daystocker,I posted quite a bit before Xmas on CNP and CER. I've...

daystocker,

I posted quite a bit before Xmas on CNP and CER. I've been open about the fact that we exited part (but not all) of our CNP holding last year after it became apparent what was happening. I continue to feel very good about CER and have posted information on the CER forum as to why.

We are and always will be long-term value players. This means research to death, buy when the company is distressed (we rarely pick the bottom, but then research suggests very very few people ever do) and hold for a long, long while. The question we try to answer is whether the problem surrounding the company under consideration is permanent or transitory. If it's permanent, move on. If it's temporary, assuming the company survives, what will it be worth in 3+ years time and can we buy it with an appropriate margin of safety now?

If you are a short-term speculator or in a leveraged product then the events surrounding BNB, Centro, etc. last year would certainly have hurt. If you buy one day with a view to exiting same day or within a few days or weeks, you're in a different game to us. We're just no good at short-term trading which keeps us away. Research suggests very few people are any good at out-performing markets through short term speculative trading. Those that do are obviously very good at it.

So, the question early in 2008 was whether the Centro had a permanent or temporary problem. Our view was that it was temporary, but this remained fluid while we waited for more information. As the information flowed, it became apparent that the Centro situation was very serious but still temporary and this remains the view today. Please, please note that by temporary I mean we are of the opinion that Centro will still be around in 3+ years (or taken over) and will be worth considerably more than today. For this reason we still have some CNP, a very large CER holding, BBP, etc.

The question today is whether BNB has a temporary or permanent problem. That is for you to decide. If you think it's temporary, you have an enviable choice of BNB or BNBG - I prefer BNBG for the reasons outlined but again I stress that we only have a small holding. If we get a 20 bagger any time between now and 2012, I'll be a happy bunny. If it goes to custard, we'll be on the creditors list for 2-3 years whilst the global economy recovers and probably end up with more than our money back anyway. If not, we won't lose the farm doing so.

I'm sorry about your losses during 2008. I appreciate it's no consolation but there are very few people who did make it through unscathed. What goes up, must come down... but history has proven the reverse is also true. Good luck in 2009.