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

To: jeffbas who wrote (3624)	3/24/1998 8:51:00 PM
From: Jurgis Bekepuris	Read Replies (1) \| Respond to of 78579

Jeffrey, >>lower R&D dollars and falling further behind >>is very astute. However, that would tend to apply to a >>small tech company trying to be a "full-service bank" >>so to speak, as opposed to selecting a niche where the >>resources it has are enough to keep it competitive. >> VTSS is a great example of a second-tier >> company that has done very well in its niche. First of all, I would regard VTSS as the first-tier company in its subfield. What I mean is that depending on your technical knowledge you can subdivide large fields into subfields and find subfield leaders. E.g. INTC is a semi field leader. VTSS is GaAs subfield leader, ALTR is FPGA subfield leader. The problem with subfields is that they have to be viable for growth and "secure" from larger predators. E.g. assuming that LTXX is a leader in discrete component semi-test sector, is this sector going to grow, and is there assurance that TER will not enter that subsector? For example, WJ has a great product line that is a standard in the industry. However, the products don't need to be replaced that often and there is not much growth in that niche. (WJ info per Andrew Vance). On the other hand, all surrounding territory is taken by AMAT, NVLS, LRCX, so WJ faces an uphill battle to expand into new products. This is a "niche squeeze" that shows investors a profitable company with high margins, but with potential of bottomless R&D expenses if the company decides to grow. And notice that AMAT, NVLS and LRCX even don't plan to wage an all out war on WJ. In addition, WJ has a good management - they are just in a difficult position. Is management of LTXX good enough to find their way into a "golden niche"? The past results are not persuasive. In summary, I buy subfield leaders when I know that subfield is secure and growing. I also look at the management expertise and vision. I don't consider LTXX such a case and I don't plan to spend time to change my opinion. I don't claim that I am right, and it's possible that new LTXX products will push them to splendor. It's also possible that the valuation is so low that the stock will go up without much fundamental change. Do your own homework. I'll ask one question though: why not KLIC? Jurgis

To: jeffbas who wrote (3624)	3/24/1998 11:07:00 PM
From: Paul Senior	Respond to of 78579

Jeffrey Bash: YES. (re: reliving '73-'74 market). Starting to get cold sweats thinking about it again. Problem with owning value stocks now in such a climate as '74 is that everyone who is anyone in the press is negative, people are indeed burned and burnt out, and you can buy (I am giving guesses here,not facts) GM for maybe 3x cash flow, AEXP for 8x pe, XRX for 6 pe with a 6% div, food co's (they're "safe" at pe of 9),Merrill (if it wasn't bot out tomorrow -g-) for maybe 7x pe (with expectation for no earnings for 2 years),REITs (that haven't folded) for 15% yields ('cause everyone thinks their div. will be cut - and they often are cut), etc. etc. And the guys who were sooo right about shorting the market -- they covered way long ago and mostly didn't make what they could have (unless they were so stubborn they never sold in any of the bear rallies). (Everyone thinks these guys would be gloating or at least happy that the market has tanked. But they aren't because everywhere they look they see pain - theirs, their neighbors, TV, etc.) So why - in such a market - would anyone hold - let alone think of buying - SWR, SJP, or any alleged value stock? The ans. is they don't - they don't want or hold. That is why it is so important not to be overinvested now, to realize that there is a margin of safety only - not a guarantee - with value stocks, to be diversified, to have patience and staying power to realize that these are businesses we are talking about(not just pieces of paper), to give these business time to work their stuff in a country of great opportunity. ..... Ahh sorry...mostly intended for myself -- don't mean to lecture ... starting to get scared in this environment too....and got to fight the chattering monkeys sometimes -g-. Paul