LongHaul Posted July 7, 2013 Share Posted July 7, 2013 Question for members: Of all the businesses you've looked at - what's the best one and why? My answer is the Panama Canal. It has a very entrenched position! Link to comment Share on other sites More sharing options...
ASTA Posted July 7, 2013 Share Posted July 7, 2013 Well It has been very entrenched but a Chinese wants to put up 40 billion for a Nicaragua canal. http://www.ft.com/intl/cms/s/0/6fbae9d2-de74-11e2-b990-00144feab7de.html#axzz2YM5xKxPt But who know maybe this man will go the same way as Vanderbilt :D Link to comment Share on other sites More sharing options...
Palantir Posted July 7, 2013 Share Posted July 7, 2013 Saudi Aramco. Link to comment Share on other sites More sharing options...
ourkid8 Posted July 7, 2013 Share Posted July 7, 2013 China National Tobacco Corporation - It enjoys a virtual monopoly in China, which accounts for roughly 30% of the world’s total consumption of cigarettes. China Tobacco caters to its customer base of 350 million smokers, who consume 1.7 trillion cigarettes every year. Unbelievable! Link to comment Share on other sites More sharing options...
frog03 Posted July 8, 2013 Share Posted July 8, 2013 OK, what is the best one, and one that the average Joe can buy into? Link to comment Share on other sites More sharing options...
jay21 Posted July 8, 2013 Share Posted July 8, 2013 BRK - Holding co that deploys capital where it is most attractive. Partially funded by float. Consumer goods (Unilever, PG, MDLZ, DEO, KO) - Population growth plus wealth growth in developing markets plus inflation protection = highly predictable single digit earnings growth for the foreseeable future. Basically, the companies and industries WEB likes. Link to comment Share on other sites More sharing options...
A_Hamilton Posted July 8, 2013 Share Posted July 8, 2013 Wrigley. Gum has the highest gross margin per linear inch of shelve space of any item in the grocery store. Link to comment Share on other sites More sharing options...
Kraven Posted July 8, 2013 Share Posted July 8, 2013 One word: plastics. Link to comment Share on other sites More sharing options...
Yours Truly Posted July 8, 2013 Share Posted July 8, 2013 Lululemon because I love how their pants fit on their customers Link to comment Share on other sites More sharing options...
Morgan Posted July 8, 2013 Share Posted July 8, 2013 Wrigley. Gum has the highest gross margin per linear inch of shelve space of any item in the grocery store. Where did you get that data? I'm not saying you're wrong. I'm just curious. It'd be cool if you had some big trove of data on the industry. ;D Link to comment Share on other sites More sharing options...
A_Hamilton Posted July 8, 2013 Share Posted July 8, 2013 Wrigley. Gum has the highest gross margin per linear inch of shelve space of any item in the grocery store. Where did you get that data? I'm not saying you're wrong. I'm just curious. It'd be cool if you had some big trove of data on the industry. ;D No, I don't have the data for that. I believe Nielsen (Nielson?) has some of this data. It was in an old credit suisse report that I have on the company. Link to comment Share on other sites More sharing options...
Morgan Posted July 8, 2013 Share Posted July 8, 2013 No, I don't have the data for that. I believe Nielsen (Nielson?) has some of this data. It was in an old credit suisse report that I have on the company. Could you post that report here? Or PM it to me? I'd love to read it over. Link to comment Share on other sites More sharing options...
VAL9000 Posted July 8, 2013 Share Posted July 8, 2013 The best businesses are the ones that governments take the time to dismantle / destroy: - Standard Oil (why: economies of scale leading to monopoly) - Pre-1984 Bell (why: network effect leading to monopoly) - Microsoft (why: network effect leading to monopoly) Link to comment Share on other sites More sharing options...
T-bone1 Posted July 8, 2013 Share Posted July 8, 2013 A colleague and I once met a man in an airport who sold after-market warranties for Harley-Davidson motorcycles. When these bikes are modified, it voids the warranty. It turns out that most of the bikes are modified in-house at the Harley-Davidson factory, but the warranties are still voided. This gentleman used to work for H-D, and he further explained that the best and most experienced mechanics would be promoted off the line to work on the after-market modifications. The bottom line was that he was selling warranties on brand new bikes, which the very best H-D mechanics worked on during final assembly - so they actually had a lower rate of failure than the bikes under warranty. Also, riders who spend a lot of money on after-market customization, take much better care of their bikes. At the time, he said he was in 32 states with thousands of policies written a year and was yet to have a single claim. Link to comment Share on other sites More sharing options...
bookie71 Posted July 9, 2013 Share Posted July 9, 2013 I am currently reading the book "Salt, Sugar and Oil" which implies that they are better than nicotine. Link to comment Share on other sites More sharing options...
BG2008 Posted July 9, 2013 Share Posted July 9, 2013 Real Estate in markets that are geographically constrained are great businesses. I'm not saying that they are cheap. For example, RE in Manhattan, San Francisco, Hong Kong, etc. There literally aren't anymore land on the island of Manhattan to build anymore buildings. In general, real estate are very high margin businesses. Assuming there is no debt on the asset, it's almost impossible for RE owners in these markets to go under. If privately owned, most RE have cashflow/revenue margin of 50+%. Obviously, interest rates and the cost of financing will dramatically affect the value of the owned RE. Things to watch out for with RE is changes in the demographics and crime (or perception of crime). While most assets depreciate in value over time, RE assets actually appreciate while allowing the owner to take tax writeoffs via depreciation on the building. Financing also allows one to take on an immense amount of leverage (4-8x). There's a quote out there saying something along the line that real estate is the only business where dumb people can become rich over time. With all of that said, I believe that many of the REITs are overvalued because people are chasing yield. REITs in the late 90s were paying 10+% dividends because rates were higher. Despite RE being great businesses, I'm not quite ready to dip my toes into them due to the low rates. Link to comment Share on other sites More sharing options...
JSArbitrage Posted July 9, 2013 Share Posted July 9, 2013 I am not quite sure how you came to the conclusion that RE is a high margin business. Link to comment Share on other sites More sharing options...
Morgan Posted July 9, 2013 Share Posted July 9, 2013 I am not quite sure how you came to the conclusion that RE is a high margin business. It can be a high margin business. I know a guy who has owned some properties forever and has 70%+ net profit margins because he no longer pays a mortgage on them. That being said, I know another guy who developed a big apartment complex that didn't work out and he went bankrupt and the property sold for ~38% what it cost to build 5 years prior. It goes both ways. Be sure to have a margin of safety. Link to comment Share on other sites More sharing options...
OracleofCarolina Posted July 9, 2013 Share Posted July 9, 2013 The best businesses are the ones that governments take the time to dismantle / destroy: - Standard Oil (why: economies of scale leading to monopoly) - Pre-1984 Bell (why: network effect leading to monopoly) - Microsoft (why: network effect leading to monopoly) What about a business the gov't runs? Selling lottery tickets? Link to comment Share on other sites More sharing options...
ASTA Posted July 9, 2013 Share Posted July 9, 2013 monte carlo casino gambling and drinking with the stars but yet small and manageable. And very unlikely to go away. Link to comment Share on other sites More sharing options...
jay21 Posted July 9, 2013 Share Posted July 9, 2013 It can be a high margin business. I know a guy who has owned some properties forever and has 70%+ net profit margins because he no longer pays a mortgage on them. But the ROE must be terrible right? Link to comment Share on other sites More sharing options...
T-bone1 Posted July 9, 2013 Share Posted July 9, 2013 What about a business the gov't runs? Selling lottery tickets? +1 Link to comment Share on other sites More sharing options...
Morgan Posted July 9, 2013 Share Posted July 9, 2013 It can be a high margin business. I know a guy who has owned some properties forever and has 70%+ net profit margins because he no longer pays a mortgage on them. But the ROE must be terrible right? I assume the ROE was pretty decent. I don't know the details of his purchases, but it was probably financed conventionally (20% down) and he didn't blow up. So he had decent leverage combined with good operations so he probably made decent money in the early years and now that his mortgages are paid off, his profits are very high. He has done well on these investments. Link to comment Share on other sites More sharing options...
twacowfca Posted July 10, 2013 Share Posted July 10, 2013 monte carlo casino gambling and drinking with the stars but yet small and manageable. And very unlikely to go away. And the room rates at the Hotel de Paris are not inexpensive. :P Link to comment Share on other sites More sharing options...
blainehodder Posted July 10, 2013 Share Posted July 10, 2013 Huy Fong Foods. Sriracha! They can probably grow the company for decades and earn outragous returns on capital as they do it. What could be better? Link to comment Share on other sites More sharing options...
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