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

To: jeffbas who wrote (18456)	1/15/2004 8:40:20 AM
From: Rock	Read Replies (1) \| Respond to of 78530

JB, I concur on your analysis, as I work for a company that went through your "bankrupsy discount" cycle and came flying out the other side. There were many like mine and most benefited from the combination of the discount and investor's memory of their big runs prior to 2001. However, I'd also add that many (most?) of these comeback plays, despite improved cost structures, have caught and then overrun their fundamentals during the year and are now pretty richly valued. Heck, INTC, though perhaps not the best example, just reported record numbers and got hit after hours b/c expectations weren't realistic. As you say in your cautionary statement, this overrun may not bode well going forward. In fact, it calls up Bill Miller's thoughts on new leadership for a new bull (debatable that we have a new bull but Miller says yes). The first to rally are the leaders from the last bull (human tendency of overweighting recent experience), they then consolidate and new leading sectors take over. Real debate may be around the strong sectors going forward as so many are richly valued right now. I happen to find pharms and energy to be interesting, as both are reasonably valued (i.e. reasonable folk can disagree) and both have good demographics going forward. The thing I don't like about pharms is that they are so well covered that you don't tend to see the short-term dislocations in value that are somewhat common amongst small-cap cigar butts. Naturally, energy has those dislocations but many are real wildcatter businesses (pun intended) that are hard to trust.