Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Paul Senior who wrote (21589)	7/3/2005 10:57:36 PM
From: itilis2003	Respond to of 78774

I have operated over the last 20 years on the assumption that smallcaps outperform larger caps and the value outperforms growth. Ive read dozens of books and things over the years that have pretty much said the same thing. I prefer microcaps because I figure that most of the really smart folks are running a large enough amount of money that they have to play in bigger playgrounds. That way I am not competing head to head with folks who are a lot smarter than me and/or who might have better access to information than I do. Tweedy Browns "What Has Worked In Investing" seems consistent with my belief and my observations over the years. tweedy.com As a general rule, I tend to avoid the larger cap stocks and probably over-diversify with the smaller ones. Over the last few years, I have not been finding the kind of values that I like and as a result, I have been holding more cash as a % of my portfolio than I ever have. Over the years, I have followed "the insiders" and picked up a number of overlooked microcaps many of which I still follow and/or trade on a regular basis. I also follow insiders in the aggregate for a clue as to the overall market. The insider buy/sell ratio has been pretty darn bearish for years now. Some, like Hulbert attempt to "explain away" that by saying stock options account for the extra selling. I disagree because on the same hand, we have a LOT of supposed "insider" buys by folks who are NOT insiders and have no insider knowledge, they are just running hedge funds and have to put that money to work somewhere. So, I believe the real insiders....the smart money....is and has been voting with their pocketbooks which suggests to me the market as a whole is not undervalued. Nor are there any obvious "pockets of value" like I used to be able to find. Ive recently had good fortune with what was & is my largest position. PURW which Ive been following for many years. Its been a good trader but I was convinced it was going to be bought out and have been adding to my position for some time. They recently announced a buyout at $4.30. This is a stock I was buying for as little as 41 cents a few years ago. This buyout is bittersweet though because it was a fantastic trading stock for me. Wide swings as a result of flucuating sales & earnings. So, I bought low and sold high and now, will be bought out at higher than I even reasonably had hoped. Here is what I posted on another board where a number of us had just enjoyed a nice buyout with ONYX. 12/31/04 PURW....$1.56 Book value of $2.04. Replacement value $3.50-4.00+. They put themselves on the block in Jan but in June despite getting numerous indications of interest they chose not to pursue any of them at the time. Since then, they have resumed their buyback and bought back stock in June, July, August and Sept at prices averaging $1.96. I suspect they have continued buying as the price has dropped but that information wont be out untill the year end report comes out. I believe that PURW will be sold, its just a matter of when. The chairman & majority owner is 68 however so I dont think it will be a 5 year wait. My guesstimate of an eventual sale price is in the $2.50-$4.00 range or more to a strategic buyer. --------- My search for low priced, value stocks goes on. But, unlike others, I dont feel the need to buy something just to be buying it. I want stocks that fit the profile of my past winners. (Below book value, insider buying and/or company buyback, low P/E, low price/sales & so forth) There are some perils with the microcaps. They can & do deregister on you. I have been hurt pretty bad by one that did that but a number of others havent been so bad. On the flip side for the low floats that havent deregistered, the low float pump & dumpers tend to pile on & off every so often and allow nice trading opportunities. Im a little suprised that more on this thread dont focus on the lower priced stocks. Its easier for a 40 cent stock to $4 than a $20 stock to go to $200. I realize there arent dozens of attractive 40 cents stocks but the point remains valid. One more thing that is consistent with my lack of not finding good stocks is Tweedy Brown cant either... "Please note that effective May 4th, 2005, at 4 P.M. , the Tweedy, Browne Global Value Fund and the Tweedy, Browne American Value Fund, will at least temporarily, no longer accept subscriptions from new investors. Management of the Funds has come to this decision as a result of what it believes to be a limited amount of new investment opportunities available in the United States and around the globe. "

To: Paul Senior who wrote (21589)	7/6/2005 6:25:39 AM
From: bruwin	Read Replies (2) \| Respond to of 78774

I notice that you, and one or two other contributors to SI's Boards, use the P/BK ratio as a stock "Value" consideration. I assume that P/BK stands for Price to Book ratio. I'd be interested to know what your definition of "Book Value" is, and why you consider the P/BK an important ratio (with regard to Industrial companies only).