BRL 0.00% 87.0¢ bathurst resources limited.

Think like Warren Buffett

  1. 23 Posts.
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    "Price is what you pay; Value is what you get" is a quote often attributed to Warren Buffett. It certainly sounds like something he would say.

    But here's the thing. The quote doesn't say anything about WHEN you get that value. Buffett has also often repeated that - once he gets the price he believes to be fair - he would not care if the stock market closed for 5 years. He is that confident in his approach to value/growth/cash-flow investing.

    I have read a number of posts here recently that throw all sorts of criticisms at management's supposed lack of actions to support BRL's share-price. This includes posters suggesting that - because management didn't immediately go into the market in a big way to execute the share buy-back they announced - then management must cynically expect the share-price to be headed lower. Others criticize management for not doing more to promote BRL; essentially scolding Richard Tacon's team for their heads-down, get-the-job-done approach to creating long-term value.

    I must say that I think these critical perspectives strike me as nonsense! Reflect for a moment on management's actions - both former BRL management such as Hamish Bohannon; plus former Solid Energy management such as Don Elder; as well as the current BRL management team led by Richard Tacon.

    To be fair to Bohannon and Elder, their times as CEO's mostly preceded my interest in BRL. I don't know their full stories and I suppose they must each be clever and capable gentlemen. Elder for instance won himself a Rhodes Scholarship.

    Definitely both gentlemen could talk! Bohannon talked up BRL well beyond sustainable value, raising hundreds of millions in outside capital . . . spending hundreds of millions to buy assets like the notorious L&M transaction . . . taking the share-price as high as $1.74 at one point . . . only to create a zombie/walking-dead company with a share-price that crashed to something below 5 cents per share by the time he exited. While Elder's 12 years heading Solid Energy ended in tears/receivership, with 700-plus people at NZ's then largest coal company losing their jobs.


    Now I ask BRL's present critics on this website: are those your models of best-practices management behavior ? Because - speaking for myself - I certainly prefer Richard Tacon's approach along the lines of "roll-up-your-sleeves, cut unnecessary costs, partner with patient key-investors, make intelligent investments and create genuine value via a rock-solid balance-sheet". Walking-the-walk matters considerably more than talking-the-talk.


    But then I consider myself to be strictly a value/growth investor. I'm not a day-trader; I don't have the patience or technical acumen to be a momentum trader or chartist; and I'm not under any sense-of-urgency to take profit.

    Nothing wrong with day-trading, charting or momentum-trading. I have commented here before that my "more clever than me" millennial-aged son is a chartist/day-trader - and a good one. But probably if you ARE a day-trader . . . frequently buying and selling the shares you target . . . then BRL may not be the right choice for you. For one thing, there is hardly any liquidity.

    For another thing, I suspect that BRL management doesn't pay much attention to the intra-day or even intra-quarter share price. What they seem to have been doing . . . ever since the share-price was stuck below 2 cents and BRL's very survival was debateable . . . is a version of a classic private-equity turn-around.


    Reflect on that - the alternative of a private-equity turnaround? Suppose that the key shareholders like RIM, Asian Dragon and others had raised more funds when BRL was a basket-case and simply de-listed the shares . . . paying off all existing share-holders at say 2.2 cents or even 3 cents per share. Even 2.2 cents - the option price for preference shares that some posters here whine about incessantly - might have looked attractive when BRL was trading at 1.6 cents, right ?

    Had the shares been de-listed, probably nothing different would be happening at the coal-face, so to speak. Richard Tacon and team could get on with partnering Talley's; masterfully acquiring SE assets; exploring new opportunities in Canada and so on . . . without any of the distractions of day-traders and various other Hot Copper posters accusing them of being terrible at their jobs.

    Then after 4 or 5 - or perhaps 7 or 8 - years . . . typical for private-equity turnarounds . . . the controlling share-holders could either re-list their (probably by then) billion-dollar baby, or sell lock-stock-and-barrel to the likes of BHP or Rio Tinto or some pure-play coal operator with deep pockets.

    Instead, the controlling share-holders kept BRL public . . . providing the opportunity for all of us to invest - or to stay-invested - and to ride along. To which I say thank you very much. Thank you to the investors who had the courage to put up capital when BRL was at 1.6 cents. Thank you to the BRL Board for strategic guidance along the way. And thank you especially to Richard Tacon and his management team for outstanding execution over the past several years.


    Sign me confident that the value I eventually harvest from my modest BRL investment will have been well worth waiting out the doldrums of 2017 and 2018's flat-lined share price.

    Price is what you pay; Value is what you get!

    That mantra works for Warren Buffett. I think it will also work for BRL investors with the patience to hang in there for the longer term.
 
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