I am a "one-trick pony". The values offered by semi-equips at the cycle bottom are incredible and I am almost content to wait for the next opportunity.
I can't argue with that. I've collected some investing "rules" - one of them is to buy businesses that you understand. (I think that's a Buffett-ism or a Lynch-ism.) You get fewer negative surprises that way. I, for one, would be absolutely clueless about clothing and fashion companies.
I've started a message about three times regarding some philosophy of investing, but I haven't gotten it edited tightly enough to make my points cleanly. Pardon the ramble; it began as an answer to Sun Tzu's question about "why AMAT?"
The basic premise is that you have three tools and four decisions while investing. The tools are money, time, and risk; the decisions are buy / not buy / sell / not sell.
Obviously, the most common is no activity. For everything you buy, you choose *not* to buy many other investments. While doing nothing, you lose nothing (except to inflation) - but you are still making a choice to pass up an opportunity (or avoid a pitfall).
Combine three levels of each tool (High/Moderate/Low), and you have 27 possible "strategy" combinations to choose from. (with finer gradations, you get more combinations, but I don't think they add much value.) For example, the classic exponential growth pattern is a little money, lots of time, and moderate risk. Day traders seem to use moderate money and high risk in a short time frame.
So why AMAT instead of other semi-equip companies? Comfort with a strategy that depends on stability (relatively speaking <g>) of a market leading company (lower risk) for equivalent money over an equivalent time. Can you make more from other stocks? Sure - at the increased risk that you actually won't. Cary's strategy of buying at cycle bottoms and selling well before the top is an even safer - and possibly lower return - approach. Tito's LEAP strategy is similar, but leveraged by a finite time horizon.
In my previous discussion with Cary, I only differ on my expectation of near-term pricing. He relies on tangible measurements of risk, and I'm including more intuition about intangibles in my assessment. Time will prove which of us is more or less accurate - but I'm not going to claim he's wrong. For his choice of strategy, he's exactly right, and he states his position very well.
I guess my time as an Army officer prepared me for the investment world better than I expected. It taught me to develop multiple (often conflicting) hypotheses about hostile activity, and to make timely decisions with incomplete data. At the very least, we considered best, worst, and expected cases at the same time. (One of Murphy's Laws of Combat states that if your maneuver is working as planned, you're actually walking into an ambush. <g>)
My observation of a few cycles leads me to conclude that professional analysts bounce between best and worst cases, while reality falls somewhere between. This cycle ain't over - despite their claims a month ago. However, *cycles* ain't over, either, though some say so now. It's almost worth using 'em as short-term contrary indicators ... <g>
- Mitch
"Never take counsel of your fears."
- GEN George S. Patton, Jr. |
