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

To: EnricoPalazzo who wrote (43907)	6/25/2001 6:41:54 PM
From: Stock Farmer	Read Replies (1) \| Respond to of 54805

Confusdus say Don't worry, be Happy! Straight to the meat though, I was suggesting that a valuation of just about any of the individual equities in early 2000 would have generated a "sell" signal. I used the fact that the market on average was overvalued as proof. Although I admit the logic was by inference not direct. I was also pointing out the usefulness of the market as a biasing tool in valuation exercise. Often we take a biased view in our own projections: we bought XYZ and we want XYZ to be a good buy, so we project that it will be, which "proves" that it was a good buy. And then we go to sleep. Lots of us do this in parallel, which lends an upward bias to the market... and fuels bubbles. One possible objectifying mechanism is to calibrate the degree of optimism and group-think going on around us. We are human after all. That would be representative in the degree to which the market as a whole is "over" or "under" priced. That's all it's good for. An individual stock may actually be moving for "news". The movement in the market reflects the degree to which all the supposed news is running. If all in one direction, groupthink detector should go off. So, I was suggesting that stock XYZ was ripe for a fall. Such assertion wrong occasionally on a case by case basis, but more right than wrong. Hence adopting such a stance as a bias, then apply CSCO to XYZ, RMBS to XYZ, QCOM to XYZ and so on... make individual decisions. Is this clearer? Start with macro bias, then proceed to micro decisions. Not the other way around, or risk bulls aways remain bullish and bears always bearish. This provides a "switch hitter" trigger. I have always maintained that buying a slice at an arbitrary price is a fools game. As to violating common sense and the widespreadedness on this thread? Perhaps not so much on the buy side. But I have seen a rather deterministic adherance to the "H" in "Hold", all through the last 12 months (I don't need to past links do I?). Even while NTAP or RMBS were selling at 3 x $40... and more. If $40 is a reasonable valuation, why all the holding while at $120? Why not pocketing of $80 more than fair? Did the long term value of the company change so drasticly over the last 1/30'th of "long term"? If so I must really question the term "sustainable". I'm not arguing buy at $39 and sell at $41. That's too fine grained for me. But 3x? 4x? nx? Pick an n and then be ruthless. And by valuation, I advocate the methodology should be completely independent of any historical, anecdotal or extrapolated share price. That is speculation! To me, PE is merely TA over a very long time frame... ...but that's probably another whole discussion altogether. So I think we are closer to agreement than many would have guessed. John.