Value investing – that’s what Warren Buffett, the “Oracle of Omaha”, has adhered to over the 60-plus years of his very successful business career. Considered the most successful investor of the 20th century, Buffett is said to be the only businessman who has made his wealth through stocks, or investing in stocks – if I remember correctly.
But of course, there’s a lot of literature that you can find online about Buffett, and his investing strategies as well as formulas. I am not to start writing about all of those here really. There’s already enough about him already out there.
I am just interested in exploring some of these tenets, his ethos, when selecting stocks to invest in or companies to buy (basically, he uses these guidelines when buying companies – but I am definitely sure that these guidelines may give us pointers when buying stocks).
But then again, just a disclaimer to those “experts” who may say – in an infinitesimal chance that they may happen to be reading this article now – that what I am writing about is a load of crap: I am no expert, nor have the financial education background to support what I am about to write now. So, if you feel you are an expert and don’t really need to be wasting your time reading this, then by all means, close this window or browser. I have no objections whatsoever (not that I could object anyway). You even have every right to ridicule this, come to that.
But that doesn’t mean that this piece will have no substance. For those who may be curious to know what the heck I am talking about, stick for a bit. I would make sure that you will be able to pick up something here that may be worth pondering on when deciding your next investing strategy.
So back to my topic.
They say there are 12 tenets (see this article and this article) that Warren Buffett and his long-time business partner and friend Charles Munger consider when investing in a company, or buying a company.
This article, meanwhile, makes it into six principles. Basically, there’s this book titled The Warren Buffett Way, and definitely you can get all these principles from there. This article, a review of that book, presents the simplified, basic principles that guide Buffett’s decisions in buying businesses or making investments. This is another good article that summarizes Buffett’s investing investment principles.
Here’s the thing. There are just a few pointers that you need to consider when buying stocks – as per Warren Buffett. Of course, that’s the generalization. According to him, intelligent investing is not complex, but that it doesn’t mean it is easy as well.
So for them, there are just four basic things to consider:
1. They should be able to understand the business
2. A business has to have some intrinsic characteristics that would give it a durable competitive advantage
3. The business should have a management in place with a lot of integrity and talent
4. And a price that makes sense
Four very simple things to consider.
Now why the heck would I mention VUL in my title? First and foremost, VUL is Vulcan Industrial and Mining Corporation, a publicly listed company in the Philippine Stock Exchange (PSE) that is involved in finding, developing, and producing mineral properties. The company has been participating in oil exploration projects and is part of two consortiums that have petroleum contracts.
VUL used to have a subsidiary, Vulcan Materials Corporation (VMC), which is primarily engaged in the quarrying, crushing and marketing of rock aggregates. On 18 December 2012, the company sold all its shares in VMC to Anglo Philippine Holdings Corporation (PSE: APO).
1. The change in corporate name from “Vulcan Industrial & Mining Corporation” to “National Book Store Retail Corporation” or such other name acceptable to the SEC as the Board may determine
2. The change in the Corporation’s Primary Purpose from “mining and oil exploration” to retail
3. The relegation of “mining and oil exploration” to the Secondary Purpose clause
4. The sale and transfer of all or a portion of the Corporation’s mining and oil exploration assets
There were other items approved by the stockholders during the meeting, but I highlighted the above because they are the main reasons why I think someone like Warren Buffett would invest in a company like VUL.
So definitely, VUL or Vulcan will now be called National Book Store Retail Corporation. Of course, there are other items above that would require approval, perhaps, from SEC. For instance, the name, as pointed out in item number one: “acceptable to the SEC as the Board may determine”.
Anyway, I do believe that it will be accepted eventually. And will be changed accordingly.
In fact, this may be considered a backdoor listing move by National Bookstore to avoid, I think, the time and expense of engaging in an initial public offering (IPO). [According to Investopedia, in an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), the best offering price and the time to bring it to market.]
The Philippines’ stock market is having a bullish run over these past two years, and is forecast to grow even higher as the global investing community begins to take notice of the country’s capital market. Therefore, I think, this may be one of the reasons that National Bookstore decided to do this strategy with VUL.
Anyway, I am veering from my topic. So: National Bookstore. Finally. Is. A. Public. Company.
Of course, someone super-rich like Buffett could just go on and buy a company like National Bookstore in a Philippines – if they want to. Or, if National Bookstore was selling at the time. Apparently there may have been no offers or feelings out. And now that the capital market is hot, that’s when National Bookstore decided to do a reverse IPO.
BUT, these are all just my assumptions. The four items above are true; you can read them from VUL’s disclosures. But all the reasons that I was thinking for this move were just my assumptions; I may be wrong. (Mostly wrong, I think. I don’t know why they did that anyway.)
But as I’ve said, now, National Bookstore is welcoming investors. In fact, they may have been considering this since last year.
Now, why consider?
According to the tenet, first and foremost, you should be able to understand the business. National Bookstore is the largest bookstore and offices supply store chain in the country. My generation grew up with National Bookstore. So did my parents’ generation. When it comes to school supplies – from preschool to primary or elementary school, to high school, to college/university – most of the stuff needed – books, textbooks, notebooks, and many others – are mostly bought from National Bookstore. (I said mostly because there are still a lot of Filipino kids who came from very humble beginnings. Such is a topic for another time).
Overall, as long as there is schooling/education (I doubt it will be abolished. What the heck.) in the Philippines, there will always be National Bookstore.
Next, once you’ve come over that, the next principle to consider is, “a business has to have some intrinsic characteristics that would give it a durable competitive advantage.”
I think I’ve just discussed that briefly. But let me elaborate more.
Consider Jollibee. More than twenty years ago, I always look forward to Saturdays because that’s always the time we go to Jollibee. Every kid in the country knows Jollibee. In fact, I would say that as long as there’s a kid born in the country (Again, what the heck, do you see the country having a birth rate of less than one anytime soon???), Jollibee is just waiting to give them their first taste of it.
Now back to National Bookstore. I could only count in my one hand the other bookstores/school supply shop that I’ve been to because I need some items ASAP. One is Goodwill Bookstore, which, if you will trace the origins of National Bookstore, may be considered a “family”, though not in a business sense. The second is Booksale, which sells mostly second-hand books/magazines (they also have new editions of course, but they started as a second-hand bookseller, I believe at the time).
Now what may be considered National Bookstore’s intrinsic property? How about having more than 145 branches nationwide, for starters? And then they own Powerbooks, as well as Metrobooks in Hong Kong.
Basically, I think National Bookstore is the national bookstore of the Philippines.
Next tenet, the business should have a management in place with a lot of integrity and talent
National Bookstore was founded by José Ramos and Socorro C. Ramos. The company has been rebuilt a few times, and has survived World War II, a fire, and a big typhoon, come to think of it.
Over those challenging years and moments, the Ramoses were able to steer the company into where it is right now: the pinnacle of the bookstore industry in the Philippines.
At present, the company is being led by Mrs. Ramos’s son, Alfredo Ramos. You can dig him up online. I think I could say that he’s got great deal of integrity. Among others, he holds directorship in the following companies: Anglo Philippine Holdings Corporation (PSE: APO), Atlas Consolidated Mining and Development Corporation (PSE: AT), Shang Properties Inc. (PSE: SHNG), Philippine Seven Corporation (PSE: SEVN), United Paragon Mining Corporation (PSE: UPM), and The Philodrill Corporation (PSE: OV), and Vulcan Industrial & Mining (PSE: VUL). He is also involved with Atlas Publishing Group of Companies, Anvil Publishing, and Penta Capital Finance Corporation.
Finally, a price that makes sense.
Again, I am writing here in the assumption that VUL will now be called National Bookstore, and that it will eventually complete the sale and transfer of all or a portion of its mining and oil exploration assets. Therefore, I am writing here in the assumption that VUL will be trading soon as National Bookstore. I am not sure as to how that will affect the change of its ticker. Probably it will be changed to “NBS”. Which makes sense. It can be done anyway, the changing of the ticker code, as long as it’s been approved by proper regulatory bodies.
So, what I am basically saying is that, VUL is now National Bookstore. Or, let’s say, will be National Bookstore soon. Eventually.
As such, its current price of PhP1.56 as of 7 June 2013 is definitely very, very cheap (again, I am already considering the company here to be National Bookstore). Why? I am no expert, but considering the sales it will generate this year as more students enrol in our schools, and with the educational system now becoming 12 years (K-12) instead of the previous 10 years, the outlook for this company is definitely very bright. In fact, the price has gone down, so I was really glad because that just means I’d be able to buy more. (The local bourse has had a downtrend over the past few trading days. Also, VUL went down probably because of some deficit reported by the company – which I do not pay attention to. As VUL said, they got several instruments to utilize if they ever needed cash.)
So, going back to the title of this post, the above are the reasons why someone like Warren Buffett would consider a stock like VUL.
But that’s just what I think. As I’ve said, I am no expert. So I may be wrong.
But I do admire Warren Buffett, and have always considered his principles in making my investment moves. Investments, mind you, not speculations. And value investing at that. And definitely I just did a fundamental analysis here. (I’ve always said that I am a fundamentalist.)
I have to admit that I invested in VUL. And I followed Buffett’s four basic tenets above when I invested in the stock. But, I just showed VUL as an example. This is not an effort of promoting the company, but a simple analysis to emulate when considering your next investing move.
I also wrote this article because of one thing. I have always wanted to have a bookstore. When I was in my early teens, it was just a big house with my own library. But over the years, it has developed into something more, of course. To have a business. But with books. So, a bookstore. I don’t think I could set up one. So I just bought myself some shares in this company. Now, I already consider myself a part-owner of a bookstore.
ALSO of course, I shamelessly wrote this with all the mentions of Warren Buffett and value investing and such, because they help with the SEO! Imagine how many investors out there who would be searching for Warren Buffett online! Perhaps this article will help me land in the first page of the results; perhaps not. Either way, it’s worth trying. Do your own.
Email me with your violent reactions.