Somewhat unique business, very uniqe management, page-33

Marsc,

Can I now have a turn at quizzing you on some philosophical issues?

Firstly, your point on having sold RMD due to concerns about potential product obsolescence: don't you think one can quite easily adopt that same sort of stance on any and every company?

For example, even with ARB there could be a concern about the love affair people in the developed world have with SUVs and the need to accessorise them could be little more than a fashion fad which, when it runs its course, would leave ARB without a business? (In fact, I have gone through bouts of thinking to myself, "this is little more than a metal bashing business with only a few smarts hanging around it")

For CTX, the advent of the battery vehicle could make all those service stations redundant.

For ONT better education and a still-to-be-invented magic compound injected into pregnant mothers or young children could one day eliminate tooth decay.

And so one could go one for just about every company one encounters...

Don't you think that the best way to make the distinction between the all-important job of discerning risk, and the counterproductive act of merely jumping at shadows, is to draw upon precedent?

Isn't the future highly likely to resemble the past, in the absence of any explicit reason why that will not be the case?


And then, your view on share buyback program, as conducted by RMD. Specifically, you have expressed reservations with RMD's practice of "automatic and continuous purchases".


But, considering the following:

- The company operates in a field (OSA and related sleep disorders) that is structurally growing.

- It is the industry leader, reinforcing its position via the biggest R&D budget compared to its competitors.

- It has a demonstrated track record of superior growth in Revenues, Profits, Cash Flows and Dividends.

- It has surplus capital on its balance sheet and adds to that surplus every year.


Now assume the following:

- The company's intrinsic value will continue to increase in the future, much like it has over an extended period in the past.


Surely, a continuous buyback program is an eminently sensible thing to do given the set of circumstances in which RMD finds itself, as described above (quite a luxurious and enviable set of circumstances, it warrants saying)?

If not, what would be the alternative mechanism by which to accelerate returns to shareholders?

Special dividends? As a shareholder, I would far prefer shares to be bought back and cancelled so that I, as a long-term shareholder end up being a holder of a larger slice of the same earnings pie. I like the idea of extinguishing equity interests that never need servicing

Of course, if the business in question was a cyclical business, and a buyback risked being made at the top of the price cycle, thereby destroying the value of shareholder capital, then a sustained and ongoing buyback could indeed be argued to be a dubious practice, but when the business is one that has both a history and ability to increase in intrinsic value over time, what is wrong with conducting a buyback at any time when there is excess capital?


Finally, your tendency to not sell shares puts us in a bit of a like-minded position.

But you say you don't tend to buy anything too often either? Presumably, that means you build up cash from time to time. How do you reconcile buying discipline with "timing the market" which, if your cash balance becomes material, and the longer it remains that way, is effectively what you are doing?