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To: Juster who wrote (285)	10/22/1997 9:18:00 AM
From: Joe Dancy	Read Replies (1) \| Respond to of 696

Some interesting theories on how many stocks you should own to reduce risk, and they all make sense. Fosback says that if you have a portfolio of around 12 stocks that are in different areas of the economy you will have diversified 90% or more of the market risk out of your portfolio. Al Frank, according to Hulbert the best investment newsletter by performance for the last 20 years, likes to hold 25 stocks since he focuses on small undervalued growth companies like BIOI that are volitile, and he is aways margined (sounds like Mason has borrowed his playbook). It works well for Frank, and from what I can tell for Mason. Warren Buffett likes to concentrate his investments - he has billions in only 10 or so stocks. Now that he has made so much money the size of these companies has gotten so large that his performance will suffer (by his own admission) compared to times when he could load up on small caps like BIOI. Of course, from a purely theoretical side the more stocks you buy the more likely you will mimic the market averages, since at some point your portfolio will duplicate the market - so you my as well just by an index fund. My theory, and I don't pretend to be anywhere as bright as anyone previously mentioned, is that we are in a new age of information for the individual investor, and that using this information you should be able to find 10-12 stocks that are really the most exciting undervalued companies in the world - and stick with those. Recognizing that you are incurring higher risks, volatility, etc., long term (5-years) the portfolio should outperform significantly. Some great books on investment theory, and it seems there are 100 different strategies that will make you money, the trick is finding the one you are comfortable with - you might check out at the library or from Amazon.com are Al Frank's "The Prudent Speculator" - he is sort of a Warren Buffett desciple of small cap stocks - Al Frank's books is the best I've ever read, and I re-read it every six months or so. There has been two or three Warren Buffett books out in the last few years about his management and investment philosophy - one does an excellent job at detailing what financial indicators he looks to in his stock selection. Also, Peter Lynch has his "One up on Wall Street" that is interesting but I found short on the hard core financial analysis, and Fosback's "Stock Market Logic" that is interesting but does not mold a strategy that I like without subscribing to his newsletters. Zweig also has a interesting investment books, but I was unimpressed. For statistical analysis one of the best books on what works for investment strategies is "What Works on Wall Street' by O'Shaughnessy. There are at least a couple of other good investment books but I can't recall the authors off the top of my head. Best - Joe

To: Juster who wrote (285)	10/22/1997 12:53:00 PM
From: Douglas V. Fant	Respond to of 696

Juster, It's easier to focus carefully on just a few stocks. And you've hit the abslute key (IMHO) in making money in the stock market, Buy stocks with growth rates higher than their P/E's and with low price/sales or price/book ratios. Conversely short stocks that have high prices and do not fit the above criteria. Come on over to Joe Dancy's "Lonestar Growth Investor Newsletter", and read the various articles he has posted on such types of investing. A good example of theabove system right now is FAST. It's grossly overvalued on the above parameters. In the last two weeks I have shorted 400 shares of FAST every time it hits $53/share. Every time it falls back to around $50/share I buy it back. Small gains in short-term trading but they add up.... BIOI on the other hand I hold long term since it fits all of tha above parameters and do not trade, but will add shares on pullbacks to my position.... Sincerely, Doug F.