Weekend stock pick: Kentz

Kentz is a specialist construction company for the oil and gas industry. It earns returns on equity of 25%, has net cash equal to a quarter of their market cap ($181m) and trades at a PE ratio of 9, the lowest it has been since 2009. This is a fantastic long term investment with a large margin of safety at today’s prices.

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Moats aren’t forever

There was once a time when a moat was one of the best defenses of a castle. It slowed down attacking troops or bottle-necked them into a narrow route of attack. However times change, and nowadays with the advent of both artillery and aircraft a moat has little use. Such is the way with competitive “moats” in business; what was once insurmountable suddenly becomes insignificant. I was reminded at the weekend of one of my favorite shops growing up – Argos ($HOME.L), a UK catalogue retailer, and began thinking about its once great moat. Unlike most catalogue retailers, Argos had physical stores where you would buy their products, rather than ordering over the phone. You would also pick up a catalogue to take home and browse through at your leisure when looking for gift ideas or something you needed. Most houses contained an Argos catalogue and back in the day, if you suddenly realized you needed something, whether it was while cooking, seeing an advert on TV etc, you would usually go first to the catalogue and check out how much it was. But that moat didn’t last forever and here are two big things in the future that I think will destroy lots of company moats in a similar way.

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A student once asked Warren Buffett how best to prepare for an investing career. Buffett thought for a few seconds and then reached for the stack of papers he had brought with him.

“Read 500 pages like this every day,” said Buffett. “That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.”

So here are some of my picks from my reading over the last couple of weeks for you to browse this weekend and make up some of your daily 500 pages.

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