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

To: Grantcw who wrote (10398)	4/20/2000 5:20:00 PM
From: Michael Burry	Read Replies (1) \| Respond to of 78507

Chilly, Welcome to the thread. I didn't buy EBSC for its growth. It may grow 10%, but not consistently, and not using its capital efficiently. In fact, investors have reacted negatively any time the company does something that indicates it will continue as a going concern, much less grow. There were investors who bought a big chunk. The company is clearly undervalued, but it is not a good company in terms of management or use of assets. As you know, there has been some theorizing that there will be shareholder maneuver to get the company to create more value for its shareholders. A Barron's article helped that out. The fact that it was a net net helped give this argument some bite here on the Value Investing thread. So I and others here bought. I brought up the issue of the huge operating lease liability. How it made it not a net net - possibly a problem for all net net retailers. There was some debate about this. To me, after some thought, I figured that this issue destroyed my reason for owning the stock. Others argued that EBSC's operating leases might be considered assets, for all we know, and hence should be held as a wash. Of course, I still find that hard to swallow, so I say, well maybe I really should ignore the operating lease liability, but at any rate I thought "this is a growing, cash-generating company trading at around net net value." So I held onto it. To me, it was a poor decision. I confused the "net net with a catalyst" strategy with a "cash flow/growth" strategy and ended up violating a rule I try to remember: to get out when the reason I bought becomes or is realized to be no longer valid. Today, I switched my EBSC out at a small loss - even though I agree it does appear very undervalued. Used the very same cash to buy ANF at 11 1/8 - the same price Jim got, it turns out. I might have continued to hold, but I really wanted to buy ANF after it fell today, and one of my retail/apparel stocks had to go. LIZ ain't going anywhere. Same with Ross Stores. I'd rather have the better business. Mike