Excellent Buffet Articles

Soumen said, I would read them in the following order:

1. Buffet on the Market 1999
2. Buffet on the Market 2001
3. Buffet on the US Dollar 2003
4. Forbes on Buffett 1969
5. Forbes on Buffett 1974
6. How Buffett spends his day

Thank you for those articles from Soumen. You can get those files from

http://groups.google.com/group/value-investment-club/files

The Buyer's Briefing: Basics of Acquiring a Biz

This is from our Greg.

You can get this file from
http://groups.google.com/group/value-investment-club/files

Biz Appraisal Sample + Eval Sheet

From Greg, posted by Josh:

One is a sample business appraisal from my favorite business appraisal company, BEAR, Inc. www.bearval.com BEAR works with accountants and attorneys who work directly with the client to gather information and collaborate on the production of the appraisal. BEAR also does many appraisals directly with clients.

The other report is a report I created to help small business sellers understand the value of their businesses – this one is really more like a Comparative Market Analysis (CMA) that a Realtor would give to a homeowner rather than a formal appraisal. I attached the unlocked Excel spreadsheet rather than a pdf of the final report so everyone could play with the spreadsheet if they want. It is not set up to be particularly user-friendly since I am the only one using it besides my marketing administrator. She can turn around and ask me a question if she gets stuck.

You can get those reports at

http://groups.google.com/group/value-investment-club/files

Meeting on 3/25

Dear club members,

We had another very good discussion on past Tuesday. Those who are on the "To" list attended the meeting. We also missed some of you who couldn't join us due to spring break vacation. Look forward to seeing all of us together to elevate to the next level through our bi-weekly meetings and BLOG communications.

Meeting Summary:
* A-has:
compounding ( Te)
power of compounding through tax saving, consumer monopoly, predictable earning ( Josh)
how much biz can make money (Greg)

* New Ideas:
From Greg,
Here’s an idea for fun – since we are calling our group Value Investing Club why don’t we use the acronym VIC and come up with a stylized logo? Maybe even a cartoon character called “Vic” who looks like Warren Buffet.

Can all memebers provide your inputs on our next meeting?

Questions:
- where can we find cash-flow investment? ( Hubert)
- How to find a strong "compounding" company? ( Te)
- How can I differentiate consumer monopoly vs commodity types of biz? ( Jeff)

* Action:
- Share Buffets articles. Soumen sent me 6 excellent articles about Buffet after the meetin. Thank you Soumen for your contribution to the club!!
- Sharing of biz evaluation tools: Greg has provided three tools: basics of buying a biz, a sample of biz appraisal, eval spreadsheet. Thank you Greg for your contribution.

For more details. Please check the BLOG. You will also see a google group invitation to get those files.

Announcement: Next Meeting
Date: 4/8, Tuesday
Time: 12pm
Place: 1630 Oakland Rd, A105, San Jose CA

Home work:
1. Please read ch 11 to ch 15
2. Be available to share your A-has, new ideas or actions which you will take.
3. Bring the deals you like to discuss to the meeting.

Cheers,

Josh

Railrod Biz: Another Consumer Monopoly?

Burlington Northern Santa Fe Corporation (BNI), Up 13.96% Year to Date while S&P500 drops 10%

Warren Buffett keeps buying BNI over the past year. He bought BNI at the prices between $75 to $85. As of Jan., Berkshire owns more than 63 million shares, representing more than 18% of total shares outstanding.

Why railroad biz comes back? The chief reason that the railroads' long-term prospects look so good today is that they began upgrading their operations soon after the industry was largely deregulated in 1980.

It seems that BNI is/has/will be

1) consumer monopoly biz

2) increasing up trend in earning ( Net income increased 20% in 2 years)

3) Lots of debt ( 1.5 times revenue, 12 times net income) This item does not match the excellent biz criteria from the book.

4) Return on Equity 16% ( better than 12% )

5) Able to retain earning and make more money (productivity double since 15 years ago)

6) Not much needed to be spent to maintain its monopoly

7) Reinvest efficiently ( not yet study )

8) Can adjust the price based on inflation

9) Increased market value due to hard working from retained earning.

Questions:

A. can we use this list to examine our business?

B. Can you find another turn-around consumer monopoly biz? ( remember railroad biz used to need large amounts of capital, have tough unions, and stiff competition from the trucking business)

You can make it to Critical mass with small busines

As a business broker for the last 22 years I have sold hundreds of businesses. My most successful small business client came into my office in 1994 to buy his first business. At that time he had a net worth of $75,000 consisting of $40,000 home equity and $35,000 cash. He bought a very troubled Denny's Restaurant and turned it around by hard work, cleaning, firing the thieves, hiring and training good people to staff the restaurant. He doubled sales in six months and tripled sales in a year. He had been working as a manager at Jack-In-The-Box for the previous 8 years.

CRITICAL MASS is a term coined by Bob Brinker, a hedge fund manager and talk show host you can hear on Saturdays and Sundays on KGO 810 and other ABC affiliates across the nation. Critical Mass is the status of having enough passive income from your investments that it totally supports your lifestyle including taxes and inflation. Bob Brinker also publishes an investment newsletter Bob Brinker's Marketimer which has provided me with valuable market information for the past several years. You can subscribe at http://www.bobbrinker.com/

My client reached Critical Mass after building his Denny's chain for several years. Today he owns 32 Denny's Restaurants and 6 Black Bear Diners in several states. He has built a great management team and has state of the art business systems. His revenues exceed $50 million and the pretax earnings are approximately 15% of revenues. He mainly works on business development now.

So you don't have to start the next Google to achieve financial independence!

Book 1: Buffettology

Buffettology

The book we've chosen to study from March to June is
Buffettology: The Previously Unexplained Techniques That Have Made Warren Buffett The Worlds (Paperback)

You can buy this book from local book stores or at amazon.com
http://www.amazon.com/Buffettology-Previously-Unexplained-Techniques-Buffett/dp/068484821X/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1203467850&sr=8-1