Tom/PX *****Off Topic??*****
Tom, you give a very nice overview of some differences between sector/industry growth.
As far as Ben Graham is concerned, he was trying to make available a fairly simple primer on investing--in the stock market (and in bonds). The Intelligent Investor is really a good book to get a basic idea on investing, although there are many other fine books available that are more recent.
Ben Graham died in the 1970's. He came to Wall Street around the 1920's, and was a Wall Street professional until shortly before he died. He's famous/well known because of three main factors:
1. He wrote a book, Security Analysis, (in the 1930's?) that is supposed to be the basis for modern fundamental security analysis: how to value a company as a business and how to value the company's stock.
2. He made a lot of money on Wall Street, and he taught about investing at some college (Columbia, I think). So he is often cited as someone who could not only teach the theory, but was able to use the theory to actually make money.
3. Some of the people who studied under Graham went on to make a ton of money on Wall Street. Warren Buffet is the most famous example.
When you talk about the Aluminum industry, you might be giving very valid reasons for the industries problems in the 1980's (overcapacity, lack of product differences, etc.)
And deregulation is often cited as a major cause of the Airline industry problems in the 1980's.
But since Graham died before 1975 (I think it was around 1975), he was talking in general terms about how to value stocks. His basic approach for the beginning investor was
1. Margin of Safety: try to buy stocks below their 'fair market value'.
2. Diversify. Don't put too much of your assets into any one stock or industry.
3. Diversify. Put some of your money into stocks, and some into bonds.
4. Be realistic in your expectations and in your behavior. If you're going to gamble in the stock market, admit to yourself that you are gambling, and keep your gambling money separate from your investing money.
5. Don't expect to make a killing on Wall Street. But if you invest sensibly, you should be able to make a nice return.
I really enjoyed The Intelligent Investor, even if I couldn't use it to make a lot of money.
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What am I trying to say, apart from the fact that I liked the book? Graham was giving general ideas, with concrete examples of actual stock market companies.
Graham was pushing a value approach. And he was also saying that you can invest in one industry that might have good growth prospects, or you can be a growth stock investor, but he favored the value approach, and that was what he was recommending to his readers.
As far as industry growth prospects, or a particular company's growth prospects, he said it's more important to look for value and try to buy the stocks of solid companies at a cheap price.
What we sometimes forget (or don't want to admit), is that Wall Street is very good at what it does. As far as earnings prospects for a particular industry or company, the news goes to Wall Street first. And then it is doled out to the general public. Graham didn't put it that way exactly, but he specifically said that anything you know about the outlook for a specific company or a specific industry is already known by Wall Street, because that is part of what they pay the analysts for.
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But since I want to make a killing, and since it's only human nature to want to make a killing, I usually ignore what I can remember about Ben Graham.
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PX-
As far as outlook for the HDD industry--
Everyone agrees there will be massive growth in the memory storage industry. The question is whether a stockholder can make much money. I'm not talking fantasy money, like being able to buy bottoms and sell tops. If the industry is able to make a lot of money, the stockholders should do well. But no one knows if these companies (SEG, WDC, QNTM, the head suppliers, etc) will consistently make money or not.
Supposedly, even with storage requirements projected to growing massively, the revenue projections are for only a small increase (because of falling unit prices).
To put it simply, the aluminum and airline industries both experienced massive revenue growth. The aluminum industry, for a while, enjoyed earnings growth along with the revenue growth. The airline industry, except for brief periods of time, did not have consistent earnings growth.
And the hard disk drive industry, in spite of projected storage demand growth, is still boom and bust. |
