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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (19616)	10/17/2003 11:07:59 PM
From: stockalot	Respond to of 42834

Eric, I enjoyed your substantive post in a location where they are few and far between. I am certainly not an expert and probably more a role model in what one should not do as often as one someone would want to emulate. "My target is to achieve a long term annual rate of return of 10%. Your portfolio should double in value every 7.2 years." That is a great goal and a realistic one rather than the Brinker hubris that claimed to call 20% "or more" gains in two to four months with up to 1/3 of a portfolio in a special bulletin that was devoid of a date, a price to purchase or an exit strategy. It was the singular worst advice for such a huge percentage of a portfolio I have ever seen. For someone who appealed to and cast his net among relatively conservative, unsophisticated investors it is reprehensible. I have also been investing for about 30 years in stocks and generally on a "as I have the money" basis. Most of my stocks are relatively long term holdings and are purchased at what I think is a good price. Sometimes on that I am correct, sometimes I am more than wrong. On the other hand over the years I've accumulated by good fortune, dumb luck or whatever a very substantial portfolio that is pretty diversified and it is more than comforting that there is NO mutual fund fees at all in the individual positions. On a substantial portfolio that is a big deal over the years I do indeed have some mutual fund holdings (probably index funds are a way to go and end up in the same place without the work) . One of the things that I think has helped me is that with one or two exceptions I have never bought the same stock a second time. I have used 1-2% of the portfolio to buy a stock and then bought something else the next time a purchase was desired. That discipline of course cuts both ways but I never culled winners as some claim they don following Brinker's advice. If I had used the 4% idea, I would have culled many positions way too early and have invested the proceeds in less profitable postions. Today there are some stocks that make up high single digits of my portfolio and some under 1%. It doesn't bother me a whit. I have made as much money over the years in stocks that I bought thinking they were "overpriced" at the time as I have in finding "bargains" . Walmart is my oldest holding and Phillip Morris is probably second, both over 25 years. Neither was "cheap" or what most thought was a "bargain" when I bought them. The same was true of Msft or Outback or IFIN--my single biggest winner of all time. Most were buys by some analysts and holds by others. The honest thing is that at least half of the 50 or so stocks I own went down after I bought them and thought I had a "bargain". Those I continued to believe in, I held, those I didn't I baled out of. In the latter group were lots of good companies like 3 M and many other great stocks that would have done well over the years. Likewise I did shuck some losers before they lost a lot of money and I took my share of elevator rides on stocks like AOL, Sun etc. My point is that though one can hunt and search and do their due dilligence, one doesn't know whether they have found a bargain. For me it often takes many years or even decades to know. I say this just to give some balance to your statement: "To summarize, it has been a long time (perhaps since the early 90's) when I have seen so many bargains" Nobody knows what they buy today is a bargain or not. I've been more than fooled many times and know not one investor who has not. This afternoon I saw an interesting post on this thread by someone who had decided that the world of investing was going to hell in a hand basket a short time down the road. and he was going to do his investing with that in mind. Having been down the road a while and way too old to be screwed by a pup like Brinker, I could tell that poster that almost every year he could read the same prediction by some seemingly very knowledgable guru. I noticed that Ruff's mutual fund was a big winner this last year--more than a double. If I had believed the guy back in the 70's and 80s and 90s when he was all gloom and doom, I'd be worse off than broke. I think buying good companies and holding most of them is one way to approach the equity market that can make sense for some of us. Real estate and fixed income investments have to be factored in and that is how I handle fluctuation in the equity market--NOT TIMING. How well it works in any particular time frame depends on a lot of uncontrollables imo. Over the long haul, I think it is a very good strategy. Leave macro marketiming games like Brinker out of your equity choices and you'll be better off. Concentrate on asset allocation and diversification and start early. Oh --and marry rich or get a good paying job helps too. :) I didn't look enough like Brad Pitt for the former. Sorry for the ramble. I realize that on this thread nobody is looking for vanilla investing ideas.

To: E_K_S who wrote (19616)	10/20/2003 2:34:55 PM
From: Tim Bagwell	Respond to of 42834

Eric, as always you provide us with some sage advice and useful insights. Obviously, you have done well with your years of experience in the markets. And isn't that really what it takes? It's personal experience, not some self-proclaimed guru, that will lead to fulfillment of your financial goals. It's been said many times that if you're going to play in the stock market you have to pay for your lessons. It doesn't come free and it doesn't come cheap. But it's better to pay the price for your own lessons than to pay the price for someone else. You had an interesting comment about the value of real-estate to the corporate balance sheet. I suppose that many large corporations that have been around a while have a fairly substantial list of real-estate holdings. A good management team will use all its resources to leverage shareholder equity. I like the use of operating earnings when trying to set a shareholder value on a company. The earnings derived from one time sales of stock or assets or whatever really don't interest me much because I usually don't have a way to foretell how they will be converted to shareholder benefit. Management is key. If you have a corporate management team that is bent on personal wealth, I'll use Carly Firona as an example, then you can't count on corporate assets being used to benefit the shareholder. These nutty CEO's get so amazingly greedy that they can't see straight anymore. At that point they become useless to shareholders. I have no use for stock in companies that demonstrate their CEO's are pirates. They will eventually implode, in my estimation as they squander the resources of the company. You have a good list of companies. I tend to stick more with companies that I know well from working in the high tech field so GLW jumps out at me from your list. Corning has always been a solid quality company making some of the best products for the fiber optics industry. I try to follow some reasonable long term timing discipline to minimize losses during bearish times. I think the company itself is not the most important factor because in a bull market all ships tend to rise with the tide and vice versa. If you seek out quality either through assets or management or IP you have a recipe for success over the long term. But you do need to do some work to identify bull vs bear trends so that you can protect yourself during those times when the market is undergoing its natural corrections. As you demonstrate, if you build a portfolio of quality then over the long term you'll be the guru.

To: E_K_S who wrote (19616)	11/1/2003 12:57:42 PM
From: E_K_S	Read Replies (1) \| Respond to of 42834

Brinker needs to review his previous trades and strategies so he can learn what has worked, modify his types of trading to accommodate the next cycle and develop an overall exit strategy to lock in his gains so he can generate the long term returns that allow his subscribers to build wealth. There are always low risk trades that can result in excellent long term annualized gains but you have to have a strategy in place before your trade and modify it from time to time to maximize your returns. When I have listened to Brinker he does not review his past strategies to see how they worked out, what went wrong, how he should have changed his position(s) to obtain a satisfactory result. It's much easier in hindsight to see what should have been done differently and you can learn a lot from this exercise. For example I recently closed a trade that I acquired in 12/99 (Ingram Micro). It was a low risk trade as the company had excellent assets, a very low PE and I was excited that management might modify their current business model to take advantage of building a Business-to-Business (Internet) service model to deliver their OEM computer hardware and software products. The key to my strategy was to hedge my investment by selling covered calls every six months as management worked on implementing these new services. After 46 months, management finally got their business downsized, streamlined their distribution centers, cut costs but never implemented a true online business-to-business business model. Also, during this period the computer hardware and company IT budgets remained flat while competition from Dell, HP and IBM encroached into their service market. As a result, the stock price remained flat and my long term gain over this period was only 3.5% annualized. The company still maintains a good portfolio of assets (especially their real estate) that makes up their regional distribution centers. The key to my strategy was the option income I generated as management was implementing their changes. I generated a 71% return on my investment by selling covered calls over this 46 month period. The reason I closed my position is that options were no longer traded on this stock (beginning in 2003) and my income hedged strategy was no longer an option for this holding. IM reported earnings yesterday and they may have finally streamlined their business enough to begin to grow their earnings on any sustained recovery. Because of the option income, this investment generated an annual return of 18% vs. only 3.5% from the capital appreciation. Brinker could learn a lot more from reviewing his old trades, looking at his strategy and most importantly how he plans to generate the annual return be it capital appreciation growth, dividend income or option premiums. My motivation to get into this investment initially was Brinker's discussion on Business-to-Business Internet companies and how this new model was going to revolutionize the way companies provide components and services in the future. The key to my investment was finding a company that had a portfolio of undervalued assets that management could utilize and "transform" their business into this new model. It's easy to develop a general idea of areas that may take advantage of technology changes and a bit more difficult to find the actual companies to investment in. So when Brinker discusses these new "industry changes", it would be quite interesting for him to look back five years and discuss what the prudent investor should have done. He has certainly been quiet on his excitement of the Business-to-Business sector and the emerging Internet applications. Several brick and mortar companies have implemented good strategies towards this end (including Sears, WallMart and Target). Brinker should look back with hindsight and discuss his thinking on what the best investment strategy would have been and his ideas on this sector for the future. EKS