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

To: jeffbas who wrote (3572)	3/22/1998 2:12:00 AM
From: Chuzzlewit	Read Replies (1) \| Respond to of 78593

Jeffrey, I'm of the opinion that most of the time it doesn't pay to try to outguess the market. I do believe that the oil drillers are an exception for the following reasons: the market has been using the spot price of oil as a leading indicator for profits in the group. However, the group's profitability depends on the supply/demand balance of the rigs. While it is true that prolonged cheap oil will result in curtailed exploration budgets, it would probably require oil to be art about $12 for six months for this to happen. This analysis is based on the premise that the market is mistaken, and so far I seem to be correct based on the recent Gulf of Mexico lease auction and the continuing increases in day rates. My favorites in this sector are ESV, GLM and VRC. Semiconductor equipment stocks are another issue altogether, because they depend to a great extent on the vibrancy of the Asian markets. I simply have no feel for when these economies will turn around, so I don't know that investing in these companies is a true "value" play. I define value as either the probable break-up value of a company or the risk-adjusted present value of future free cash flows. The impact of the Asian currency crisis is such that my crystal ball is very murky on this, and I would be very hard-pressed to come up with anything reasonable. My approach is to assume that all stocks are more or less fully valued by the market. This approach lends itself to a buy and hold philosophy which I believe is the way to maximize you market returns. Regards, Paul