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

To: Dale Baker who wrote (16340)	2/3/2003 1:22:37 AM
From: Paul Senior	Read Replies (1) \| Respond to of 78523

Imo there's lots of evidence that book value would likely be included in a normative approach. For example, you've seen those studies in the "Contrarian Investment Strategies" by Dreman, in Tweedy Browne's "What Has Worked in Investing", and again in this NY Times article where price/book value (or the academic equivalent) is used as a simple proxy which separates companies into either value or growth categories. And there doesn't seem to be much argument against using p/bk for doing that, according to Hulbert. It'd be my opinion that after carefully picking a number of stocks and then "trading them carefully and intelligently" that would only be a normative method if it could be done by an investor under defined rules and with skills that the average investor could muster. I'd guess the subset of people with such skills and talent is so small as to preclude this as an effective way to manage money for most people. Certainly if there were a magic bullet, it's general use would render it ineffective. Dreman was asked why he wasn't worried about sharing his methods and his supporting evidence. He said that he once was, but that after his first book came out, he realized people didn't have the patience or discipline or interest to pursue his successful methodology. So I say, let me first find a magic bullet-- I'll worry about its diminishing effect later. -g-