna buy and hold, buy a solid Monopoly, good leadership that pays dividends

You are grossly over-applying "monopoly" -- conflating it with "good leadership".

Warren prefers companies with "good moats" that they maintain well -- whether technological, superior service, or overall brand: your product is established, and competitors are easy to spot.
KO is one -- a favorite with him, right? Why?

I raise the point because GOOG and FB and some others are being accused of monopoly practices and of needing gov't regulation to prevent (further) abuse. These are companies for which there are a dozen competitors -- but most of whom *suck*. "So let's demonize the good guy!" Yeahhhhhh yell the torch&pitchfork crowd. (Made up of AOL,YHOO,MySpace,eGroups,etc etc etc)

Being at the top of the heap does not make you a monopoly, it does not convey quality except by comparative virtue, it does not convey inassailibility by those who perceive a way to do better. And it SURE don't mean that you should be regulated simply because you're on top.

EOS.

("End of Sermon"?? Yeahhhh. )