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Strategies & Market Trends : Value Investing

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To: Michael Burry who wrote (1954)	9/18/1997 10:07:00 PM
From: Jeff Maresh	of 78717

Hi Mike - I see your point. I spent about 40-50 hours on AMGN recently just for the heck of it. They have two good products and lots in the pipeline but it's like you say about obsolescense. Getting through clinicals is another story. But the interesting thing about AMGN is that it appears to be moving sideways as the PSR adjusts downward to more reasonable levels. If it follows Fisher's model, it may move sideways for 3-5 years at the current revenue growth rate! The current PSR is around 7 and the growth rate is around 20%. A PSR of 2-3 is perhaps reasonable high value for a company of it's size in 3-5 years. >Indeed, some biotechs explode upward, but those that don't often fail. What about Stryker? It's a favorite NAIC stock that just keeps going up. Of course it's not a value stock but it's one heck of a great company. A few doctors around here put a lot of money into it 5 - 7 years ago and are still holding it. >AMAT I bought >April 96 at 37 only to see it fall to the value you bought it at. >I got out at 31. Looked smart for about 4 months. Believe it or not, that's when I started buying also! My average cost is in the neighborhood of $35-37. The method I use that works great is buy on price movements and in fixed intervals to average the cost down if it truely is a great company. I accumulated AMAT in about 8 purchases. I bought about 6 weeks apart when the price didn't move and then I bought every time the price moved about $5-7. It's impossible to bottom fish. Just when you think they've hit bottom, the bottom falls out. A recent case in point was SGI. I bought some at $20 just before the April earnings announcement and then bought a lot more beginning 2 days later at $13 or $14! I made my last buy at about $28. But I started buying as high as $34 on the way down. Average cost is around $21. Tech value investing is in a class by itself and IMO Fisher's method makes the most sense from a value standpoint. Obviously intrinsic value approaches fall apart here. But the tech revolution is here and it is going to drive the country for a long time. But unlike the railroads that accumulated tangible assets, tech companies have intangible assets which do have value. Regards Jeff

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