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Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: NOW who wrote (4389)	5/10/2002 4:06:44 PM
From: ahhaha	Read Replies (2) \| Respond to of 24758

That's what I said.

To: NOW who wrote (4389)	5/13/2002 10:57:00 AM
From: GraceZ	Read Replies (1) \| Respond to of 24758

The highest possible return comes from engaging risk. Your mission is to figure out whether or not the return and the risk the market has attached to owning WCOM here is what it appears to be. It won't be resolved in a matter of days. The greatest returns come from finding stocks that are about to change risk classes or risk classes that the market will re-price en mass. On the long side, the value stock that is about to have its risk discount disappear. On the short side, the growth stock that is about to stop growing and have its growth premium disappear. More than that there's the general market risk. At times the market prices a higher premium on growth than at others. It also tends to discount value more during some time frames than it does at others. It does this over the whole risk class, all the growth stocks tend to move together over long cycles, all the value stocks tend to move together with both having numerous examples of individual names that diverge. WCOM used to be growth, now its being priced closer to value since the perceived risk of holding the stock is so much higher. The market is starting to take away the discount that its had on value for the last ten years and it has been in the process of taking away the high premium paid on growth (as well as a large number of the growth stocks simply stopped being growth stocks, like WCOM) So the real question is, is the value there behind that value price (we already know that the market is re-pricing value stocks higher, taking away the discount)? Or will WCOM revert to its previous growth status AND will the market resume placing a premium on growth? Some of my very best trades have been made using my judgement about just this type of situation. I'm thinking Maryland National Bank selling at .7 to book, with assets on the book which everyone questioned because so many regional banks had bad loans and worthless assets that they were reluctant to write off (sound familiar?) and the whole sector was suffering from the nationwide real estate fall out (banks aren't suppose to fail!). I bought at 1 5/8 and got taken out at 7 dollars. For each of the deals I did like this there were those other situations where cheap just got cheaper. The secret is to limit your losses when going after risk because there's always a good reason why cheap is cheap.