To P and All, Part Two. Got knocked off and then got a visitor. Now I'm back.
2. Another reason why I post on the net is because I get a lot of great ideas that have helped me make money. I get a lot of crappy ideas, too, but they are usually easy to dismiss.
3. I have worked as a trader and don't consider myself one. The fact that I trade often has to do with price more than time. If I buy something expecting a 50% return in a year, and it gives me a 40% return in a month, it's hasta la vista, baby. <G> I have often traded actively, but with an investor's point of view. In other words, I am not looking and saying, I'd like to buy APF for a pop of a point. I am saying, I like APF as a double in two years. If the returns outrun my valuation time line, then I punt.
4. I do tend to be fairly dogmatic. Also somewhat hypocritical. At $82, Ciena was a piece of crap managed by a bunch of scamsters and owned by a bunch of morons. At $12, Ciena is an undervalued, quality small co. managed by intelligent gentlemen with a vision and its shareholders, who now include myself, are top notch. I will agree that these dogmatic positions sometimes can be consider cartoon caricatures. However, as the sage Cyndi Lauper once sang, "Money Changes Everything." In the case of stocks, it is price. Every once is a while I find a co. I really can't stand and won't buy at any price, or one I love and won't short at any price. But, for the most part, I have once been long most of the stocks on which I currently hold puts and once held puts or sold short most of the stocks I currently hold long. That is because these are "action issues."
They get way overvalued and way undervalued.
The only thing I am always dogmatic about is valuation. If a stock is overvalued, I am willing to call it a dog no matter who likes it or how high priced and popular it is. The market cannot humble those who know how to value securities and I feel my task is to learn all I can about valuation and get a lot better at it.
The market is not stupid or smart. The participants are. TA and momentum folks say to listen to follow the market. I think big profits are only made, in the long run, by people who lead the market. What I feel I have to do is determine where the market participants are most misjudging value, and this is in several different markets, and play them the way I see them. That means almost always going against the consensus and its marketing miracle or its manic depression during the bear phases.
You used AOL as an example. AOL reminds me of Chiron 5 years ago. Folks were saying exactly the same thing. If it dropped by half, it would still be overvalued but we'd all have to buy because of the marketing good will. It dropped by half and nobody bought. It has now dropped by 76% and the herd has not rediscovered it. And, unlike AOL, Chiron is a decent company with no accounting shenanigans. The internet stocks will crash just as the biotech stocks did. Yes, there will be an Amgen and a half dozen other names that do well during the crash. But the hundreds of other players will suffer greatly. The herd is always wrong when it overvalues and undervalues an area. That is why brain dead but effective techniques like The Dogs of the Dow have some merit.
MB |
