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

To: James Clarke who wrote (16025)	12/31/2002 12:46:56 AM
From: Marc Fortier	Respond to of 78645

Interesting point of view James. I know what you're talking about when you refer to that "spider sense". I have felt it with GBT.a (TSE) and DCI. I studied both stocks closely and did not hesitate to average down. It was a wise decision in both cases so far. As I said before, I think it is prudent policy to cash in some of the profits when a position has grown to a dangerous level. Even the best companies hit some bumps, and sometimes it's very difficult to forecast when it will happen. It's better to err on the safe side than be sorry IMO.

To: James Clarke who wrote (16025)	12/31/2002 4:27:39 AM
From: Don Earl	Respond to of 78645

James, I enjoyed your comments also. I always find it interesting to see how other investors approach the market. Maybe most interesting is how after an investor has had a chance to make most of the usual mistakes, some kind of a system seems to form out of the ashes. The things that work go into the bag of tricks and the things that don't work go into the avoid pile. The bag of tricks will vary from investor to investor, but it's interesting to see how often they overlap in a lot of the same places, and the avoid piles start looking an awful lot alike. The baby gets thrown out with the bath water once in awhile, but the odds improve. Good luck to everyone in 2003.

To: James Clarke who wrote (16025)	12/31/2002 2:44:54 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78645

Yes, I'm a very strong believer in maintaining diversified portfolios. I am keeping at least 100 companies in my largest portfolio. I often take positions in downtrodden sectors. And, as I've mentioned before, because my history has shown I don't do well in defining or determining what will be the "best" stock going forward in a sector, I often try to take positions in several stocks within the sector. My intent and hope is that at least most of the sector recovers, and that by diversifying within the beat-down sector, I have reduced the business and market risk that would've been entailed by picking just one company in it. As examples of this tactic, I have mentioned many stocks I own in retail clothing, in retail auto dealerships, in defense, in restaurants, in grocery stories, in insurance, in oil, and so on. My point here, is that for me, it's not about which particular stock is my largest position, but which sector is. A sector drop can affects me more than a stock drop. (Although some stock drops do result large and permanent pain.) I also like to diversify within niches. That would include having stocks which fit a dividend model which I occasionally mention, having net-net plays, and recently, several below-cash stocks. In net-net stocks, I try to follow the Graham model and buy a package of them -- when I can find any at all. (We've talked about how that differs from and seems less successful than your rifle approach to net-nets which adds a further judgmental screen.) Possibly money is the biggest factor in diversification: one has to have enough money to diversify if one is not buying mutual funds. TIME is the second biggest element in considering diversification, imo. I see value stocks as problem companies. Time is generally required to overcome those problems, and time is usually necessary for such progress to be recognized in the market. So I am buying value stocks now for their hoped-for progress and recovery 18-24 months out. Similarly, come 2003, I am planning and hoping to sell stocks bought 2001 or earlier. A cycle of planting, weeding, harvesting. In other words, I want to have a goodly number of stocks moving through each of these phases. Other than the continuation of the bear market, I see no reason why owning the "best" 100-150 stocks I can find shouldn't allow me to show very good profits over a market cycle, and maybe even beat the market averages occasionally. It seems to me posters on S.I often practice what appears to me to be some sort of combined concentration and diversification. Which is something like never owning more that a few stocks at once (say at most, 10-15), but completely turning the entire portfolio over one or more times during the year; or sometimes that's buying and selling the same stock several times or buying then selling different stocks while maintaining a "core" position of one or two or three stocks. To me, that mostly seems like trading (vs. investing) and where I don't see academic support or well-known, successful adherents. jmo Paul Senior

To: James Clarke who wrote (16025)	1/2/2003 12:05:05 PM
From: Jurgis Bekepuris	Read Replies (1) \| Respond to of 78645

In regards of diversification, I will be beating my personal horse: mutual funds + stock investing. :-) I don't know about the circumstances of other people, but for me quite a large percentage of investment dollars is in 401(k), which does not allow stock investing. So even if I wanted to concentrate my positions, XX% of my portfolio has to stay in mutual funds - S&P500, value funds, etc. Considering the above, I don't see a point of having more than 10-15 positions in my active accounts. Lately, I don't even have enough time for these 10-15 positions, so the number may decline even lower. If I sell existing positions and don't have time or ideas for new ones, I would probably buy selected mutual funds. Jurgis