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

To: Chuzzlewit who wrote (21418)	5/5/1998 2:18:00 AM
From: Broken_Clock	Read Replies (3) \| Respond to of 95453

Chuz...what do you think of LSS as a value play?

To: Chuzzlewit who wrote (21418)	5/5/1998 10:09:00 AM
From: RGinPG	Read Replies (3) \| Respond to of 95453

If I we get rewarded for risk, then we should be greatly rewarded eventually in this sector don't you think? BTW TTFN CTC is cooler than Best Regards.

To: Chuzzlewit who wrote (21418)	5/5/1998 2:10:00 PM
From: jbe	Read Replies (1) \| Respond to of 95453

Chuzzlewit, more on valuation. Now we are getting down to the nitty-gritty. So, if I understand you correctly, you are saying that although ideally we should evaluate companies in terms of the future stream of free cash flows (discounted), in practice we can't do it. Next, you say -- again, if I understand you correctly -- that it's easier to project the future of a whole industry segment, and then figure out which companies in it are in the "strongest position to capitalize on the forecasted growth." That sounds to me as if you are not talking about "free cash flow" at all, but about growth (sales, eps) and competitive position. Does a company's present free cash flow situation count for anything, in your view? When I intially started considering investing in the oil service sector(at its market top last year!), I was puzzled by one characteristic of the industry. And that is that although almost all of the companies in it had strong cash flows (and low price/cash flow ratios), most of them had negative free cash flow (conventionally defined). (Eventually, I ended up investing in companies with good positive free cash flow in the present -- TDW, ESV, MAVK.) Just how important is/should be free cash flow in the oil service industry, anyway? (I notice that you occasionally seem to use the terms "cash flow" and "free cash flow" almost interchangeably.) Let me nail you down still further. Suppose you have money you MUST invest, in a hurry, in one company in this industry. But you have only an hour to check out all the companies you could buy. What rough-and-ready criteria would you use to select "the" one? It's a long-term investment, now, so you can't cop out by buying the one with the most here-and-now momentum. In other words, what, if any, "objective" measures (as opposed to what you call "subjective impressions")would you personally employ to determine value (again, in this particular industry -- industries of course differ)? Personally, I've wasted a lot of blood, sweat, and tears coming up with the criteria I use, but I am not at all sure I'm using the right ones! (So far, they sure haven't paid off, in $$$ terms.) By the way, I am familiar with MPT (although not with the acronym). Morningstar uses it extensively, by the way, for evaluating funds. My problem is that I have some reservations about the "efficient" (i.e., rational) market hypothesis. The market sometimes seems driven by psychology more than by anything else. How can so many irrational (by which I mean subjective, not "crazy") decisions produce a rational/efficient result? My son suggests, quite seriously, that we should use "chaos theory" in analyzing the market. Know of any such attempts? On the price/sales ratio. Doesn't it have its uses? For example, I read somewhere the other day -- internet stocks were the subject -- that it provides some solid information about companies that are not (yet) making any profit. At least it will tell you whether the company has good revenues, and what you are paying for them. If it isn't increasing sales, fahgeddaboutit! Eagerly awaiting your response! jbe