Somewhat unique business, very uniqe management, page-32

Madam

I won't go on about ONT for now, as I fear you've already exceeded your 2.5% time allocation, certainly for this week.   Ha ha.

My experience with ARB certainly seems to mirror yours, though it sounds like you might have got in a touch earlier, you lucky bugger. I can't complain though, it's worked very well for me, though I suspect ARB got a tail wind from a little commodity super cycle. Whether or not the unwinding of such will give further entry opportunities, well I hope so. Though so far it doesn't seem to have.

ARB is a great case study of a "value decoy" (as opposed to a a value trap). Perhaps that would make a great new post, but clearly not here under the ONT tag.

I was an RMD holder for a few years. I sold out for two primary reasons:

• I didn't have sufficient confidence in the long term future of the technology. The business had, and still does have, a lot of blue sky, for many reasons. However, I felt that any new technology that might come from left of center, that eliminated the need for an uncomfortable CPAP style device, would unravel the business. As difficult as it was to envisage what form this technology might take, I wasn't comfortable. Rightly or wrongly (in hindsight wrongly, thus far).
• The business was, when I held it, buying back massive amounts of its own shares, year after year (it may still be, I don't know). As much as I applaud share buybacks when performed on the basis that management believe their shares are clearly undervalued, I am not comfortable with automatic and continuous purchases. The business was (and no doubt still is) generating very attractive returns on its capital. However, when I looked at the returns on capital to shareholders, on a per share basis, they were no where near as attractive. This was due to the capital foregone by those shareholders not selling into the share buy backs. Unfortunately, to me, this did not seem rational behavior.

Of course, on the final point,  in hindsight, I may have been proven spectacularly wrong (I don't know, I haven't followed the business for years). For all I know, the business was actually cheap at the time. This comes back to the question of what is cheap? - as per your comments. Yes, for a great business, the upper limit of reasonable value, can be very high indeed. Which is why I too , tend not to sell anything (mind you I don't buy anything too often either!).

Mars