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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (37574)	1/17/2000 12:52:00 AM
From: Crimson Ghost	Respond to of 99985

From the Tocqueville Fund Group MEMO FROM: Fran‡ois Sicart MEMO TO: All Portfolio Managers As the graph above illustrates, the out-performance of technology-related stocks has now lasted for a full year -- the entire professional careers of some of today?s best-performing money managers. This is enough to stop treating it as a fluke and to admit that we have entered a new paradigm. Some among you may attempt to argue that value investing has consistently outperformed every other management style, with only brief interruptions, for a century or more.ÿ I will grant them that value-based investing remains a trusted way of making money in the stock market. But it no longer is how ?real? money is made. As a result, to bring Tocqueville Asset Management into the 21st Century, I have decided to enunciate a number of rules for investing our portfolios, which I expect all managers and analysts to follow. In fact, the matter has become pressing enough that I have decided that these rules will become effective today, rather than on April 1, 2000, as originally planned. 1.Effective immediately,ÿ managers will only be allowed to purchase stocks that are up at least 70% over the previous twelve months and sell for at least 10 times sales. These criteria will confirm that a majority of analysts concur with our view, and should therefore reinforce our confidence in making such purchases. 2.Special caution should be exercised in analyzing so-called ?growth stocks? thatÿ are actually earning money. This may be an indication that the management is following an outdated business model, ill-adapted to the ?New Economy?. Note that some companies with a modest level of earnings may be considered, as long as most of those earnings are derived from creative accounting. Creative accounting, in the New Economy, seems to go along with creative technology, creative marketing, and creative vocabulary. 3.Any company not spending 50% of its total revenues on advertising is missing the new paradigm and business models altogether. 4.From now on, we will buy only the shares of companies followed by a very large number of analysts. Not only will this reinforce our level of comfort, but it guarantees that the quarterly earnings ?whisper numbers? will be heard loud and clear, so that we are only exposed to positive surprises. 5.History is bunk if it is over five years. Financial analysis has become less relevant for new industries where historical comparisons do not exist, and since everything changes all the time, past financials become obsolete even as they are printed. Thus, we should read only summary financials of the last year, and rely more on brokerage firms? analysts, who are well known for their entrepreneurial talent, and are thus in an ideal position to judge today?s new entrepreneurs ? and their business models. Fran‡ois Sicart December 1999