Warren Buffett says buy good management and let them do their job.
His problem with CODI would be the skimming of the profits to Joe and his group. Its like double management.
Joe buys good management then adds his layer of management on top. Makes for a big burocracy. Granted Joe has value added aspects to his layer.
However, would we not be better off just owning a company that is good at management themselves? A company that does not need someone to teach : upgradded IT, solid management incentives, new uses for products, and bolt on aquisitions.
I don't presume to know why Buffett does or doesn't like CODI, and I'm not a follower of his investment style. Certainly, if you wanted to go our and buy a temp staffing company, a promotional products company, a medical devices company, a recreational products company, and a PCB company we could do that. There are two things that keep me from taking that approach.
First, I'd have to do it in the public equity markets. That market is much more efficient than the private equity market and generally I pay a higher multiple. Patience can correct for this, so I might be willing to live with that if it weren't for:
Second, WE DON'T GET THE CASH from that portfolio. I don't really care to hold an equity interest in a publicly traded cyclical. But if you give me a share of the cash flow, my perception of that cyclical changes.
Or, probably like you, some didn't pay $12/share and paid closer to 6x CAD.
But you make a good point. Perhaps some are paying to chase the dividend and others are paying to buy based on future earnings. And some undoubtedly are buying because they read about it from some pundit newsletter.
So I guess the question is, would Joe be selling at 11X CAD? Or would a better measure be "normalized CAD" rather than "worst economy since the great Depression" CAD? If normalized CAD is $2 (not an outrageous number), then CODI is only 6.5X.
This is an interesting subject. I would really like to hear what everyone's take is on this.