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Strategies & Market Trends : The Art of Investing -- Ignore unavailable to you. Want to Upgrade?

To: timbur who wrote (874)	2/20/2000 7:01:00 AM
From: Stuart C Hall	Respond to of 10713

Before we take ourselves too seriously, here is a great parody of SI. The only links that work are the ones in the lower right. home.att.net

To: timbur who wrote (874)	9/20/2001 9:00:22 PM
From: Sun Tzu	Read Replies (1) \| Respond to of 10713

In the last run, large cap growth stocks went through a most irrational exuberance that has not been completely ironed out yet. Today, many stocks are going through irrational pessimism. Case in point is ACTI. It is obvious that someone is willing to pay over a dollar in cash to get rid of the stock. "Take my stock PLEASE!", they scream, and I am happy to do so. Stocks do trade below cash and ACTI is not the only one. Let's take a look at the reasons. To begin with, the seller may be forced to sell due to margin calls, and the buyers in this market are hard to come by. Secondly, the stock has not gone anywhere, and it could be argued that the proceeds from the sale will be put to better use elsewhere. Thirdly, and most importantly, stock market is way to discount the future. If you think that a stock will not be higher two months from now, regardless of the valuation, selling may be the right thing to do. In case of ACTI, fear has created a great opportunity for the brave and the patient. The opportunity is not here because of valuation alone. Value stocks can remain cheap for a long time and their intrinsic value may disappear while the market takes its time. Successful value investing depends on 3 conditions and all must be present. First, the stock should trade at least at a 30-60% discount to its intrinsic value. Second, there must be a catalyst to unleash the value. And third, the company must be doing something useful so that while you are waiting for the value to be released, the intrinsic value is actually increased. In a bear market, there is also a fourth condition that is paramount; capital preservation. In the case of ACTI, all four are present to varying degrees. The value, I hope, is self evident in this case. The company has partnerships with many companies, including SUNW for its product and is busy developing just the right things. The catalyst is two fold: the existing trend towards the use of smartcards, and the new hightend sense of security due to the recent tragedy. As for capital preservation, the company has enough cash that at its current burn rate it can remain in business for another 10 years before needing money. It should not trade at a much greater discount to its cash position...or so I hope :) BTW, it may be time to research out good value managers. Any suggestions? Sun Tzu PS GX is another great value story. I've bought 6,000 shares and have orders for another 9,000 shares if it hits my prices.