Anodyne
Friday, May 07, 2004
 
New addition to the neighborhood, proof positive that the "hood" component of Mount Pleasant is still alive and well. Be sure to leave the homepage open a while, so you can experience the club's signature soundtrack in all its pulse-pounding glory.
Thursday, May 06, 2004
 
Motley Fool contributor Bill Mann picks up and runs with Warren Buffett's notion of the 20-punch lifetime investing scorecard.
Wednesday, May 05, 2004
 
Annual report season, v 1.2:

I may or may not have an equity position in any of the securities I discuss or analyze. I don't make specific recommendations of specific securities and if you'd invest or not invest in anything on the basis of my analysis and/or discussion of it you probably shouldn't be purchasing securities in the first place. I have posted less than half a dozen pseudonymous messages to online stock discussion forums like stockhouse.com over the last 12 months, and won't post any more, so long as I am analyzing and/or discussing securities in the blog. I don't engage in "day trading" or "momentum trading." I am self-taught as an amateur financial analyst, based on my close reading of Buffett, Graham & Dodd, Philip Fisher & etc. Don't ask me for any hot tips; Ben, Warren & Phil didn't give me any, and I don't plan on giving any, either. Financial specifics aren't transmissible, but ideas and sensibilities might be. See Buffett's "Superinvestors of Graham & Doddsville" for the concept of intellectual origin.
 
Annual report season!

Two up for discussion this evening. Parkland Industries sells gasoline in non-urban Western Canadian markets through its Fas Gas branded stations, familiar to any book scout driving the Trans Canada east from Kamloops, and also owns a refinery, now mothballed, in Red Deer, Alberta. I've followed this one on and off since high school. A little pricey now, since its conversion to an income trust a year or two ago, but margins are rock-solid on the core business, and the income payout is more than covered by earnings. Note the annual report paragraphs concerning the company's ongoing negotiations with the Blood Tribe of Red Deer vis-a-vis selling the refinery to the tribe; a successful sale will apparently boost cash flow 20% or so from current levels. The sale's timing is uncertain, hence impossible to accurately value via a discounted cash flow analysis, but, if completed, should provide a nice earnings boost some time in the next few years. I have tried to construct a portfolio packed with potential "positive earnings surprises" like this one; none of my investments are made strictly on the basis of their presence -- no sense in paying present dollars for hypothetical future earnings -- but they do lighten my trademark dour mood when they go off without a hitch, like fireworks that rise just slightly above their neighbors.

Dominion Citrus is an Ontario-based produce wholesaler busily remodelling itself as a "diversified food service company." Margins are tight on the core business (selling carrots, apples, onions & etc. from a terminal in downtown Toronto to customers like the Real Candian Superstore), so the ambitious management is diversifying by purchasing thematically related businesses like a line of fine Italian pastas, oils and sauces; a maple syrup processor; a Quebec-based produce distributor, & etc. No problems with the core business or the acquisitions, which are producing solid financial results. Check out the margins, which are expanding every year, and the terrific ROE. But the discipline management shows in running its various businesses doesn't carry over into its investing and financing activities, as disclosed in the management information circular sent in advance of the AGM.

Some things that give me pause:

• Management's dilution of existing shareholders' equity by continually issuing new shares for acquisitions and "investing activities," like the share issue made in 2002 to fund an ill-starred takeover bid of Humpty Dumpty, Inc., a Waterloo-based snack food maker whose balance sheet is a mix of lame management excuses for piss-poor financial performance and a textbook example of the persistant overuse/abuse of bank debt. The Humpty Dumpty investment is still carried on Dominion's books as a loss, and Humpty Dumpty's inept management doesn't give me any hope that the situation is going to change any time soon.

• A provision to dilute current shareholders by up to 25% (!!!) in order to fund "working capital requirements" for acquisitions; why these can't be addressed using the company's existing banking and credit facilities is left unexplained.

• Options and more options for senior management! Which, unsurprisingly, will help managerial shareholders assuage the pain non-managerial stockholders will experience as their equity trickles away like sand through their fingers.

None of these complaints take away from the undeniable skill Dominion's managers bring to running their core businesses. But they have the depressing and all-too common effect of converting present profitability into future hypotheticals, spreading a small pool of profits thinner and thinner across an ever-expanding bed of shares. Count my proxies as a big fat gaff to the head of the managerial genius who thinks that issuing new shares, or options for that matter, is a cost-free activity.


Tuesday, May 04, 2004
 
Lawrence Block in the Village Voice on book collecting:

If more folks were content with a simple signature, they were also intent on getting their entire collection signed.

Because I have been doing this a long time, I have a backlist that extends halfway down the street and around the corner. During a tour in 1998, when a couple of Dallas suitcase dealers brought in cartons of old stuff, I instituted a policy I've clung to ever since: I'll sign up to three of the books you bring from home for every copy of the new hardcover you buy at the signing. Most people figure this is fair, and the others—like the dame in Charlottesville the other day who frowned and said, "If I do that, how am I gonna make any profit on the deal?"—the others, all things considered, can go to hell.

Monday, May 03, 2004
 
Feedback for some hapless bookseller (not us!) found on Amazon.ca:

1 out of 5: "The book was defiled with ejaculate. Unreadable and discarded."
Date: 21/04/2004 Rated by Buyer: odstudios
Sunday, May 02, 2004
 
Berkshire Hathaway Annual General Meeting 2004, courtesy the Omaha World-Herald. Would I were there...
 
Totoros, little (& a few not-so-little) creatures from the mind & pen of Miyazaki-san, close relatives of the Incredible Talking Cats and a psychic lift on an evening when fullblown bipolar depression has made anything resembling useful work totally impossible.
 
Detailed and seemingly accurate account of visiting Larry McMurtry's four building antiquarian bookstore, Booked Up, in Archer City, Texas
 
M. John Harrison, the best living science fiction writer I know. Also the author of the long out of print and soon to be reissued cult classic Climbers. UK hardcover purchased by yours truly in Scotland in 1996 and much coveted by deadbeat climber pals ever since.

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