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

To: Paul Senior who wrote (28317)	9/29/2007 2:30:05 PM
From: E_K_S	Read Replies (1) \| Respond to of 78717

Hi Paul - The "Value" portfolio is what I try to build and one of the large components that I consider is the total dividend income which is generated. This provides me a level of safety so if there is a significant sell off, I can collect my dividends and wait for my stocks to come back to my fair value targets. I do try to maintain a discipline of peeling off long term capital gains and building up my cash reserves in times where the general market is at or near fair historical value. If I sold out and went into all cash, I would have huge capital gains tax liabilities and it would take me a long time to rebuild my portfolio to generate the high "effective" dividend yield I currently have. The only way this long term approach works from my experience is to accumulate companies that have undervalued or under utilized assets that either appreciate or maintain their value over time. The difficult part is to find the hidden value opportunities during the stock screening and company research review. I have found that different "value" themes develop out of larger macro economic disruptions. In the 90's it was undervalued real estate hidden in corporate balance sheets. Today it is a mixed bag of good and bad debt, $US dollar denominated assets which are falling in value and company owned resources (below & above ground) that is in demand from a growing global economy. For example, I believe natural gas is currently priced significantly below it's longer term fair value (perhaps as much as 50% - 100% undervalued). The difficult part is to identify those companies that own these assets and can capitalize on the appreciation without stumbling into other non profitable lines of business. Money management is key too. I never use margin and always maintain a large cash reserve that can be deployed when special situations arise. All this takes time and discipline to manage so that you can optimize your return. It's hard not to get caught up in the emotion and fear when "black swan" events occur. The investor has not control over these types of economic disruptions. It should be seen as a potential once in a life time value opportunity. If you have managed your portfolio based on conservative value criteria, there should be no need to do massive selling but rather you should be nibbling at new value buys to add to your basket. Finally, I continue to focus on moving new money into ADR's that meet some of my long term value themes. Two on my list include Petroleo Brasileiro (PBR) & Perdigao S.A. (PDA). Both are at all time highs, so I am waiting until there is some correction lower. EKS