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

To: Paul Senior who wrote (13357)	11/25/2001 8:29:11 AM
From: blankmind	Respond to of 78470

what is psr?

To: Paul Senior who wrote (13357)	11/25/2001 8:43:29 AM
From: blankmind	Respond to of 78470

Wisconsin Energy Corporation (WEC) appears to be extremely cheap right now: - WEC is #1 holding of the Am Century Small Cap value fund which consistently rates in the top 20% in its class - e.p.s. about $1.95; so p/e of about 11.5 based on closing price of $22.50 - about 118 mill shs o/s - they're $100 mill into a $400 mill stock buyback; with a $23 stock price, that's 4.3 mill shares; or abour 4% of the shares o/s; so it's sizeable - pays about a 3 1/2% dividend - over $8 bill in assets; about $2 bill in equity; so they trade for only about 130% of book value - they just issued $300 mill of 5.5% debt which means the rating agencies like them enough, otherwise, the yield would have been much greater - bottom line: great book value, great earnings, stock price depressed, captive audience, nyse-trade

To: Paul Senior who wrote (13357)	11/25/2001 1:30:56 PM
From: Brendan W	Read Replies (1) \| Respond to of 78470

re: what have we learned I don't know that there has been any collective advance in learning or knowledge in value investing. To me it seems like the accepted principles and the debates have not changed. There is, of course, individual learning. Interesting questions to me are "what is value investing" and "how do you characterize this particular community?" For me value investing boils down to this string of statements: what is the discounted present value of this business... i will not project past growth willy-nilly out into the future ... i will very grudgingly price in high (e.g., 15+%) future growth rates ... yes, the balance sheet and cash flow statements are just as important as the income statement... and what is the level of certainty about the valuation, and no, technical or price-per-share related analysis is pretty worthless regardless of how tempting (even to me). The actual valuation process and metrics is driven by the time, information and resources that are practical for me as an individual to apply to widely varying business models and situations. As an individual, I don't want to and cannot apply professional rigor to the process. I have to use judgment, experience, and intuition to guide me through shortcuts. If I had professional rigor, I wouldn’t be using this thread as one of my shortcuts. Finally, I add scrutiny to the process when I lose money or want to invest more. re: "how do you characterize this particular community?" This community feels very small to me (like 100 to 200) people. I don't know how to estimate lurkers. I would guess that the community comprises primarily two groups: the first group is individuals with a serious hobby and a bent toward their vision of value investing in equities, and the second group is individuals who have "made it" based on their vision of value investing and now are full-time for their own account. If there is a professional money manager audience (besides the two individuals you mention), they sure are invisible. It seems like there is a strong bias toward US equities (common and preferred). There has not been much focus on investing in international, mutual funds, commodities, options, or debt. I think the primary investment universe for the community is the 10,000 US stocks. re: portfolio concentration Are you saying you don’t go over 3% in a position? Obviously, concentration is both the number of positions, and how much you have in them. I routinely go over 5% (primarily through appreciation) and I believe these positions disproportionately benefit my returns. I develop these positions when I have relatively high confidence and the market is giving me “inadequate” returns (Owens Illinois and UNUMProvident are this year’s examples, Pep Boys last year’s). There has been change over the five year period on concentration… you can now buy practically unlimited trading in securities at a practical cost. As an individual, however, you still have a large information burden with a 100+ stock portfolio, plus significant tax reporting and portfolio performance reporting burdens. It is nice, however, eating small slices of humble pie. Re: participation/recognition I think recognition is key. The people in the community that invest in a discussed stock without later acknowledging this to the thread damage the community (and thus themselves-- to the extent they benefit from the community). I think individuals do not post because they think their view will affect the ocean that is the US stock market. Instead, they post (a) to solicit response and (b) to help the community and (c) to help individuals in the community. If nobody buys or responds, why post? If you are in either group, the constraints of time and attention when your investment universe is 10,000 US stocks are compelling. Re: quality/depth of posts Recognition drives the quality of the posts when you realize you will not influence the market. I don’t understand individuals just posting tickers. You have to demonstrate a track record for that to be meaningful. (Of course, there will be posters where you are grateful for only the ticker). How many individuals here recognize more than a thousand tickers? I might be able to recognize half the names. It seems like the minimum on an introductory post should be the name, the ticker, a ten-word description of the business, and what you most like about the stock. You don’t need a complete write-up to generate discussion.

To: Paul Senior who wrote (13357)	11/25/2001 4:29:59 PM
From: Madharry	Respond to of 78470

I have learned that for most stocks beauty is in the eye of the beholder and the view is dynamic. Relative valuations are meaningless unless there are active acquisitions taking place in the sector. I take anything anyone says with a grain of salt and do my own dilligence. An undervalued situation doesnt mean anything if the management is not willing to act in the interest of the shareholders- Seagate anyone? Insider buying or lack of insider selling seems to me to be an important intangible. To me in insider who touts his stock publicly while liquidating shares is of questionable integrity and I would doubt anything that person says. I am also not that happy about company loans to purchase stock. It has been my sad experience that when the investment doesn't work out as plan the loan is forgiven the options are repriced and the other sharholders bare the consequences. One needs to understand the business and contingent liabilities as well as the pitfalls of foreign entities and subs. Nevertheless It is comforting to know that true bargains seem to materialize on a regular basis for patient investors who know what their levels of risk and reward are. who are not overly greedy and who know what the time frame is to seek the return of their investment.

To: Paul Senior who wrote (13357)	11/26/2001 11:09:04 AM
From: Bob Rudd	Read Replies (2) \| Respond to of 78470

Paul: Thank you for the retrospective - great topic. Here I respond to diversification [without reading other, prior replies] Link to Glassman article: washingtonpost.com When Glassman writes "Peter Lynch, who was probably the best mutual fund manager of the 20th century, calls spreading yourself too thin "diworseification." I beleive he misquotes Lynch whose reference to "diworseification" was a negative take on companies buying other companies in unrelated businesses and paying a premium to do so. Lynch favors portfolio diversification for individual investors, as, I suspect, does Buffett. The Focus Twenty fund comments hit at a vulnerability we all have...tending to concentrate in sectors we know, or where we have an edge. This is really a good thing as long as some method is used to spread risk...as in mixing some funds with stock holdings...and particularly spreading among asset classes as well as stock sectors. Personally I've often noted Paul's comments on broad diversification especially with microcaps. I've made 2 concentrated bets, but still less than 3% net after tax exposure and both went badly...one has comeback nicely - 100+% net gain and the other is yet to play out fully, but will probably end well into the loss column. Key lesson: It's really tough for an outside investor to really know what's going on inside a company.