Saturday, May 27, 2006

Thursday, May 25, 2006

Sarbit Asset Management

Larry Sarbit is one of Canada's best known and highly respected money managers. There are plenty of things to learn from him.

According to Larry Sarbit, there are 4 pillars of successful business investing.
  1. Buy "wonderful" businesses.
  2. Paying a bargain price.
  3. Concentration: Own a few terrific companies.
  4. Have patience.

So, what is a "wonderful" business?

A "wonderful" business:

  1. A huge sustainable competitive advantage - a franchise.
  2. A growing stream of free cash flow.
  3. Simple, understandable.
  4. Stable - The basic business changes little over time.
  5. Predictable earnings.
  6. Consistent, repeated purchases of product or service.
  7. Not natural targets of regulations.
  8. Disaster proof - Most mistakes are forgiven.
  9. A royalty on the growth of others, requiring little capital itself.
  10. Good management.

To learn more of Larry Sarbit.....

Happy Investing,

Dah Hui Lau (David)

To visit my archive:

Thursday, May 18, 2006

Dell, An Excellent Company at Bargain Price

I'm going to do some simple calculation and discussion to explain why Dell is an excellent company at a bargain price.......

Step 1: FCF/EV yield vs. Treasury yield

Enterprise Value (EV) = $49.1B

Free Cash Flow (FCF) = $4.1B

FCF/EV yield = 8.35%

Treasury yield (30 years) = 5.30%

Dell looks like an excellent deal compared with treasury yield.

Step 2: Insider holdings

I have mentioned about superior return by investing in founder-CEO companies. Investing in companies that have significant insiders holding is one of the great ways to achieve superior return.

Michael Dell has holdings over 10% of the Dell. On top of that, he is still young and has great enthusiasm to expand Dell’s empire.

To read my previous comment on insiders holding, please visit:

Step 3: Is Dell a good Company?

Profit Margin (ttm): 6.39%
Operating Margin (ttm): 7.96%

Return on Assets (ttm): 12.01%
Return on Equity (ttm): 67.31%

Dell has good Return on Assets.

Step 4: Does Dell management shareholders-orientated?

Dell has been buying its own shares aggressively; purchasing up to $6.2B, which is more than its income of $3.57B. Over the last 3 years, Dell has repurchased over $10B worth of shares, and with its current low price, I don’t see why Dell will stop repurchasing its shares even more furiously. Buying back shares is an important step to enrich shareholders, as long as it doesn’t restrict its financial ability to expand and improve its service.

Step 5: Do you understand its Business?

Dell was founded in 1984 by Michael Dell, the longest-tenured executive to lead a company in the computer industry. The company is based on a simple concept: by selling computer systems directly to customers, Dell could best understand their needs and efficiently provide the most effective computing solutions to meet those needs. This direct business model eliminates retailers that add unnecessary time and cost, or can diminish Dell's understanding of customer expectations. The direct model allows the company to build every system to order and offer customers powerful, richly-configured systems at competitive prices. Dell also introduces the latest relevant technology much more quickly than companies with slow-moving, indirect distribution channels, turning over inventory every four days on average. [From: Dell's website]

Step 6: Does Dell have a Moat?

Moat comes in different forms. As for Dell, its moat is being the lowest-cost producer of commodity, which is computer. Dell has done extremely well with its supply chain and direct model that it is hard to fathom an emergence of possible competitors.

Do you know how strong is its working capital management? Very, very strong. Dell has negative working capital! That’s right, it has a minus $4.6B of working capital. There aren’t many companies that have a negative working capital.

Step 7: Does any superinvestor invest in Dell?

Without doubt, there are famous superinvestors investing in Dell. Among them are Mason Hawkins (7.18% of assets), Bill Miller (0.87% of assets), and others. Mason Hawkins believes so strongly Dell is undervalued that he makes Dell its biggest holding.

Step 8: What are the potential risks in buying Dell?

“Our biggest worry is the competitive climate in the desktop PC market. Asian firms have often endured break-even margins to generate growth and could induce an irrational pricing environment in their quest for market share.” [From Morningstar report]


Dell is a buy at current price of $25.20.

Warren Buffett said, “The most common cause of low prices is pessimism -- some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer.”

Happy investing,
Dah Hui Lau (David)

To visit my archive:

Monday, May 15, 2006

Wesco Financial Annual Meeting, May 11, 2006

Notes from Wesco Financial Annual Meeting (May 11, 2006) by Peter Boodell. Thanks to Futile France for sharing this wonderful link.

Happy learning,
Dah Hui Lau (David)

To visit my archive:

Saturday, May 13, 2006

Buffett's $15 Billion Tease May 13, 2006

I came across this interesting article from DealBook... talking about possible $15 billion deal by Warren Buffett.

...Warren Buffett, the billionaire investor who leads Berkshire Hathaway, stoked speculation about such a deal when he told shareholders on Saturday that he is working on a $15 billion acquisition, which, if it happens, would put a large chunk of his company’s $40 billion in cash holdings to work...

To read the complete article: Buffett's $15 Billion Tease

Happy investing,

Dah Hui Lau (David)

To visit my archive:

Berkshire Hathaway Annual General Meeting 2006 Notes May 13, 2006

Shai Dardashti has kindly shared this wonderful link to Whitney Tilson's Berkshire Hathaway Annual General Meeting Notes for 2006.

Thank you, Shai.

Happy learning,
Dah Hui Lau (David)

To visit my archive:

Thursday, May 11, 2006

New Century, New Wealth May 11, 2006

Majority of people too focus on money as wealth. However, money is not everything. I read about an article from Metro, which made me realized that how lucky we are in this new century.

....If you think life is violent now you should have tried living in Neolithic Britain. Our ancestors living 5,000 to 6,000 years ago had a one in 14 chance of being bashed over the head and seioursly injured. One in 50 was likely to be fatally wounded in the attack. The research was done by systematic survey of Neolithic British skulls by a team from Queen's University, Belfast, reported in New Scientist....

Be thankful! We are all alive and well.

All the best,
Dah Hui Lau (David)

To visit my archive:

Wednesday, May 10, 2006

Warren Buffett on Naked Short Selling

"There’s nothing evil about short-selling. But it’s a tough way to make a living. It’s tough emotionally. If you short a stock at $20, the most you can make is $20, but there’s no limit to how much you can lose. People on the short side will do and say things to try to get their positions to fall; people on the long side do, too. Some of the things they do may be inappropriate," said Warren Buffett.

"Historically, a lot of stocks that have high short interest are later shown to be frauds or semi-frauds. I’ve had 100 ideas to be short, and have often been right—eventually, but long after I’ve covered, and the stocks have risen a lot. The people who run those companies tend to be good at keeping their stock prices up," said Warren Buffett.

"Being short stocks is a tough psychological game. I’d never put money in a short fund," said Warren Buffett.

Berkshire Hathaway Annual General Meeting May 6, 2006

Charlie Munger on Jeremy Siegel

"I think he’s demented. He tries to compare apples and elephants in making accurate projections," said Charlie Munger.

Berkshire Hathaway Annual General Meeting May 6, 2006

Charlie Munger on Newspaper Companies

"I used to think that GM was a bulletproof franchise. Now I’d put GM and newspapers in the “Too Hard” pile. If something is too hard to do, we look for something that isn’t too hard," said Charlie Munger.

Berkshire Hathaway Annual General Meeting May 6, 2006

Warren Buffett on Newspaper Companies

"What multiple should you for a company that earns $100 million per year whose earnings are falling by 5% per year rather than rising by 5% per year? Newspapers face the prospect of seeing their earnings erode indefinitely. It’s unlikely that at most papers, circulation or ad pages will be larger in five years than they are now. That’s even true in cities that are growing," said Warren Buffett.

"Sometimes there’s a perception lag between the actual erosion of a business and how that erosion is seen by investors. Certain newspaper executives are going out and investing on other newspapers. I don’t see it. It’s hard to make money buying a business that’s in permanent decline. If anything, the decline is accelerating. Newspaper readers are heading into the cemetery, while newspaper non-readers are just getting out of college. The old virtuous circle, where big readership draws a lot of ads, which in turn draw more readers, has broken down," said Warren Buffett.

"Charlie and I think newspapers are indispensable. I read four a day. He reads five. We couldn’t live without them. But a lot of people can now. This used to be the ultimate bulletproof franchise. It’s not anymore," said Warren Buffett.

Berkshire Hathaway Annual General Meeting May 6, 2006

Warren Buffett on Charities

"Pick what’s important to you. Most people give to their churches or schools. Give to causes that give you personal satisfaction. I look for things that I think are important, but that don’t have a natural source of funding. But there’s nothing wrong with giving to a cause that gives you pleasure. I often go where my gut leads me," said Warren Buffett.

Berkshire Hathaway Annual General Meeting May 6, 2006

Warren Buffett on Professions

"The activities of most professions are safe and necessary. If your wife is going to have a baby, it’s better to call the obstetrician rather than try to deliver it yourself. Most professions add value. But the investment profession does not do that, in aggregate. It makes $140 billion per year, and it basically does the same thing that one person could do if he spent ten minutes per year thinking about his investments. I can’t think of another business like that. Plus, the business is unique in that, the more you charge, the more money you bring in." said Warren Buffett.

Berkshire Hathaway Annual General Meeting May 6, 2006

Warren Buffett on Coca Cola

"Coke is a fabulous company. It sold the equivalent of 21 billion cases last year, and that number goes up every year. Back in 1997 and 1998, when the stock was trading at $80, earnings per share were $1.50. Last year the company earned $2.17—and earnings were of much higher quality than back in the late 1990s. Every year the company gets a little higher share of the liquids that people consume. The company has $5 billion or $6 billion in tangible assets (ex bottler assets), and earns about that much annually. A 100% pretax return on tangible assets is pretty attractive." said Warren Buffett.

"In the late 1990s the stock got a little crazy, but we can’t hold management responsible for that. But long-term it’s a wonderful business. Volume grows by 5%, year in and year out, while global population grows at just 2%. It’s just that for awhile the stock got to a silly price. You can fault me for not selling any. We’ll own Coke years from now." said Warren Buffett.

Berkshire Hathaway Annual General Meeting May 6, 2006

Warren Buffett on Manufactured Housing

"The manufactured housing business has an interesting history. Volume is lower now than it was 30 or 40 years ago—and quality is higher. Some years back then, 1 out of 5 houses built was a manufactured home. Last year 130,000 manufactured homes were constructed (ex FEMA-related construction), or around 6% or 7% of total home construction. You can install a manufactured home for $45 per square foot. There’s a lot of resistance to manufactured housing via restrictive zoning laws in many locations, spurred by local builders. But in many areas, developers are building entire subdivisions of manufactured homes." said Warren Buffett.

"Some day, the industry will deliver 200,000 units per year, but not in the next year or two. The industry has to think through how to finance its sales so that, after 5 to 10 years, the buyer has an asset that’s worth more than the loan that’s financed it. It can’t just make loans and sell them to Wall Street. Clayton could be the biggest homebuilder in the U.S. in a few years." said Warren Buffett.

Berkshire Hathaway Annual General Meeting May 6, 2006

Warren Buffett on Commodities Bubble

"Energy, oil, and metals have all seen terrific moves. Copper may have had the biggest. The start of most trends is driven by the fundamentals of supply and demand, but then speculation takes over. People have been watching the fundamentals of commodities for years. There’s an old saying, “What wise men do in the beginning, fools do in the end.” Any move that starts with fundamentals will sooner or later draw speculators, and eventually the speculators will dominate. Probably the best known example is the tulip craze of the 1600s." said Warren Buffett.

Berkshire Hathaway Annual General Meeting May 6, 20006

Bruce Berkowitz Investing Philosophy May 10, 2006

Bruce Berkowitz is the founder of Fairholme Capital Management.

"There are two models we try to follow. The first is invest with decent, honest people who have a fabulous documented long-term record and eat their own cooking. The second is just buy stuffs that's really cheap."

Happy investing,
Dah Hui Lau (David)

Microsoft's New Brain; May 10, 2006

I have recently read about "Microsoft's New Brain" article on Fortune Magazine, and found very interesting development going on at the tech powerhouse. Among the significant changes going on are increasingly more powerful role of Ray Ozzie.

...Ozzie's assignment is to Webify everything: To intertwine Microsoft's entire product line - software for consumers, software for businesses, Xboxes, all of it - with the vast and ever-growing power of the Net....

..."Everything we do should have a presence on the Web," Ozzie says....

Ray Ozzie commands excessive respect from Microsoft people.

...Ballmer says that he always knew Ozzie would fit in, and that he had wanted to hire him for 23 years....

...Adds Gates: "For over a decade we've said that if we had one wish of somebody we could hire...we'd want to hire Ray."...

...Ozzie commanded unquestioning respect on technical matters from the day he walked in, which is unheard of in Microsoft's competitive culture....

..."With Ray, it was like he had always been part of us," says an executive....

..."Ray really starts with the customer," says Windows and MSN boss Kevin Johnson. "He looks at things 'outside in,' as he says, not technology-out."...

...Many executives now concede that Microsoft tended to take the opposite approach - focusing first on the technical possibilities and only later on what customers really wanted....

Another interesting evolution of Microsoft is the building of server farms.

....Microsoft is planning to use its server farms to offer anyone huge amounts of online storage of digital data. It even has a name for that future service: Live Drive. With Live Drive, all your information - movies, music, tax information, a high-definition videoconference you had with your grandmother, whatever - could be accessible from anywhere, on any device.....

.....Microsoft farms are 1,400,000 square feet of data centers, equivalent to 10 Costcos......

Please read: Microsoft; MSFT, A Good Investment? April 29, 2006

Please read: Microsoft, Where are your "Moat"? May 8, 2006

Happy investing,

Dah Hui Lau (David)

To visit my archive:

Tuesday, May 09, 2006

Charlie Munger on Iscar Metalworking Cos.

"Well this is a company from modest beginnings to become the best in the world. Not the biggest, but it leaves them something to do. Average quality of people is off the chart. The beauty is that they are all young. They know how to do things that we don’t know how to do," said Charlie Munger

Berkshire Hathaway Annual General Meeting May 6, 2006

Monday, May 08, 2006

Microsoft, Where is your "Moat"? May 8, 2006

I would like to quote Warren Buffett saying about "moat"......

"We like to own castles with large moats filled with sharks and crocodiles that can fend off marauders -- the millions of people with capital that want to take our capital. “We think in terms of moats that are impossible to cross, and tell our managers to widen their moat every year, even if profits do not increase every year. We think almost all of our businesses have big and widening moats."

"The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors."

I have written about Microsoft on April 29, 2006 and believe that it is a good company to own for the long-term. The most significant question regarding whether Microsoft is a good buy or not is down to its "moat". And, I do believe that Microsoft has strong "moat". RT Wolf has kindly allowed me to share his wisdom on Microsoft "moat".....

"The biggest thing that Microsoft has going for it is that people don't like change. People don't want to have to learn a new operating system or new way of doing things. Technologically savvy people often forget that other people don't want to spend time learning how to use a tool like a computer and would rather use it. If companies were to initiate changes to mac or linux, they would have to spend considerable time, effort and money retraining everyone. It's cheaper just to go with what works well enough. This is definitely a strength for Microsoft. In the operating system and office productivity suites arena, it is almost the same thing."

"Another biggest component of Microsoft moat: very high switching costs. The incompatibility and closed-source nature of Office formats is also a switching cost."

Remember, to invest successfully, one has to wait for the fat pitch!

Happy investing,
Dah Hui Lau (David)

To visit my archive:

Sunday, May 07, 2006

Audio report about Buffett and Wertheimer Deal (4Mins)

Have a listen to Buffett comments.

Happy investing,
Dah Hui Lau (David)

To visit my archive:

Warren Buffett on Housing Market

"I would not be surprised if there is some significant adjustment from the peak in high-priced areas such as California and Florida," said Buffett.

Annual General Meeting May 6, 2006

Charlie Munger on Successes and Failures

Munger on failure: "It's a good habit to trumpet your failures and be quiet about your successes."

Annual General Meeting May 6, 2006

Charlie Munger on Investing Expectation

For young people in the investment field, Munger offered this advice: "The best thing you can do is reduce your expectations."

Annual General Meeting May 6, 2006

Warren Buffett on Media Business

"Technology has opened up a huge variety of ways to be informed faster," Buffett said. "It hasn't expanded the time you have for entertainment or for acquiring knowledge. Anytime you get more and more people competing in any given area, generally the economics deteriorate. . . "

"Generally speaking, the economics of media businesses do not have a great outlook."

Annual General Meeting May 6, 2006

Warren Buffett on Hurricane Issue

"It's an explosive sort of equation that you're dealing with," Buffett said.

"The laws of thermodynamics are such that if the oceans get warmer - and they are getting warmer - the weather's going to have more high energy in it," said Berkshire Vice Chairman Charlie Munger. "I think we'd be out of our minds if we wrote more insurance as though global warming wasn't going to have any effect at all."

Annual General Meeting May 6, 2006

Warren Buffett on Immigration Issue

"Illegal immigration is a problem that should be addressed and addressed promptly," Buffett said. "I don't believe in shipping 11 million people away. I think we ought to enforce rules in the future. I don't think it (legalizing immigrants) would make a dramatic difference. You may end up paying a little more for meat in the end."

Annual General Meeting May 6, 2006

Warren Buffett on Compensation

"Managers of businesses dealing with wide price swings, such as petroleum, should be compensated for their performance in the things they can control, such as the cost of production. Profits or losses due to price trends beyond the managers' control are not a good basis for determining pay" said Warren Buffett.

Annual General Meeting May 6, 2006

Saturday, May 06, 2006

Does it pay to be 'the next Buffett'? May 6, 2006

I read this article from, which I find it humorous! :) Enjoy....

"The Next Warren Buffett: A Compliment or a Curse?" The business press dusts off the headline whenever a value investor manages to turn a tidy profit with a Buffett-like strategy, but it's a difficult comparison to live up to. Few - if any - have risen to the occasion. That's probably why a question mark usually is appended to the phrase.

Here are a few of the investors who have contended with the loaded sobriquet in recent years.

Edward Lampert

Status: Chairman of Sears Holdings Corp.

In the same breath as Buffett: Business Week asked whether he might be the next Buffett after the hedge-fund manager bought a controlling stake in Kmart (which he later merged with Sears). The move gave rise to speculation he might turn the retailers into a holding company like Berkshire, which was once a textile mill.

Claim to fame: Lampert's ESL Investments hedge fund has generated average annual returns of 29 percent since its founding in 1988. But not all the numbers rival Buffett's: Only 100 shareholders, mostly professional investors, turned out to hear him discuss his vision for the company at its annual meeting this year.

Verdict: Not funny enough.

L. Dennis Kozlowski

Status: Former CEO of Tyco In- ternational Ltd., sentenced to eight to 25 years for stealing hundreds of millions of dollars from the company.

In the same breath as Buffett: Kozlowski once bragged that he would be the next Warren Buffett.

Claim to fame: Grew Tyco's businesses at an impressive rate through mergers and acquisitions but looted the company's coffers for lavish parties and a number of personal amenities, including a $6,000 shower curtain and a $17,100 traveling toiletry kit.

Verdict: Not thrifty enough.

William H. Miller III

Status: Chairman of Legg Mason Capital Management and portfolio manager for Legg Mason Value Trust.

In the same breath as Buffett: Having outperformed the S&P 500 stock index for 15 years in a row, his long-term investment prowess is often compared with that of Buffett.

Claim to fame: Miller manages the $11.6 billion Legg Mason Value Trust, which follows a value investing strategy similar to that espoused by Buffett. The fund, based in Boston, has generated average annual returns of 16.49 percent since its 1982 inception.

Verdict: Not Nebraskan enough.

Christopher K. Bagdasarian

Status: Ex-convict. Bagdasarian was sentenced to two years in prison in 1998 after pleading guilty to securities fraud, bank fraud and perjury. Barred by the Securities and Exchange Commission from association with brokers, dealers or investment advisers.

In the same breath as Buffett: Fortune magazine dubbed him the next Buffett when he an- nounced a $200 million initial public offering of Normandy America Inc., a fraudulent insurance company that planned to invest float, as Buffett does for Berkshire. As the fraud came to light, the company withdrew the offering after trading for one day on the Nasdaq exchange.

Claim to fame: Lied that he achieved a 10-year average annual return of 29.1 percent on assets that ranged as high as $731.3 million.

Verdict: Not honest enough.

Gerry Angulo

Status: President and publisher of the San Juan Star.

In the same breath as Buffett: In 1989, a profile in Forbes magazine asked whether he might be the next Buffett or "just another of the stock market's overnight wonders."

Claim to fame: His now-defunct, Miami-based partnership, First Capital Partners, posted gains of 142 percent in 1988. In 1994, he bought the Puerto Rican newspaper and has devoted his career to running it.

Verdict: Not investing enough.

Nicholas D. Gerber

Status: Portfolio manager for Ameristock Mutual Fund.

In the same breath as Buffett: Told Crain Communications in 2001 that he was trying to out-Buffett Warren through his value-slanted approach to indexing. He said, "I'm getting a later start than Warren Buffett did from an age perspective. . . . We have a lot of catching up to do. "

Claim to fame: The Ameristock fund generated double-digit returns four of the five years between 1996 and 2000. Since then, the fund has trailed the S&P 500 by a little less than 2 percentage points.

Verdict: Not catching up fast enough.

Richard B. Wright

Status: 25-year-old analyst for Davis Advisors in New York.

In the same breath as Buffett: Suggested to Buffett that he look at Clayton Homes Inc. in 2003, setting in motion the $1.7 billion purchase by Berkshire Hathaway.

Claim to fame: Received a letter of recommendation from Warren Buffett, an endorsement that was dubbed "a letter from God" by Brian Sullivan, chief executive officer of New York-based executive search firm Christian & Timbers.

Verdict: Not gray enough.

Article from: Omaha

Happy investing,

Dah Hui Lau (David)

Berkshire Hathaway 1st Quarter Results Highlights May 6, 2006

Berkshire Hathaway has published its 1st Quarter results, which as expected, was extremely strong. Let me give you some major highlights...

  1. Net income per share increased by 69.4% compared to 1st Quarter last year.
  2. Free Cash Flow increased by 52.7% compared to 1st Quarter last year.
  3. Acquisition spending increased by 2760% compared to 1st Quarter last year.
  4. Shareholders' equity increased by 4.2% over the last 3 months.

Please Read: 1st Quarter Report

Please Read: Berkshire Hathaway Inc; BRK.A April 6, 2006

Please Read: Berkshire Hathaway; BRK.A Reasons I love Berkshire April 2006

Please Read: Archive of Dah Hui Lau's Blog

Happy Investing,

Dah Hui Lau (David)

Friday, May 05, 2006

Eddie Lampert and Sears by Mike Onghai May 5, 2006

Mike Onghai shared his views on Eddie Lampert on his wonderful blog....

"Eddie struck me as somebody who is extremly balanced in his thinking. He always offers 2 sides of the coin when explaining. For example, hewould say we are doing this not because X, but because of Y. He always offersthe is, and the what is not. This to me is a sign of wisdom -- a very self-aware, very wise person. I liken this to Lao Tzu's quote. "Knowing what you know, and knowing what you do not know. That is the way to know.""

To read more: Mike Onghai's blog

All the best,
Dah Hui Lau (David)

Archive of Dah Hui Lau's Blog

The Other Guy From Omaha; May 5, 2006

"It is impossible to earn above-average long-term returns without being willing to be out of step with the market from time to time," says Weitz... to read more, please visit Forbes

How true this is! If you look at Lau Model Portfolio, you will notice that all my picks except one have gone down..... but, I believe that these are all brilliant companies, selling at wonderful prices. Let see what happen in one year time!

All the best,
Dah Hui Lau (David)

To visit my archive:

Eight signs Microsoft is dead in the water; May 5, 2006

John C. Dvorak from MarketWatch lambasted Microsoft as below......

Let's just look at a casual status report of Microsoft's bed-ridden condition:

1. Vista OS. It's now so delayed that its consumer version will miss the 2006 Christmas season. It's now supposed to arrive in early 2007. Even when it does, all of its promised cool features have been removed and it appears to be little more than a gussied-up version of Windows XP. It appears as if it is going to be a great disappointment. This should have been the company's number one priority.

2. Office 2007. There is nothing in this new suite that is going to do much more than sustain the product as a dominant office suite. Unfortunately seven different versions are going to be released which will just confuse things. A new enterprise version has been added which appears to have a Lotus Notes-like element called Microsoft Groove. This is being sold as some sort of solution for online collaboration. If it is anything like Notes it will create a lot of anguish with users.

3. MSN. Microsoft should have abandoned MSN a decade ago. There is a lot of talk about Microsoft becoming more of a publisher and selling advertising. Microsoft should be buying advertising not selling it. This is not a media publishing company; it's a software publishing company. Why people keep encouraging Microsoft to go in this direction is baffling.

4. MSN Search Engine. Again more of the same and pointless. Selling ads

5. Xbox360. The potential to become the dominant game platform and an eventual and enviable profit center. Unfortunately the company did not foresee the Sony delays and failed to manufacture enough units to satisfy the demand. This was an exhibition of poor planning and bad business intelligence gathering.

6. Pad-based computing. According to Gates just a few years back this was to become the dominant form of computing by now. What happened?

7. Dot Net initiative. The .Net framework that many believe is an example of how Microsoft can actually put together elegant and powerful architectures when it wants to, is being killed by Open Source systems that are free and almost just as powerful. Microsoft has been unable to cope with Open Source except to complain about it.

8. Preoccupation with Google. Microsoft is too easily distracted by successful companies who are not competitors. There is a deep-rooted belief that if a company like Google is successful, then they are an enemy per se. So the company obsesses on what Google is doing rather than concentrating on important Microsoft projects. Now Microsoft is about to do a deal with Yahoo to flank Google. This old-lady-like skittishness is unbecoming for a company this size.

......As more and more pessimistic views come out, the chances that we could invest at a better price increase..... Remember, to invest successful, you need to know your company well and wait for the "fat pitch". And I believe that the time is now.....

Happy investing,
Dah Hui Lau (David)

To visit my archive:

Thursday, May 04, 2006

Arnold Van Den Berg: Large company stocks are 27% undervalued May 4, 2006

GuruFocus posted a great article about Arnold Van Den Berg..........

"When adjusted for the interest rate environment using the 10-year Treasury bond, the chart shows that these large company stocks have gone from being 35% overvalued in 2000, down to 27% undervalued by the end of 2005. This is a 62% swing in value as measured by P/E's when adjusted for interest rates."

We agreed completely with this superinvestor, and that's why Lau Model Portfolio comprises of large undervalued companies.

Happy investing,
Dah Hui Lau (David)

To visit my archive:

Wednesday, May 03, 2006

Looking For Hidden Value With Whitney Tilson April 25, 2006

Few people are more qualified to discuss hedge funds and value investing than Whitney Tilson. Founder of T2 Partners, which manages three value-oriented hedge funds and two mutual funds, Tilson also co-edits Value Investor Insight, an investment newsletter, and is the co-founder and chairman of the Value Investing Congress. He’s also written on value investing for the Motley Fool Web site and for Recently, we asked him to explain what differentiates a value investor, and to share some of his best investment ideas. Who influenced your style in value investing?

Whitney Tilson: Warren Buffett has, by far, been the biggest influence on me as an investor. Beyond him, I’d cite Charlie Munger, Ben Graham, Phil Fisher, Joel Greenblatt, Seth Klarman and Bill Miller. Incidentally, one of the reasons I started the newsletter, Value Investor Insight, and the Value Investing Congress is so I could continue to learn from some of the all-time greatest money managers.

To read the full article:

All the best,
Dah Hui Lau (David)

To visit my archive:

Interview of Warren Buffett on CNBC on March 20, 2006

To watch the short interview of Warren Buffett by CNBC...

All the best,
Dah Hui Lau (David)

To visit my archive:

Seth Klarman's Lecture at Harvard May 3, 2006

Seth Klarman's Lecture at Harvard

All the best,
Dah Hui Lau (David)

To visit my archive:

Do All Banks Have Moats? May 3, 2006

You might be surprised to hear that nearly all banks have a sustainable competitive advantage--an economic moat. Warren Buffett and Charlie Munger were surprised, too. Buffett once remarked, "Charlie and I have been surprised at how much profitability banks have, given that it seems like a commodity business."

To read further:

All the best,
Dah Hui Lau (David)

To visit my archive:

2005 Sayings of Chairman Buffett

Whitney Tilson, a great hedge fund and mutual fund manager, has compiled some sayings of Warren Buffett for year 2005.

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All the best,
Dah Hui Lau (David)