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Technology Stocks : Dell Technologies Inc.

DELL 138.80

-2.7%

Nov 11 3:59 PM EST

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To: Ibexx who wrote (45595)	5/31/1998 2:41:00 PM
From: Chuzzlewit	Read Replies (1) of 176387

Ibexx, that's an excellent point! Guys like Zweig and O'Neil are wonderful right up until there is real money on the line. If you think Zweig's fund is a poor performer try looking at O'Neil's. As I recall it was just about the worst performing fund around! The problem is that a lot of these guys are guilty of data mining. The classic example in my opinion is O'Neil's faulty reasoning behind the CANSLIM method. For example, he recommends selling a stock if it has fallen 15% (20% if you have owned it for some time and have decent paper profits). But think about it! If you agree that in the long run stock prices are dictated by profits and cash flow and nothing fundamental has changed about the company except the price, why sell it? I'd try to buy more because it has become a more compelling value. I think everybody would agree that there are two variables which push the price of stocks down. The first is business risk. OXHP is a great example of that. The stock tanked because investors became aware that the company's "earnings" were built on smoke and mirrors. The second is market risk. October 27 is an excellent example, but there are other more subtle ones which are better examples. For instance, when Compaq issued its earnings warnings it dragged DELL down with it. The failure to recognize that either of two broadly defined factors can cause a stock to decline leads to false conclusions The point is that a multivariate approach is required to sift through the data, and even then there is no guarantee that cause and effect relationships have been demonstrated. Even more sophisticated analysts are guilty of the same transgression. For example, take O'Shaugnessy's argument that low P/E investing outperforms high P/E investing. High P/Es are caused by two quite dissimilar factors. The first is that a once solid company has fallen on hard times and is operating at slightly better than break-even. The second is that investors recognize and reward potential growth. Failure to distinguish cases once again leads to specious arguments. What is interesting about the study that Paul Reuben posted is that we have actuals -- no hypotheticals. We are dealing with real money. The conclusion is clear. Those investors who bought and held did significantly better than those who churned. TTFN, CTC

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