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

To: jsabelko who wrote (100)	9/14/2006 1:39:11 PM
From: bruwin	Read Replies (1) \| Respond to of 4080

Well joby, I think the important consideration here is the integrity and reliability of an EV value. If the EV value in a particular situation, such as the one I described for AHFI, gives you a "junk" valuation, then whether you use EV on its own, or whether you combine it with anything else, you will still get a "junk" answer. In other words, EV/ebitda = "junk"/ebitda = "junk". That’s just how the principles of mathematics work. As they say in the IT world, "garbage in = garbage out". Needless to say, the "ebitda" value is a Factual number, which one can rely on, and so is Turnover. So ebitda/Turnover will give one an unambiguous answer from which you can draw a logical conclusion. I realise that folk often feel comfortable when they use a ratio etc.., that so many others use, and they regard this "large use by others" as confirmation of its absolute integrity and reliability. You, yourself, agreed that book value had its drawbacks, but there are many that won’t hear of it, and are convinced of its usefulness. At the end of the day, I believe it’s important to always interrogate the make-up and integrity of any ratio, formula, indicator etc.., so that one is always sure what it is you’re getting as an answer, and also how relevant that answer actually is, irrespective of how many others may be using it. With regard to length of investment period and holding a stock for "5-10-15 years" .... Personally, as previously mentioned, I’m a longer term investor, but I don’t necessarily hold a particular stock for a pre-determined length of time. I will purchase a stock if it meets or exceeds my percentage target criteria, amongst other requirements. I will continue to hold it until such time as its latest set of published results indicate that it’s not meeting those criteria, or I find something of better value and prospects. But it’s always based on that company’s latest set of Financial Statements. bruwin.