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

To: Dale Baker who wrote (14626)	6/13/2002 11:01:28 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 78715

10:16 ET ALD lower on talk of negative research report Hearing that Allied Capital (ALD 22.74 -1.78) is being pressured by a Sell rating issued by Off Wall Street Research. Firm is said to have a price target of $15 on the stock. Briefing.com has not seen the report and, therefore, cannot confirm its existence. Investors may remember that ALD took a hit May 16 in reaction to comments made by a fund manager at a celebrity fund raiser.

To: Dale Baker who wrote (14626)	6/13/2002 11:11:29 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 78715

To generate a 300% return in one year, you have to take a risk profile that value investors would never take, period. i agree. returns can potentially become arbitrarily large with enough leverage, non-diversification, and luck. but that is gambling, not investing. it is recognition that such portfolios can likewise become arbitrarily small that gives the impetus for non-leverage, high diversification, and high-risk-margin portfolio allocations.

To: Dale Baker who wrote (14626)	6/13/2002 2:54:14 PM
From: Don Earl	Respond to of 78715

<<<I couldn't sleep at night putting the majority of my net worth on the line>>> Neither could I. The majority of my net worth is in FDIC insured savings accounts and real estate. I don't think I could sleep at night if the majority of my net worth was in the stock market, period. One Black Tuesday type event, and that's all she wrote. <<<To generate a 300% return in one year, you have to take a risk profile that value investors would never take, period.>>> Actually it was a combination of put options on a company I had been studying for over two years, plus the fact I was almost all cash on September 11 and had my pick of cheap stocks to look at. Money managers seem to like to do most of their window dressing in the fall ahead of tax loss selling, so my focus at the time was to go to the side lines and wait for a market bottom. Market news on the economy was looking pretty grim, so it seemed like a good idea at the time. I've noticed the market seems to go through some kind of "crisis" about every 12-18 months and the usual result is you can just about close your eyes and pick something out of a hat for at least a double in the following 3 months. Which is more risky? A diversified portfolio with total market exposure 365 days a year, or a portfolio that is all cash most of the year, except for heavy concentrations of a few issues immediately after a major market event, then back to cash? I realize it's an unorthodox approach, and I'm open to discussion, but my theory is it involves less risk, and past experience has told me it's what I should have been doing all along. I don't think it's contrary to a value oriented strategy other than it adds cash to the definition of value. As far as the put options are concerned, you're welcome to read some of the analysis I posted on the SEI board. Everyone knows options involve a high degree of risk. And everyone knows they should NEVER have a high concentration of options in their portfolio. In the past 6 years this is the only time I've ever had more than 5% of my account in options. I suppose you could call it dumb luck that after studying the company for several years I accidently bought too many options at the right price and time to see a nice return on trades that took place over a 4 month period. Risk is nothing more than a way to calculate the degree of ignorance involved in predicting future events. The higher the level of uncertainty, the higher the risk. If there's a point to any of this, it's my belief that ignorance is a generally curable condition and cash is a good investment at times when there is no cure.