Growing Rich - Arabictrader.com

KIRK KAZANJIAN
that have low asset intensity. I look at how many times a company
turns over its fixed assets, for example. Then I examine the income
and cash-flow statement to see what kinds of returns it has generated.
You can analyze a building the same way you analyze a stock. It’s
just that one requires much less maintenance than the other. Essentially,
I want to see the private market value growing.”
Yacktman also likes companies with strong market shares in their
principal products or service lines, a need for relatively low-capital,
long product cycles, and excellent positioning in global markets.
Three typical businesses he owns are unique professional service
companies (which have low start-up and maintenance costs), media
providers (because of their sparse competition and low capital requirements),
and guaranteed franchises (which require little capital and
derive a substantial percentage of revenue from a growing pool of
service fees).
Good businesses aren’t always glamorous or immediately recognizable.
Yacktman likes to tell the story of the guy who went to his
twenty-fifth class reunion at the Harvard Business School. He drove
up in a limo, walked down the red carpet, and was immediately
greeted by his fellow classmates. They asked what he had been up to.
“You know, I barely made it into this school in the first place,” he
told them. “I worked my tail off for the entire two years I was here.
It was clear to me I couldn’t compete with you for any of those fancy
consulting or finance jobs. So I went back to my small hometown in
Ohio and started this little manufacturing company. We develop a
device that every automobile in America must have. We make the
product for $1 and sell it for $4. You’d be amazed at how that 3 percent
adds up.” The guy obviously didn’t get his math right. He barely
made it through business school, after all. But he clearly had what
Yacktman would call a good business. Low capital intensity, high
profit margins, and a product with extremely strong demand. If this
guy ever takes his company public, you can bet Yacktman would be
an interested investor.
DAVIS’S TOP TEN
Over the years, Shelby Davis has developed a list of the ten most
important characteristics he looks for in every company he invests
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