Comments on: Building Materials Holding Corp Moat Check

By: George

George — Sun, 15 Oct 2006 22:24:18 +0000

Hi Geoff,

Thanks for stopping by. I hadn’t realized you wrote about Building Materials Holding Corp earlier this year.

I agree with you take on this company. I also share your doubts about the use of the current P/E ratio given the huge jump in earnings.

By: TheValueBlogs » Building Materials Holding Corp Moat Check

TheValueBlogs » Building Materials Holding Corp Moat Check — Sun, 15 Oct 2006 20:12:11 +0000

[...] To continue reading click here. [...]

By: Geoff Gannon

Geoff Gannon — Fri, 13 Oct 2006 23:40:25 +0000

I agree with you on BMHC’s moat – there is none. However, I did make a mistake when I ultimately decided not to buy it about three years ago. I wrote about this mistake in a post entitled “On The Two That Got Away”:

http://www.gannononinvesting.c....._away.html

If you look at BMHC’s historical valuations, it has often traded at low price-to-earnings, price-to-book, and price-to-sales ratios. The difference today is that both the earnings and the stock price have jumped over the past couple of years. While the company may look cheap at these levels, I was a lot more interested when it had a low p/e and an EBIT of about $30 million (a number it had been close to several times before) than I am now that it has an EBIT of about $225 million – something it never came close to doing in previous years. As I see it, the huge jump in earnings casts real doubt on the utility of the current P/E ratio.

By: George

George — Fri, 13 Oct 2006 20:47:36 +0000

Hi Ron - I'm glad you like Value Investing News. If you've already seen the Clayton video I guess you are already actively using the new site. Please provide any feedback you have on Value Investing News in either the forum or just send me a message. Thanks!

By: Ron

Ron — Fri, 13 Oct 2006 20:19:19 +0000

OK. I did really get a sense , stronger than ever both in an interview the author Miles had with Clayton of Clayton homes where he was so strongly influenced by Buffetts’ emphasis on increasing their moat, and in a speech and question and answer session Buffett had at U of Florida. At that one he really seemed to me to say that moat was more important for him and price didn’t have to be that cheap (although that was a bonus) because the competitive advantage would over the long run really pay off better and was more of a sure thing. By the way. Again, thanks for and good luck on Value Investing News. I like it. Ron

By: George

George — Fri, 13 Oct 2006 18:00:09 +0000

The difference between Building Materials Holding Corp and Apache is that I think Apache could possible be a low cost producer. In addition, Apache controls some of the supply of nonrenewable resource that is currently essential for commerce. Building Materials Holding Corp does not share that characteristic.

By: Ron

Ron — Fri, 13 Oct 2006 17:42:01 +0000

I agree. No moat. But is it a bargain around this price? You mentioned if Apache got down to the right price even though it was in a commodity type business it might interest you.

By: Value Investing News

Value Investing News — Fri, 13 Oct 2006 15:39:12 +0000

Building Materials Holding Corp Moat Check…

Fat Pitch Financials takes a close look at whether or not Building Materials Holding Corp has a wide moat.
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