I'm not sure why. Maybe it's a history of independence, fiduciary obligation, separation of state and media (lol), and those kinds of values?

I gave you the ABB idea last week, and I've been mulling over Nestle today. I would have written it up if the stock was listed in North America, but institutional traders like it, and they are readers too, so here's the deal.

I asked a reader who once worked for Nestle in a head office management capacity (but who today professes he knows too little to be of help), to give me his straight-up view. I thought I'd share it.

He says:

"Nestle has "worked aggressively to address costs and efficiency (purchasing/Globe project), streamlining manufacturing (best practice/regional approach/increasing cross-border trades/3rd party production for basic products/divestments), strong branding/commercialization (brand portfolios with lesser but stronger range brands), focus on value added products (food science: eg, branded ingredients, new technologies for best aroma delivery, differentiated products) and focus on higher margin strategic product groups. Geographically they pursue a leading position for their strategic product groups in all markets mainly through acquisitions and internal growth.

Nestle is an elephant but on the move and pretty dynamic for its size. They are global but often perceived as local. They were in the past years able to build up strong positions in strategic segments in a short time frame (like the water business, already No.1 ww, ice-cream, breakfast cereals, pet food). Nestle also owns Alcon and has an approx. 25-pct stake in L'Oreal which owns Body Shop. In the past it was said that Nestle will aim to acquire the 26-pct stake of L'Oreal from Mrs. Bettencourt once she dies. The Alcon/L'Oreal business performance can affect the Nestle shares.

I think longer term their growth potential is promising with their leadership amongst the international players in emerging markets. Contrary to American companies, Nestle is one of the few that has never left a market when their factories were nationalized (like Indulac in Venezeula) or their local business was otherwise in trouble. They fix it and usually achieve a turn-around (like in ice-cream). Today Nestle has the strongest position in emerging markets with high market shares and strong brands. They are always looking at acquisition targets and they are patient and long-term oriented.

These are just some remarks reflecting my perception. But I am not updated on Nestle. If there is a specific information you need I might be able to get it.

I like very much ABB, which you wrote up. Actually there are quite a few excellent Swiss companies, but most are not traded in the US. Another one I like is Logitech that is traded in the US: Nasdaq LOGI."

I'll have to look into LOGI. If anybody has some insights, please pass them along. This blog is about sharing, you know.

ADDENDUM:

I received a letter from another Swiss reader who wanted to add his view (or should I say perspective):

Bill, Excellent entry on Nestle, which I own as a global water and food play. Very strong company now, after they struggled in the 90s. Comparable to ABB also as a China play.

In travelling through more than 50 countries in the past I realized that there are only 2 globally known food brands: Coke and Nestle. In the center of Beiijing you will find big ads for Nestle now. The stock is a little bit overbought, a pull back of 15 % is possible. Good dividend.

Here are 2 reports on Logitech, the mouse and computer camera company.
I would buy it after a pullback of 20 %.

2nd ADDENDUM

Hello Bill, Thank you for quoting me in "A view from the Alps"; it was a pleasant surprise. You triggered my interest in Nestle (again) so I just read through some Peter Brabeck (CEO) speeches. I think what I wrote is pretty much in line with what they say. But what called my attention was their share buy-back program.

"Nestlé today has a more flexible policy with regard to the management of its capital structure. The Board now makes use of both tools, dividends as well as buy-backs. When we announced the first buy-back program in February of last year, I specified that we would use buy-backs selectively and flexibly, according to circumstances and specific situations. Also, we made it clear that this was not to be interpreted as a fundamental modification of our views as to the long-term development of the Nestlé Group. It gives us, however, the possibility to economically return capital to shareholders when circumstances do not require this capital to be retained in the Company. You have seen that our investments in fixed assets remain stable as a percentage of sales. You know our acquisition policy at this time centers on acquisition opportunities that help us fill-in strategically important sectors in specific countries or regions. Finally, you are aware of the rock-solid nature of our balance sheet that is reflected in the AAA rating. At present, therefore, we are returning capital to our shareholders both through buy-backs as well as through a dynamic dividend policy."

I just wonder what you think about "...economically return capital to shareholders when circumstances do not require this capital to be retained in the Company". In your latest WIR you wrote: "What share buybacks mean is that the company cannot redeploy funds at its Internal Rate of Return (IRR) requirement (usually a relatively low +10-pct for a conglomerate of this size), so the Honeywell Directors want shareholders (read their tax-advantaged friends) to receive that capital at cycle-topping prices. I can do better than +10-pct returns (often quarterly), so why would I care? To me, the share buyback represents a failure on the part of management." Do you think this is the real reason also for Nestle's share buy-back? Kind regards from the Swiss buy-side

I don't know, but I am surprised that share buy-backs are so prevalent in all parts of the world.