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

To: Ron Bower who wrote (3420)	3/3/1998 10:47:00 AM
From: Honest Abe	Read Replies (1) \| Respond to of 79205

I didn't clarify myself. When I say, "when the story changes", I am referring to the company fundamentals, not price. Here is my process: Find a great company, because of whatever reasons (balance sheet, market leader, innovative products, whatever). Just a great company. Next, buy if the price is undervalued. Sell when it is no longer a great company. No analysis on price whatsoever. If the reasons that led me to believe it was a great company changed, I will sell. Example: TXN is a great company because of its willingness to dump the majority of their sub-par divisions and focus practically all their energies into DSP. I believe DSP will be a lot bigger than the market realizes. As long as TXN is the market leader in DSP's and they are holding their margins, and as long as the internet bandwidth problem still exists, I will hold onto TXN. If they start making less money off of DSPs I will sell. If the internet bandwidth problem is solved, and a couple years pass, allowing full market realization of the enormous potential for DSPs, currently and in the future, I will sell. If TXN goes to 1000 tomorrow, I will hold. And all of you would have gotten out at 100.

To: Ron Bower who wrote (3420)	3/3/1998 5:31:00 PM
From: Michael Burry	Read Replies (1) \| Respond to of 79205

In value investing as defined by its two greatest practitioners, Graham and Buffett, there are two main methods of finding undervaluation - looking at the present, and looking way beyond Wall Street to points 5+ years in the future. The key to knowing when to sell is to know why you bought. If you bought based on an undervaluation of the company's current situation a la Graham, then you should look to sell when fair valuation is approached. You should gladly give up any further momentum-driven appreciation. If you bought based on future expectations a la Buffett, then you obviously have a strong company that meets Buffett's criteria, and may be a candidate for a long-term hold. Note that relatively few of even Buffett's stocks meet this. Perusing Berkshire's portfolio over the years reveals many, nay most, are 1-3 year deals. Mike