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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (39019)8/31/2010 6:31:48 PM
From: Jurgis Bekepuris   of 78704
 
Aside? Scuttlebutt.

There are people who think that investing without scuttlebutt is like gambling in a casino (hehe ;)). There are people who don't do scuttlebutt - that's me. :)

I thought about it and IMHO scuttlebutt makes sense only when the payoff is highly asymmetrical (or portfolio is highly concentrated - let's skip that situation for now). I.e. if we are talking about next Microsoft, Blockbuster or similar. Scuttlebutt takes a lot of time and effort. If you do it for every random company - like your example of casino slot machines - the time is probably better spent on looking at financials and choosing or discarding the company based on them. Scuttlebutt makes tremendous sense when financials suck, but you have a feeling that the company might be great going forward - and market has not seen that yet. Great positive example of this was QCOM before its explosion up in the 1990's, which made its original holders multimillionaires (and very arrogant ;)). CREE might be another example - the financials still mostly suck.

I was talking with one of the "scuttlebutt or you're not an investor" types recently. So I proposed to them to do a scuttlebutt on DRWI. Another tech fallen angel - Charlie Silk type - I'd not buy it without a true scuttlebutt of whether this is a dead horse or the next QCOM. Unfortunately the guy didn't take the challenge. Anybody here want to do some real 10-bagger scuttlebutt? ;) Note: don't look at financials, they won't tell you anything. DRWI did fine, now over half of the revenue is gone. The task is to figure out what's next. :)
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