@MarsC
The attributes that you look for in a business "black box" are very similar to what I look for when buying shares in a company. Personally, I find it very useful to have a checklist that I can tick as I analyse deeper into a company.
As for HVN, in my personal opinion, HVN and other retailers of goods that are easily posted by mail, are vulnerable to attacks by online giants such as Amazon. Almost the whole electronics business of HVN are potential hunting grounds for Amazon.
Furniture and other bulky goods are probably less vulnerable as customers still prefer to touch and feel the goods before making the decisions to buy.
If the financial performance of HVN is negatively affected by the arrival of Amazon, then the valuation of its property portfolio will also be affected. This property portfolio, which for a long time has been HVN's source of competitive advantage, can turn into burden or source of competitive disadvantage.
The current controversy relating to how HVN actually accounts for its under-performing franchisees has its origin in the very business structure of HVN. Every time I look at HVN's network of thousands of micro-franchisees, I can't help but feel that its business structure is so nineties, or even eighties! It is simply unnecessarily complicated.
HVN's major competitors such as JBH or NCK are able to grow rapidly without having to resort to selling franchises/territories to franchisees. As a result, their businesses are much simpler to understand.
As for this current controversy, I always believe that if we find a cockroach in a pantry/kitchen, chances are it's not the only one around. There is probably one big family of cockroaches hiding somewhere behind the tins of tomatoes.
Sometimes, it's very hard for an investor to avoid being blinded by a big personality, especially one who has forms such as GH. When bad news arrives, it's very easy to be understanding/accommodating and ignore the bad signs as a one-off that is dwarfed by the list of boxes that are ticked.
A few years ago, I had a bad experience being blinded by a big personality who I thought to be "faultless". It was Frank O'Halloran's QBE. At that time FOH spoke all the right words and "did" all the right things. In the end, it turned out that all of the acquisitions that he made were not that brilliant and QBE shareholders are still paying the price up until today.
Fortunately for me, I bit the bullet and moved on. The companies that I bought using the proceeds from QBE did much better than QBE and I prevented myself from wasting a precious few years.
The other thing that should be considered is HVN's life after GH retires. He is 77 this year. What will happen to his shares? Will the market derate HVN's valuation? Who's going to replace his role as the ultimate protector of HVN's capital?
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