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To: Sergio H who wrote (1750)	4/25/2012 3:15:13 PM
From: bruwin	of 3042

Absolutely no need to apologise Sergio H. Far more important and appreciated was the research that you did, and your sharing it with others. With regard to payment of increased dividends, over the years I’ve come across several company analysis commentators who have regarded the payment of an ongoing and increasing dividend as an important criteria for stock selection. A local stock investment advisor, Richard Cluver ( rcis.co.za ), grades local stocks in terms of those that have paid an increasing dividend, every year, for the last 10 years, followed by those that have paid an increasing dividend for the last 5 years. Seeing as those 10 companies you listed have been around for many years, surviving the ups and downs in the market place, I thought I’d see how nine of them stacked up in terms of Warren Buffett’s target percentage requirements for a company’s Income Statement performance, as shown in the following link and table. The numbers come from the company's latest Annual results …. Message 27443100 More than half the stocks satisfy the "GROSS PROFIT", "DEPRECIATION" and "INTEREST EXPENSE" requirements (See the bold numbers). However, none of them can meet NET EARNINGS to be greater than 20% of REVENUE, although MMM comes closest.

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To: bruwin who wrote (1751)

4/25/2012 6:23:55 PM

From: Sergio H

1 Recommendation of 3042

Thanks for the doing the work on Buffett selection criteria. Some of the stocks on that list
are utilities, that's why they carry low earnings as percent of revenue. I passed on 3M
because of its high price to book value which is another Buffett criteria. Too bad I passed
as they reported better than expected earnings.

The following is a list of stocks that have increased dividends for at least 40 consecutive
years but less than 50. At lease one is a current Buffett holding. Only one is near 52 week
low while several hit a new 52 week high today. I have not done any homework on any stocks
on this list, but will be and I'll post if I find anything worth sharing.

dynamicdividend.com

Company Symbol Since Last Raise

The Coca-Cola Company	KO	1963	9% (February 2012)
Johnson & Johnson	JNJ	1963	5.6% (April 2011)
Lancaster Colony Corp.	LANC	1963	9.1% (November 2011)
Lowe's Companies	LOW	1963	27.3% (May 2011)
Colgate-Palmolive Company	CL	1964	7% (March 2012)
Illinois Tool Works	ITW	1964	5.9% (August 2011)
Nordson Corporation	NDSN	1964	19.0% (August 2011)
CLARCOR Inc.	CLC	1965	14.3% (September 2011)
The Chubb Corporation	CB	1966	5% (February 2012)
Tootsie Roll Industries**	TR	1966	3% (February 2011)**
Hormel Foods Corporation	HRL	1967	17.7% (November 2011)
ABM Industries	ABM	1968	3.6% (December 2011)
California Water Service Group	CWT	1968	2% (January 2012)
Federal Realty Inv. Trust	FRT	1968	3.0% (August 2011)
SJW Corp.	SJW	1968	3% (January 2012)
Stanley Black & Decker	SWK	1968	20.6% (February 2011)
Stepan Company	SCL	1968	7.7% (October 2011)
Target Corporation	TGT	1968	20.0% (June 2011)
Commerce Bancshares**	CBSH	1969	5% (November 2011)**
Black Hills Corporation	BKH	1970	1% (January 2012)
Connecticut Water Service	CTWS	1970	2.2% (August 2011)
H.B. Fuller Company	FUL	1970	13% (April 2012)
National Fuel Gas Co.	NFG	1971	2.9% (June 2011)
SYSCO Corporation	SYY	1971	3.8% (November 2011)
Becton, Dickinson and Co.	BDX	1972	9.8% (November 2011)
C.R. Bard, Inc.	BCR	1972	5.6% (June 2011)
Leggett & Platt, Inc.	LEG	1972	3.7% (August 2011)
Mine Safety Appliances	MSA	1972	4.0% (May 2011)
Tennant Company	TNC	1972	21.4% (November 2010)
Universal Corporation	UVV	1972	2.1% (November 2011)
W.W. Grainger, Inc.	GWW	1972	22.2% (April 2011)

http://finance.yahoo.com/quotes/KO,JNJ,LANC,LOW,CL,ITW,NDSN,CLC,CB,TR,HRL,ABM,CWT,FRT,SJW,SWK,SCL,TGT,CBSH,BKH,CTWS,FUL,NFG,BDX,SYY,BCR,LEG,MSA,TNC,UVV,GWW/view/dv;_ylt=Aj3XGTmsHcFLTJjZvYRGoqwLv7gF;_ylu=X3oDMTExYzFvNTI2BHBvcwM0BHNlYwN5ZmlUYWJsaXN0BHNsawNkZXRhaWxlZA--

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To: bruwin who wrote (1746)	4/26/2012 4:50:40 PM
From: The Ox	1 Recommendation of 3042

MOD is like a lot of companies here in the US. They were a bit too slow to react to the downturn that started in 2008 and they have paid the price. By 2010 their top line was down over 30%. I have them on a watch list and I think that at some point (and we may be near that now) it will be a solid investment going forward. I'm in the camp that feels its a bit too early to buy into companies like MOD. I want to see better forward guidance. I wouldn't mind seeing other investors step into the stock first and a clean reversal in the stock chart. I agree with your assessment, bruwin and I think you are right on target with your analysis. Having said this, its important to be open to the fact that those are trailing numbers and the future may hold better things for them. Their industries have been hard hit over the past few years, trucking/auto, AC/heating, construction, etc... They have done a very decent job of adjusting to the current environment and for them to be profitable at this stage, shows me their commitment to the future. I will assume your main concern is similar to the market's, how well can they translate their future income to the bottom line. As you pointed out very nicely, they aren't doing it just yet. My 2 cents, fwiw. TO

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To: The Ox who wrote (1754)	4/27/2012 3:36:05 AM
From: bruwin	1 Recommendation of 3042

Always good to hear from you, TO. It’s been a while. Yes, as you say, studying a company’s financials is, to a large extent, looking at past performance, but it does show us what’s currently happening in several critical areas of the business, especially with regard to debt and return on capital and how much Revenue is left over at the Bottom Line. Of course, a more in depth interrogation of the company’s position in its market and other related aspects, is also needed to try and determine its future prospects. No doubt you’ve spent a lot of time and effort doing just that, which is probably why MOD is on your watch list. As you said, ” They have done a very decent job of adjusting to the current environment and for them to be profitable at this stage, shows me their commitment to the future.” That could tie in with my observation that several financial ratios, such as those related to debt expense and return on capital, have shown improvement in the last 12 months. ….. and your contributions are always worth a lot more than “2 cents” !! Best wishes, and keep enjoying your “semi-retirement” as you get “younger every day”!! {:-)

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To: Spekulatius who wrote (1756)	4/30/2012 2:43:39 PM
From: bruwin	2 Recommendations of 3042

Hi there Clownbuck. I just want to make sure I’m following your question, ”are you sure about the net earnings > 20% of revenues”, correctly, because Sergio H appears to think that your reference to “net earnings” may not be the same as “Net Income”. If that’s the case then below is a copy of a scan of one of the pages of Mary Buffett and David Clark’s book, “Warren Buffett and the Interpretation of Financial Statements” ... ... on page 25 the authors refer to the Bottom Line of the Income Statement as “Net Earnings” and I used their reference in my summary. On the other hand, if your question referred to the most unlikely event that an industrial type company could ever achieve a Net Income (or Bottom Line) > 20% of Revenue, then I’d go along with the contention that it’s certainly not an easy target to achieve, but there again, it does happen. Below are two of Buffett’s favoured companies, Coca Cola and Johnson and Johnson. Over the last 5 year’s worth of Annual Results, KO exceeded the 20% ratio on 3 occasions, while JNJ beat it on 2 occasions. KO. 2010 :- 11809/35119 = 33.6%. 2009 :- 6824/30990 = 22.0%. 2007 :- 5981/28857 = 20.7% JNJ. 2010 :- 13334/61587 = 21.6%. 2008 :- 12949/63747 = 20.3%. According to the research of the above authors, Buffett (and Munger) are primarily interested in finding companies that have Durable Competitive Advantage, and it is generally these category of companies that show “a net earnings (or Net Income) history of more than 20% on total revenues”, as referred to on page 61 of their book.

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To: The Ox who wrote (1759)	5/3/2012 5:00:12 AM
From: bruwin	of 3042

"I sure hope the same is true in your neck of the world!!" Yes, thanks TO, all is, currently, well in this neck of the woods. And thanks, also, for bringing that EBIX reference to my attention. Those are pretty good figures in terms of past Sales (3 years) and potential future Earnings growth of 32% and 20% respectively. I have EBIX on one of my watch lists that I keep at Finviz. After its dramatic fall off in March last year, when it went from about $30 to about $14, it started a fairly steady recovery. I got back into the stock, with a more modest amount than previously, at about $19 towards the end of November last year. Its price continued to improve to hit about $27 and then tested its support/resistance level of about $21. After rising to, and meeting resistance at, about $24 it moved sideways for a while. I decided to take some profit at around $23, so I now have about 50% of what I bought at $19. Now I’ve had a look at the last 4 Quarterlies of EBIX and the Top Line Revenue for the last 12 months is $169.1mil. The total EBITDA for that period is $76.3mil. which gives an excellent EBITDA Margin of about 45%. In addition, the total Pre-tax Income for that period is $73.4mil., and the current Capital Employed of the company is $361.4mil. That gives a Pre-tax Inc./Cap. Emp. ratio of 20.3%, which I’d say is pretty good. One of the “contentious” issues surrounding EBIX has been the relatively small amount of tax that the company pays and reports. If we take that Pre-tax income figure of $73.4mil. and deduct, say, 35% for tax we are left with $47.7mil. Now that would give EBIX a Net Income Margin of 47.7/169.1 = 28% for the last 12 months. By Buffett’s “standard” that’s a very good number !! Should be interesting to see where EBIX goes from here. I’ll be keeping my finger on the button as it seems, currently, to be finding support at about $20 !! Best wishes ….

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