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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Justa Werkenstiff who wrote (6372)	6/29/1999 5:10:00 PM
From: Math Junkie	Read Replies (1) \| Respond to of 15132

Yes, I think you have identified yet another reason why Ben Graham's writings cannot be used to justify the "It doesn't matter what you pay for an Internet stock" mantra.

To: Justa Werkenstiff who wrote (6372)	6/29/1999 5:25:00 PM
From: Math Junkie	Respond to of 15132

Also, I should point out, for the benefit of any "new metrics" lurkers, that a company that never shows a profit will eventually have to cover their losses, either by getting infusions of new capital by issuing secondary offerings, or by going bankrupt, thereby cancelling their net debt. Now of course, continued infusions of new capital is nothing more than the "greater fool theory" at work, while the implications of bankruptcy are obvious enough. That's why I posted my inference, a few days ago, that bankruptcy would send an Internet company's stock price to infinity. That is, after all, the logical conclusion of the notion that "Earnings don't matter".

To: Justa Werkenstiff who wrote (6372)	6/30/1999 12:58:00 AM
From: Lars	Respond to of 15132

Justa, >>> Richard: You should be aware that the context of that quote from Graham. He was discussing the proper valuation of companies with real earnings when he made that statement. Does anyone think Graham would invest in an internet company now because it has growing revenues with no earnings? Not a chance. >>> Whoooooaaaa has Graham been taken out of context! Graham would be laughing at these companies more than Warren. Graham was a cigar-butt investor mainly. He like to pick up companies selling at 2/3 or less of current assets. He did do some other plays and some arbitrage but he was obsessed with the numbers of a company. Warren took the focus of the numbers and added to it by looking at the business and management. That is why he bought See's, KO and G. If he followed Graham principles strictly he never would have purchased these companies. For example, don't quote me, but I believe he bought See's for around $28 million in 1974 which was at a premium. In fact he said that based on his focus at the time that if they would have wanted more than that he wouldn't have bought the company which would have been a mistake. Last year See's gave BRK around $35 million after-tax if I am not mistaken. It is late and I am not recalling the exact figures but the point is made nonetheless.