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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Uncle Frank who wrote (34055)10/30/2000 12:53:42 PM
From: StockHawk  Read Replies (1) of 54805
 
...an amorphous body of enthusiasm mixed with high pressure selling. Project Hunt taught us the value of objectivity and structure.

That's an excellent point, Frank. And it is something I think we should take more time to consider.

Unfortunately, enthusiastic advocacy is often a component of investment research by us amateurs. The reason is quite simple. Doing extensive research and analysis on a company takes a lot of time. Few people are going to do such work on a company that they are not interested in. Most of the time, the research is done not only on a company that interest the person, but it is a company that the person has an investment in. The perhaps subconscious motivation is to prove to ourselves the validity of our investment and to get others to see it.

It is a difficult problem to overcome, and increasing awareness of it is the first step.

The second step is to identify the areas where "rose colored glasses" do the most harm. Those would generally be the subjective areas. Hard numbers, following a format, are harder to misdirect. Metrics like ROE or ROIC or flow ratio or YOY sales growth can help a report to be more objective.

I also think it is problematic whenever someone investigates a single company. More clarity can be provided when two close competitors are analyzed and compared. We saw the value of this a few months ago when Bruce provided some quantitative comparisons between CSCO and LU.

Just MHO.

StockHawk
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