We still look to the balance sheet for our margin of safety.
   Shareholder: Buffett's partner, Charlie Munger, has been somewhat unkind to money managers...
   Cundill: Yeah, but he didn't persuade me to become a plumber.
   Shareholder: But he's apparently pulled Buffett away from a pure Benjamin Graham-approach to value investing. And I know that you're a value investor -- along with Charles Brandes and John Templeton. Are you a pure Benjamin Graham afficionado or are you leaning towards growth investing as well?
   Cundill: I think we're still looking for margin of safety in the balance sheet as distinct from the business.

But we're paying increasing attention to the business.
   Cundill: But it's been really interesting to watch. We had a one-day seminar ... about six weeks ago in which Tony Browne -- one of the principals of Roxbury who's become a Warren Buffett growth fella -- talked about his transformation as he went along.
   And we've had a bit of a transformation, too. In the '90-'91 period, you could buy a $1 bill for 50¢, but the business deteriorated. So the $1 bill can also shrink in value. And therefore, we're paying a lot more attention to the business.
   The real barnburner, of course, is if you can buy the $1 bill for 50¢ and it turns around. Then you get all sorts of benefits. And that's happened to us over the years.
   I was thinking about this very theme as I was running this morning. I think what Charlie Munger said to Buffett -- although Buffett was coming independently to this view -- was that if you can buy the business at a multiple well below the rate of growth -- and I'm thinking of Coca-Cola -- the margin of safety is in the business itself.
   That's something we haven't done. But I think we're always studying to try and get it better.

In bad markets, babies get thrown out with the bath water.
   Cundill: In a bad market, like the one that happened in the mid-1970's, you got wonderful businesses. You got franchises that were trading below cash that were growing and earning high returns on shareholders' equity.
   As you may recall, that was when Buffett really made his bones because he built his liabilities from 1969 to 1974. So he had the cash to be able to make purchases. In bad markets, everything converges [price-wise].
   So, yes -- we look to the balance sheet first. But we're worrying about the nature of the business more....

©Copyright 1996-2008 Outstanding Investor Digest, Inc. All rights reserved.
295 Greenwich St., Box 282, New York, NY 10007 (212) 925-3885