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Strategies & Market Trends : A.I.M Users Group Bulletin Board -- Ignore unavailable to you. Want to Upgrade?

To: Condo who wrote (13161)	10/13/2000 3:21:41 PM
From: OldAIMGuy	Read Replies (1) \| Respond to of 18928

Hi EJ, Make sure your "Book Value" doesn't already include the CASH on hand. You don't want to be double adding the cash. Depending upon the source, you either have $9+ or maybe $15+ per share as what you term the 'break-up' value. It's always a theoretical value in any case but does act as a base of estimation for lots of analysts. Obviously if several major employees were to leave, it doesn't change the cash on hand or the bricks and mortar calcs, but it does have an effect on how people value a company. Yes, if you get good at estimating the "floor" value of the stock where it usually will stop dropping, you can then ask AIM how much cash it would need to buy to that low price. That amount converted to a percent of the total AIM account value including the cash could then be used as a starting percent. Thanks for bringing the question up. A while ago, our fellow BB friend JZGalt attempted to guess how much cash he would need to "buy to the bottom" of the then collapsing oil drilling stocks. He said that the stocks had fallen a tremendous amount already, therefore AIM shouldn't need as much cash for a starting position. He set the accounts up with 25% cash to start. Over the first couple of months he rapidly exhausted the cash. Then the price kept falling and he was forced to look at his calculations each week knowing he had no purchasing power left. He would have had a better average cost/share if he'd started with more cash at the beginning. However, he felt his "upside" performance would have been hindered with the extra burden of cash if he started with a higher percent. I've done the same thing in the past. I've usually found out in one way or another that I would have been just as well or better if I'd just started with the IW's numbers or Mr. Lichello's default 50% or 33% than anything less. Since developing the "VEALIE", I almost always start with the Idiot Wave's value. This is because the 'vealie' will keep me from selling too much of my share inventory if the price goes up first. Hope this helps more than it confuses!! Best regards, Tom

To: Condo who wrote (13161)	10/13/2000 8:49:26 PM
From: Gemlaoshi	Read Replies (3) \| Respond to of 18928

Hi EJ, I would suggest you read Benjamin Graham's classic, "Security Analysis" if you intend to estimate other "values" associated with equities. Many people use terms such as "breakup value", "salvage value", and "economic value", without really understanding the implications. As Graham points out, the key really is whether these other values ever get recognized in the "market value." David Dreman also points out that a stock can become undervalued according to certain measures, and remain that way for years! Tom's excellent point cannot be emphasized enough: know what is in the "book value". It can be everything from undervalued real estate bought at pennies on the dollar, to specialized facilities that have no value anywhere else. I've always been a firm believer in "value" investing, but it does take gaining some extra knowledge. Read all of the Benjamin Graham and David Dreman you can get your hands on. And Good Luck! Dave