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Strategies & Market Trends : Value Investing

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To: Dave who wrote (15203)	8/15/2002 1:17:45 PM
From: Jurgis Bekepuris	Read Replies (1) of 78605

Dave, >if one relies on ROE alone, that might be flawed. > For example, a company that utilizes a high degree of >leverage to generate assets may show an abnormally >high ROE Agreed by definition, but since I usually do not buy companies with high leverage, I don't really care about this problem. As you say, if debt/equity is high, then good-bye. :-))) >one should not compare ratios of companies in different >industries to determine whether or not one company is >a buy in view of another. I totally disagree with this. If a company earns only 4% ROE, I don't care whether it is in the money printing industry. I will instead buy a company from manure industry that earns 25% ROE. Tell me why I should buy the 4% money printing company? Because it has higher ROE than another money printing company that earns only 1% ROE? I don't see logic there. And if the whole industry earns high ROE - e.g. pharmaceuticals - I would buy the whole industry and don't buy anything from e.g. paper industry. Yeah, I know, I should diversify. I do that in my 401(k). Jurgis

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