In 1997, an analyst pitched Buffett on Cisco:
"An Open Letter to Warren Buffett Re: Cisco Systems"
"Dear Warren:
If You Think Coke Is A Good Investment . . ."
"Among other tenets of your investment discipline, we share the following:
• Long-term investment horizons;
• A focus on business fundamentals
• Fundamental analysis
• Companies that have defensible franchises(some level of monopolistic pricing power;
• Rigorous valuation."
"STOP! Do not throw out this letter! We recognize that you perceive most, if not all, technology companies to lie outside your “circle of competence;” happily, we believe you are mistaken!"
(we do not expect you to rely on the research of a securities analyst.)
Cisco vs Coke
I heard you were looking for that ROIC..
"Akin to shovel manufacturers during the Gold Rush of 1849, in our opinion, the equipment vendors are the companies best positioned to benefit from the initial hype over the Internet"
First Mover Advantage: "The industry structure can be described as Gorilla-Chimpanzee-Monkey"
Interestingly, the gorillas are indeed still around today. Everyone else is gone.
"We believe Cisco can be purchased at a fair price."
based on ROIC vs. enterprise value to invested capital (return on capital vs. multiple assigned to each dollar of capital)
"companies above the regression line are overvalued relative to their peers"
"rigorous valuation"🤔
Incredibly, $CSCO and $BRKA nearly in the same place today
The pitch
web.archive.org/web/2006051307…
"We view technology-driven obsolescence as discontinuities"
Does this seem more complex than tracking the market share in sugar water and assorted snacks?
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