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

To: Dale Baker who wrote (14617)	6/12/2002 9:57:23 PM
From: Don Earl	Read Replies (2) \| Respond to of 78702

<<<my approach has produced a decent profit (around 10% YTD)>>> I'm up over 300% this year, which would be real nifty if I hadn't gotten clobbered good over the previous several years. There's something about getting clobbered that makes certain lessons hard to forget. It also seems like every time I've been clobbered, it was a direct result of breaking my own investing rules. When I stick to what has worked most of the time in the past, I usually do okay. Negative growth is a bad investment. Too much debt is a bad investment. Not enough cash or too much cash burn is a bad investment. Negative momentum is a bad investment. Buying stock with the intention to keep averaging down is a bad investment. On the flip side, you can't lose money taking profits. There's always another trade and missing out on one is not the end of the world. As a defensive play, nothing beats holding cash. The best time to stop out of a bad trade is within the first week. Good due diligence and a lot of patience will eliminate 99% of the stops. I also think it's important to understand the advantages and disadvantages of being a private investor vs. a fund manager. The disadvantages are a private investor doesn't have the time or staff resources to do quality research on an unlimited number of companies. Spreads and commissions chew up too large a percentage of investable cash to build a hugely diversified portfolio. And a private investor isn't likely to have the connections to create opinion where opinion doesn't already exist. The major advantage to a private investor is the amount of flexibility to respond to changing market conditions. I don't have to stick to any guidelines as to what, how much or how long to invest. I can move relatively small amounts of stock in and out of the market on short notice, and without being noticed. I can spend any amount of time I wish to research a particular company's stock or options. I can sit on cash indefinitely and wait for a trade to come to me rather than having to go after a trade. I can over concentrate my portfolio in a few issues when my targets show up and I can trade the market in both directions. For myself, I think it would be a mistake for me to study what the money managers do and try to beat them at their own game. If all I was after is slightly better than money market returns I think my interests would be better served by placing my bet on a mutual fund and letting a money manager do what he is paid to do. So, like the man said, what I'm looking for are "obscene value plays". The only chance I have to beat the odds as a private investor are to try to identify those issues where the down side is limited and the upside is not. It's a lot easier to say than it is to do, but I think it's possible to shade the odds in my favor by being ruthlessly selective about what positions I'm willing to hold at any given time. One that doesn't quite fit in with my own objectives, but might work for those with a more diversified style is AMD. I was looking at it real hard last fall when it briefly dipped below 8 and it's starting to tease around that level again. If it retests support and holds, it might be worth a shot. I think there's some value there, but I haven't been able to make up my mind if it's obscene or not. Good luck all.