Natural tendency for corporate bloating, page-9

@travelightor,

I am surprised at your strident views on this one, especially in comparison to a business like BRG in which I, along with you, are also a long-term shareholder.

For it someone held a gun to my head and said, I could own only DLX or BRG, but not both, my choice would be DLX.

The reason for this is that I see the DLX business model as being far more resilient and durable than BRG's. As case in point, as a shareholder I have been quietly dismayed at how margins in BRG's Australia + NZ business have been white-anted by competitive forces in recent years (BRG's ANZ EBIT has been crunched by 40% from its 2013 peak levels). [Heaven knows what BRG's share price might have been had the company not established a global business].

I cannot envisage a scenario where DLX's operating profits would ever experience a 40% fall. DLX's customer base is far more granular and far less discretionary in nature, than BRG's.

The BRG business model is lot more "fad-centric" than DLX's, and is quite prone to any tectonic shifts in the competitive landscape (witness the decay in the Australian business, as well as the Keurig ambush in 2014).

Speaking as an objective owner of both companies [*], I'm convinced that DLX is a far more robust business than BRG is.

Put another way, if someone offered me a choice of the job of CEO: either at DLX or BRG, I am sure the DLX gig would be far less challenging, testimony to the fact that I'd have less to worry about that I would running BRG.

My sense is that there is little that DLX's customers, competitors or customers could do that would throw the business off its natural course; with BRG, demonstrably, the same cannot be said.


[*] Coincidentally, I have a near-identical amount of my invest-able capital sitting in DLX and BRG (around 4% of my portfolio). The difference is that I last purchased shares in BRG in 2015; the last time I added to my DLX holdings was late last year. For the record, REH makes up about 6.5%.