Brambles Limited

ASX:BXB

Brambles Limited

ASX:BXB
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$19.25 (+0.9%)
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Pinned straw:
Mujo
Added 2 months ago

John Hempton on Brambles - Brambles - some thoughts - John Hempton's Newsletter
Chagsy
Added 2 months ago

I was happily agreeing with everything in that article as it nicely fits my reading around Brambles. I have recently increased to a 5% holding. It will be interesting to see how the tracking tags improve their business efficiency as they get cheaper and therefore deployed more widely.

As the author implies, if they just stick to their knitting they can build a wider and wider moat, with ever improving financial metrics and essentially be able to outcompete all others. They already enjoy the best network effects in most western countries. With time this should extend to the whole world.

I’m highly amused that such terms, usually reserved for fancy SaaS companies, can be applied to something as basic as this:

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C

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Solvetheriddle
Added 2 months ago

My 2c on BXB which i started following around 1988, but haven't followed it closely over the last few years. i note it seems to have come back in favour recently. i classify BXB as an almost stock, it's almost a growth stock. where it gets into trouble is when it diversifies, note it has held a variety of other businesses, i think all have been disappointing, and secondly, it can grow at a certain cadence. when they try and push it at a faster rate it implodes. i have met Chipchase a few times and he importantly understands that. these issues have led to an inconsistent record.

my favourtie BXB story was around mid 2000's the board was undecided on who to make the new CEO, the CFO or the COO. each was asked to present to the board. the board asked each what the LT growth rate was for the business. The COO said 6% unit growth, the CFO said 8%. the CFO got the job, but the COO was right, it led to disaster, you cant push the natural cadence for this one.


good luck with it

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Scoonie
Added 2 months ago

Thanks Mujo John Hempton commentary is always worth a read.

His comment below on equipment leasing businesses is useful:

"An equipment leasing business which meets customers marginal needs can be disastrously cyclic. Imagine if the customer owns say 80 percent of their forklifts – the forklifts they might need for work in a recessed economy. In a boom they rent the marginal forklifts from an operator like Brambles. Then when a recession comes, they keep their own forklifts and return all the rented ones. The rental equipment company is left with debt used to finance forklifts now rusting in their yard. This business can be disastrous."

How many businesses are like this, having the periodic appearance of prosperity however are super leveraged to overall industry prosperity. I guess all businesses are to some extent, just some are far more leveraged than others.

Businesses built on the cyclical mining industry come to mind. Trouble is when the good times just keep rolling on it is easy to lose sight of.

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Strawman
Added 2 months ago

So true @Scoonie. Mining is a good example, but I think general services businesses also fit well into this category. Way back in the day, I was quite fond of a few of the tech services/consulting companies, but learned a hard lesson when a lot of the work slowed down (albeit only temporarily) and shareholders saw the negative side of operational leverage and, in a few cases, over leveraged balance sheets.

Builders and related companies are another good example.

Also, other non-tech examples of network effects @Chagsy are shipping containers, and freight railcars. Standards are super powerful and hard to disrupt -- we still use the calendar introduced by Caesar in 45BC! And the metric system, and the QWERTY keyboard, and screw heads etc etc etc Hard to see us ever shifting from these standards.

What you really want is a standard/network that is OWNED by a company.. Cochlear is a good example on the ASX, which owns proprietary standards in implantable hearing devices, and a network of compatible clinics and professionals. Likewise, Audinate owns the Dante audio-over-IP standard, establishing a fast growing network in professional audio systems.

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