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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Bob Rudd who wrote (8403)	9/27/1999 7:43:00 PM
From: Paul Senior	Read Replies (4) \| Respond to of 78959

Armin wrote: <<perhaps by adding a criterion of a defined catalyst to value selections can improve performance>> I think it's one of those ideas that are unassailable logically, but in actuality, do not work. I see the idea often mentioned by value fund managers. I've come to the conclusion it's something they say as a marketing ploy to tout their ability to pick stocks. It's a story they give about how there are so many cheap stocks out there, that the art of the thing is to be able to tell which ones are temporarily mispriced from the ones that truly deserve to be cheap. I put it in the same category of pig-at-trough investing. (eg.pick and own your 40 best stocks; another stock for consideration has to displace one of the 40 to make it onto the buy list.) The thing that shoots it all down for me is that these managers can not pick, a priori, which of their stocks are actually going to be the big winners, and which are (actually) going to languish. And they will have many stocks that do nothing for long periods of time. This, in spite of apparently having some "extra" catalyst criteria. Contra indicator however: On the other hand, I'm trying to keep track of my net-net choices which are selected solely based on financial numbers vs. the net-net choices picked by Jim Clarke. Jim's are winnowed to a select few by considering fundamental factors such as the business model (i.e. there's a defined catalyst or margin of safety). So far, on a small sample and only over a year or so, Jim's picks are far outdistancing the few net-nets that I've picked. In some reports of academic studies I've read, the only catalyst would seem to be the presence of insider buying. On stocks that are discussed here, usually that factor is mentioned. (I believe Mike Burry, et. al. are fans of insider buying. I like it too.) jmo, Paul