Banking Heavies Make Dash For Sliding Scrip

The Sunday Age

Sunday March 2, 2008

Christopher Webb

MUST be something happening to the banks judging by the sudden share buying by a clutch of bank heavies. It might have something to do with scrip across the sector falling by anything up to 36% from peak levels.

Last week, the crew from the ANZ Bank, led by one Charley B. Goode, all waded into the market with buying orders. As reported here, Charley bought a bit more than $1 million worth of stock.

Others from within the bank's boardroom were also buyers.

The new boy at the bank, Michael Smith, outlaid a shade under $1 million, buying 43,950 shares at $22.75 a share. Jeremy Ellis picked up 9000 shares at $22.80, while Ian John Macfarlane bought 1000 shares at $22.55 each.

Dr Gregory Clark bought 2000 shares at an average $21.51 a share.

That canny old market watcher Charley B. remains ahead of the field as he got his at $21.40.

It's not just ANZ Bank folk who reckon there could be value in the sector.

Coming in over the top of all of them was Ahmed Fahour, the National Australia Bank heavyweight.

On Friday, with his stock at a heavy discount on its high, he told his broker to buy 50,000 shares, which he duly did at $28.73 a share, an all up cost of $1,436,625.

So how are all these contrarians faring very early in the game? NAB closed at $28.85, while ANZ last fetched $22.

The reporter owns ANZ shares.

Buffett master class

WARREN Buffett's latest letter to shareholders provides a repeat dose of the master's wisdom, including his views on a company that possesses an excellent chief.

Noting that a truly great business must have an enduring "moat" that protects excellent returns on invested capital, the master noted that he and partner Charlie Munger's criterion of "enduring" caused them to rule out companies in industries prone to rapid and continuous change.

"Though capitalism's 'creative destruction' is highly beneficial for society, it precludes investment certainty. A moat that must be continuously rebuilt will eventually be no moat at all," he said.

What he then had to say might interest those who invest in companies where the managing director is a star. Buffett said, "additionally, this criterion eliminates the business whose success depends on having a great manager.

"Of course, a terrific CEO is a huge asset for any enterprise, and at Berkshire we have an abundance of these managers. Their abilities have created billions of dollars of value that would never have materialised if typical CEOs had been running their businesses.

"But if a business requires a superstar to produce great results, the business itself cannot be deemed great.

"A medical partnership led by your area's premier brain surgeon may enjoy outsized and growing earnings, but that tells little about its future. "The partnership's moat will go when the surgeon goes.

"You can count, though, on the moat of the Mayo Clinic to endure, even though you can't name its CEO."

Elsewhere, Buffett had a pot shot at various banks and other lenders.

"As house prices fall, a huge amount of financial folly is being exposed," he said. "You only learn who has been swimming naked when the tide goes out - and what we are witnessing at some of our largest financial institutions is an ugly sight."

Last but not least

WITH its scrip dropping from 45 cents to 6 cents, National Leisure & Gaming filed its latest results with the profit seasons stragglers late on Friday.

The outfit operated 39 hotels at the end of calendar 2007 and reported sales of $101 million. But it was unable to extract a cent of profit and went on to lose $6.4 million for the December half-year.

The balance sheet is not a pretty sight. Pitcher Partners, the groups auditors, noted that National Leisure had a deficiency in current assets compared with current liabilities of $207 million.

The directors believed that the group would be successful in renegotiating its finance facilities and accordingly had prepared the financial report on a going concern basis, the auditor stated.

He went on to note that should the company not achieve its financing objective or get sufficient alternative funding, then there was significant uncertainty whether it would be able to continue as a going concern.

National Leisure is valued by the market at $27 million, just a little under its stated $118 million of shareholders funds.