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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Larry Grzemkowski who wrote (42226)	4/28/2001 9:43:05 PM
From: tekboy	Read Replies (1) \| Respond to of 54805

Larry, Larry, Larry... :0) Your rant about our mistakes is true enough, probably, but not exactly news at this point. Moreover, just repeating the word "valuation" is not a sufficient remedy for the problem, because of the difficulties in coming up with appropriate metrics for valuing fast-growing bleeding-edge tech stocks whose worth depends on a reasonably unpredictable future. For example, you say "the good news is that most of my stocks are at fair value now." But how would you justify that claim? Traditional value investors would rarely if ever touch gorillas, and I don't think now is an exception to that rule. But once you abandon the purity of traditional metrics, it's something of a slippery slope down into the abyss--with the bottom being the infamous "price-to-vision ratio." I say "something of" a slippery slope because certain individuals have devised their own rules of thumb for G&K (or fast-growing tech) valuations, and used them to exercise more discipline than the clowns (like yours truly). But there's hardly a consensus out there, so it's not sufficient to "tsk-tsk" everybody as if "fair value" were something staring people in the face, and only now to boot. In fact, I'd say that valuation is only a subset of the larger issue, which is really investing discipline. The failure, if any, was in that area, and there are many approaches to discipline of which valuation is only one. What are some of the others? you ask. Well, portfolio rebalancing--either not letting individual stocks or sectors take up too much of your portfolio, or not letting equities in general do so. One could have done great in reducing risk during the later stages of the bubble even without calculating valuations, simply by dutifully selling off bits of one's holdings as they ran up to, and over, predetermined limits. Another strategy could have centered on monetary values: for every $X dollars your account rises, take $.1X (or whatever) off the table into cash. Combined with a reverse strategy for downturns, such a countercyclical approach would also have worked nicely over the past few years. This strategy could also be used with absolute values: "My next goal is $X, and when I hit it I'll take some cash off the table." Another strategy would be to focus on market cycles or stock patterns, like BB is starting to advocate. And others would be dollar-cost-averaging, diversification, hedging with CC's, etc. Anyway, my point is not to dis attempts at valuation, or defend the silly things some (like me!) did during the bubble. I just think that it's worth stepping back and taking a broader perspective, because it's really discipline that's the key issue, and valuation is only one path up the mountain. tekboy/Ares@andarockypath,too,forthosewhocan'tcount.com

To: Larry Grzemkowski who wrote (42226)	4/28/2001 10:51:29 PM
From: alanrs	Respond to of 54805

Even though some did mention valuation there was not any really hard serious discussion. There is something I have been thinking about in this regard for a long time. When my entire portfolio went parabolic, it was obvious that either I was the greatest stock picker ever or something was out of wack. In one of my accounts I took profits, paid off all mortgages, and put some in muni bonds, oil drillers, and REITS, with the balance in tech stocks. I stopped putting new money in somewhere around mid-1999. The IRA remained fully invested as did the realigned and now smaller brokerage account. This is where it gets a little difficult. The IRA returned 600% for 1999. With the last 12-14 months, I have given back roughly 1/2 of that, but still have a total return of about 350% over a seven year period and I believe 100% over seven years is more the norm. No complaints. Not having a mortgage or any other debt is worth something over and above the 8% debt service I no longer have. No complaints. The muni bonds did terribly as did the tech stocks in the brokerage account, but having some money in bonds, etc. acted like a savings account I could tap when tech prices began to look more attractive. I began buying techs with the NASDAQ at 3500, then again around 2800, 2200, and 1650-1800. Why didn't I sell more at NASDAQ 5000? Why didn't I sell everything when we broke through 4000? Probably because I didn't put enough faith in price and volume TA. Probably because the economy looked healthy-it still does to me. Probably because I keep saying "Who am I to tell the market what something is worth? I thought the DOW was overvalued when it went through 5700. What do I know?" My personal fear level goes way up when everything I own goes parabolic. My greed level goes way up when everything I own is down 50-70%. I tend to buy early and sell early. This I know from watching myself for 14 years. I try to dollar cost average in and out. Valuation metrics are difficult. Unless I go with a Graham and Dodd like system (say, nothing over 1.5 times tangible book), I'm always in the position of telling the market that it is wrong, when I'm only willing to venture that MAYBE it is wrong with a part of my money. What I am getting at (I think) is that there is no mathematical way to determine when something is cheap or expensive. It all boils down to "relative to what?" If the entire market goes parabolic or down the toilet, the price of XYZ Co. remains the same relative to it's peers. Who am I to say the price being paid is wrong and at what part of that parabolic curve do I bail? I haven't figured that out. This is probably a little confused and rambling. Sorry about that. ARS

To: Larry Grzemkowski who wrote (42226)	4/29/2001 3:53:29 PM
From: Pirah Naman	Read Replies (1) \| Respond to of 54805

Hi Larry: there was not enough discussion about valuation and what is the right price to buy... some did mention valuation there was not any really hard serious discussion...I believe there needs to be more emphasis on valuation on this thread. The amount of discussion is reflective of the interest in the topic. There have been a few of us that have brought up discussion on the topic - but take a look at the quantity of responses. What I would offer to you, and to others that may share your view, is that there are people willing to discuss it, but a discussion has to be two (or more) ways. - Pirah