10 Comments
User's avatar
Andrea's avatar

This is a very good article. Bravo Larry !!

Why don't you lunch a stock picking news letter ? I'd be a happy paying subscriber!

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Forbes Jamieson's avatar

Thanks Andrea. I think equity research may be best left in the hands of others, but I might change my mind. Planning on going paid at some point, however.

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Tim Lester's avatar

Nice article. Putting the qualitative and quantitative together to take rational action is a heap better than hopium.

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Forbes Jamieson's avatar

Thanks, mate.

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Heavy Moat Investments's avatar

Great article. Liked, Subscribed and recommended the sub to get this to its $10b valuation ;)

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Forbes Jamieson's avatar

Greatly appreciated. IPO here we come.

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Arny Trezzi's avatar

I rarely read a long article with such enthusiasm. Great analysis Larry!

SPGI Moody’s MSCI are among my fav. businesses for their ability to grow with almost no investment requirements.

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Forbes Jamieson's avatar

Glad you enjoyed mate.

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SM's avatar

Great writeup, I really enjoyed it.

My only question is using the 2000 ending period for judging Buffett's $KO purchase vs. Moodys. Wasn't it trading at around 50 P/E? Can that really be conservatively expected of even the highest caliber companies? Thanks.

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Forbes Jamieson's avatar

Great question. Yes, Buffett experienced multiple expansion - although from the historical data I don't think it's that extreme by mid/late-2000, when prices had come down somewhat. I think around 30x trailing is more accurate. Still that's almost a 100% increase in the multiple - which is great - but keep in mind that EPS growth over the 12 years for $KO was 15% compounded annually + dividends. Even without the multiple expansion you would have done fine - and I don't think it was the crazy to think that MCO would also experience multiple expansion. Private market transactions in various credit ratings related business had been in the 4-5% earnings yield range over previous year.

I'll address this point in the next weekly digest! Thanks for asking.

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