Q: Do you think businesses like See’s candy, or hard assets such as railroads are superior in a inflationary world?
The first group is superior. You have the price power. The worst business is one that has a lot of receivables. Normally we were not enthusiastic with utilities and railroad. The ideal business, See’s candy, was doing $25 million when we bought it. We are doing $300 million now. We only had to plough back $30 million in the business. We don’t have receivables and much fixed assets. See’s Candy is far better.
The ideal asset is the royalty on someone else’s sale. That kind of asset is inflation protected. We deployed in utilities and railroads because we cannot find enough business like See’s.
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This company will be a beast if they can get the assets into the right hands. LUK is minting money with that royalty. Its tough you need a buyer, but one with big pockets who can push through regardless of the commodity cycle.
