Possibly this is why 85% of the professional managers underperform your basic S&P 500 Fund. See comments on Point & Figure in first paragraph. The biggest problem TSCM has is their brand name conjures up thoughts of Cramer and they are going to eventually have to deal with it in this incredibly competitive market for basic every day market information that one can get from newspapers.com T
Pros and Cons of Pro Investors
By James J. Cramer
00/01/26 7:16pm ET
What do people want out of companies? What kinds of numbers do we want to seem that make buyers excited? What goes on in these conference calls that makes portfolio managers want to buy more rather than sell? To understand this question is to understand the difference between the way the individual plays the market and the way the professional investor makes
her decisions. The typical portfolio manager is not sitting there with a point-and-figure chart hoping that the lines will show whether to buy or
sell.
The portfolio manager has built a model of earnings for the future and she is trying to figure out whether her numbers are too low or too high. Join the discussion onTSC Message Boards. Take JDS Uniphase (JDSU:Nasdaq), which reported last night. When I go into Matt "Just Don't Sell Us" Jacobs' office as he listens in on the call, he is not doodling on a pad, or reading Sports Illustrated or checking out icks.com. He is looking at his model of what he expects JDS to earn in the future, a model built on expectations arrived at through working with the company and with Wall Street analysts.
If he hears information about the sequential growth that is better than he expected, he is thrilled. Numbers have to go p. He jumps up and down when he hears that JDS may be hinting that its revenue figure for the next quarter is
going to be bigger than the one he was looking for two quarters out.
But he is very disappointed when he hears that the numbers ahead are not going to be as high as those in his model.
That's a bummer. That's yesterday's Qualcomm (QCOM:Nasdaq) experience. Or today's Dell (DELL:Nasdaq) fiasco (which, just so we are clear, was a really ugly one that will test those long-term holders while it creates a buying
opportunity).
That's what makes him come in to me and say we should be selling, not buying. Of course, this is one of those areas where I think the professional is better than the amateur. The professional has the models, she knows what
people are looking for. She can figure out instantly what is really better than expected, as opposed to all of this whisper junk you keep hearing about.
This skill, however, affects stocks only at the margin. We may reach a decision to sell because the model is not beaten. However, there are more things at stake than just the numbers. Longer term, the short-term numbers may turn out to be meaningless.
Let's take Disney (DIS:NYSE). Those professional traders who extrapolated previous numbers off their models weren't able to see the breakout coming, because it occurred intraquarter. But those individuals who last year looked
at Disney and said, "It can't get any worse than this, I will ride it out," turned out to be huge winners.
That's why I always give the long-term investing edge to the amateur. The professional can make excellent short-term decisions based on near-term revenue and earning projections. But the amateur can often make a long-term
decision based on the true worth of an enterprise over many years.
And that's where the biggest money is made. |
