Let’s talk about Duratec, which I have recommended at $1.00 and various other prices around that. Duratec is, as I’ve written before, “the most boring company in the world”. I want to talk about the Duratec Katamari.
What is a Katamari? A Katamari is a ball that you keep pushing, until it gets bigger and bigger. At first you pick up small things, like paper clips and candy:
And then, you keep rolling, and you end up rolling up bigger things — people and signs and all sorts!
And then before you know it, you are rolling up houses and buildings. Your Katamari is getting big!
And, eventually, you are rolling up whole countries and planets and the universe. You get the idea.
This is what has happened with Duratec. Duratec was $1.00 in May, and now it is about $1.60. That’s a 60% return. It has slowly Katamari’ed, growing month by month. It is painfully boring. Often, I find, the most money is to be found in boring areas (also it so happens an Aussie small cap fund was liquidating their assets at the time, which pushed the price to $1.00).
All wealth creation is really about making a Katamari.
You start with $100, you compound that at 12% for 100 years (with zero additional investment) and by the end you have about $8.3 million dollars. You’ve Katamari’d that. A lot of finance “gurus” would have you think it is more complicated than that, but really, it’s all about compounding.
Let’s talk about the Katamari master. Here he is:
He’s compounded wealth, since 1965, at a rate of about 19.8% per year. He’s built a big Katamari. The problem is what happens when there’s very little left to Katamari.
You’ve Katamari’d the world.
There’s so little left to buy.
That’s the Buffett paradox. Buffett, our coke drinking, McDonald’s-loving friend, has about $300bn in his portfolio and $277bn in cash via t-bills. In essence, you’re talking about a liquid pile of ~$570 billion dollars. That reduces Buffett’s universe to very few companies. It’s the equivalent of rolling up the world. It reduces it to even fewer when you consider Buffett’s criteria. Buffett Katamari’d so hard, he left himself with little choice but to either quit or try and roll up the rest of the world.
Luckily, we’re nowhere near as rich as Buffett. Small mercies.
This is how I imagine myself, by the way:
Happy Friday.
Restaurant power rankings
Restaurant of the week has to go to Culprit, which was imaginative and fun and delicious in all the ways Paris Butter was not. There were jet planes, ladies and gentlemen. Whimsy but not at the expense of flavour. (See – I do have a sense of humour). Sometimes, a lack of pretension is best.
