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Technology Stocks : THQ,Inc. (THQI) -- Ignore unavailable to you. Want to Upgrade?

To: Apakhabar who wrote (13786)	4/19/2000 3:11:00 PM
From: OGM	Read Replies (1) \| Respond to of 14266

"Congratulations. You get the prize for most perverted use of the long-term philosophy." Apakhabar, I really do prefer healthy debates that are on a positive tone, so please keep the sarcasm to a minimum (I mean this with sincerity -- the THQI board tends to be better than many in this regard). I agree with some parts of what you say and disagree with others: AGREE: - Lowered guidance (ie, missing your number) is never good, no matter what how good the past financials. - THQI did a crummy job of IR when they lowered guidance. - THQI's business model may not make sense for a value investor, given that it requires continual product development and limited shelf life. DISAGREE: - Buffett and others like him do not set a limit on acceptable price drops at 20%. He made a large chunk of his money on larger price drops in the early 70's, when great companies had dropped far lower than that. The key question was intrinsic value. - Buffett does not hate risk per-se. If he did he wouldn't be in the super-cat reinsurance business. He hates risk that he cannot understand. He does not understand technology so he stays away from it. - Buffett invests in many small companies (Borsheim's, etc), but they no longer make any dent in the returns of Berkshire because of their relative size. He specifically never states that he avoids small companies because they are inherently riskier...he avoids them because he needs to make fewer bigger bets rather than many small ones. In his annual reports he talks about how this is a problem, because over the years it has limited the universe of stocks he can pick from. CONCLUSION: Like you, my own conclusion is mixed, and I do see the tension. On one hand (negative): - They need to keep developing and replacing products. This is not as ideal as Coke or American Express. (However, their portfolio approach and past record at applying it has seemed to mitigate this problem to the extent possible...it's turned it into a numbers game). - Management's actions on the IR front have disturbed me. I will be watching this very closely. On the other hand (positive): - THQI's portfolio approach is prudent given what I know about software and game development (unlike Buffett, I work in this industry and therefore know something about it). In this approach, I'm figuring that at any one point they'll have a couple big wins, a couple of dogs, and a lot in-between. The big wins need to carry the rest. - I like the management, financials, the way the ship is run, and their past performance (ROE, etc.) - Since I believe in their business model and the company's management (and have studied the company carefully over the last 2 years) I feel comfortable buying below the intrinsic value line. I didn't buy at previous highs because I thought the price was too high. I am particularly drawn to this company because it does seem manipulated so frequently: the price crashes and I get to pick up stock at cheap prices. Like you, I'm also in JAKK, but have lightened up since I don't understand the toy business (particularly distribution channels) as well. Thanks, OGM