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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Czechsinthemail who wrote (10703)	2/5/1998 1:48:00 PM
From: Chuzzlewit	Respond to of 95453

Baird, by FA I take it that you mean fundamental analysis as opposed to financial analysis. Financial analysis is not predictive of anything. It's principal use to the investor is to weed out potential problem companies from consideration in a portfolio. For example, companies might be out there with substantial debt and liquidity problems, which probably means that there would have to be a secondary equity offering resulting in dilution. I know what TA is designed to accomplish, but unfortunately, all of the available evidence (and here I mean statistical studies, not anecdotal accounts) indicates that it does not work. There is some objective evidence that FA works -- for example,the "Value-Line effect" has been studied, and appears to be statistically significant. Your point about the herd mentality among analysts working for brokerages is well taken. In fact, Burton Malkiel, in his excellent book "A Random Walk Down Wall Street", suggests that they are inept, and the entire exercise is pointless anyway. My approach is this. I try to find industry segments that are poised for significant growth. I then try to seek out those companies within that industry sector that are best positioned to capitalize on that growth. Finally, I stay with those investments for as long as the underlying growth story remains intact. That's why the drop in oil prices didn't prompt me to sell the drillers, and that's why I see the arguments made by several of the drillers pointing out that the crucial issue is volume, not price, as a key to understanding the sector long-term. Regards, Paul