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from Outstanding Investor Digest's December 31, 1996 Edition

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CENTURY MANAGEMENT'S
ARNOLD VAN DEN BERG

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OID: What could turn Moore into a mistake - fraudulent accounting?
Van Den Berg: No. I worry about almost everything. However, this is one company where I don't worry about fraudulent accounting. You very rarely find engineering companies involved in cases of fraudulent accounting. You generally find that sort of thing in marketing companies and fad companies where people with the nature to do that type of thing tend to be located.

OID: So all you worry about is bad engineering?
Van Den Berg: No. First of all, I don't really think there is much risk simply because of all their assets. They'd have to be blind to turn this into a disaster.
And even with their high R&D and everything else, they're still going to earn 40¢ this year and have $1.75 of cash flow. And that's spending $3 to $4 of R&D.

OID: I see what you mean.
Van Den Berg: So let's assume they run into trouble. Short term, they could cut their R&D in half and have $3 per share of cash flow - with no debt. Plus, these people all have their whole life's work tied up in the company.
Therefore, it's hard for me to see how anyone could lose a lot of money in this company.

OID: You're obviously not very familiar with the Emerson Pittance...
Van Den Berg: And if it ever did start to bleed, I think that there are enough assets that you could get out of this thing without too much trouble. I'm not saying you would get out without a loss, but it wouldn't be a disaster.
This is the kind of company I feel very comfortable just sitting on. And I say that for a number of reasons: First, its assets are increasing. Second, its sales are growing. Third, people are addressing its deficiencies. And, fourth, they've got a good name.
So if they ever did start to get into trouble, any number of companies would view them as a very desirable acquisition candidate.

OID: Although companies in trouble very frequently don't command a premium price.
Van Den Berg: No. But from today's stock price, shareholders might still make out fine.

OID: What, then, do you worry about?
Van Den Berg: Not much. Frankly, our only problem with this company has been not being able to buy enough of it. It's very thinly traded. And we want to buy it right. So we don't chase it.

OID: Then we're especially grateful for you sharing it with us. However, to activate the Emerson Curse, all you had to do was buy a few shares in my name - although, for the full effect, may I suggest margin...
Van Den Berg: I don't want to mislead you. We have a very good position in Moore Products today - and, obviously, we're very happy to own it.

OID: I definitely got that impression.
Van Den Berg: You mentioned accounting fraud. And after having been in this business for 25 years, very little surprises me. But, frankly, that would.
As we follow this company and learn more about them, we find lots of evidence that they are solid, conservative people. You can see that in everything from their annual reports, financial statements, their salaries and in the contact that our analyst, Jim Brilliant, has on a regular basis with their management.

OID: As I recall, this year's proxy showed no one making more than $160,000±.
Van Den Berg: That's right. None of the Moores need the money. And they're very straight-up people. I think very highly of them. And none of the fingerprints in their proxies or their annual reports indicate any kind of self-dealing whatsoever.
I wouldn't give 'em an "A" for managing the company. But I wouldn't say anything negative either - because their main concern hasn't been to get the stock price up. They're trying to build a company with a great deal of pride in their products and a reputation to match. And, unfortunately, sometimes when someone focuses too much on one thing, they can slip up elsewhere.
But, again, to their credit, I believe they're correcting that imbalance with their new chairman.

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