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

To: Paul Senior who wrote (2552)	11/28/1997 9:19:00 PM
From: jeffbas	Read Replies (1) \| Respond to of 78645

I think there is a lesson to be learned from Ray's points - If you are looking at two stocks which are nearly identical in every way, then you should closely examine the expected probability of deviation from the future earnings estimates. I have seen lots of so-called growth companies selling at low multiples of next year's projected earnings where I have gotten burned because I did not properly consider the chances of them missing the estimates. In particular, all commodity type businesses, whether it be steel, eggs, disk drives or semiconductors have a much greater chance of not hitting earnings estimates than other companies, which is often not reflected in the P/E.

To: Paul Senior who wrote (2552)	11/28/1997 11:21:00 PM
From: Michael Burry	Read Replies (2) \| Respond to of 78645

Re: PE IMO, PE's are bashed too much by most of us value investors and praised too highly by those in the momentum/ <1 year camp. My biggest use for the PE is to look at historic ranges once I've already checked out that the PE is valid, i.e. no tricks in the income statement or balance sheet. After all, the market does like the PE as a tool, and keeps most stocks in their historical range year-in year out. If I'm on the fence, and the stock is at the lower end of its 10 year PE range, it helps to know this. It is this analysis which is keeping me out of Nike currently, waiting for the mid-30's should they ever come. Good Investing, Mike