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

To: Michael Burry who wrote (4062)	5/12/1998 7:20:00 PM
From: James Clarke	Read Replies (1) \| Respond to of 78519

Mike, you took the words out of my mouth. I am testing a theory too, and so far I am two for two within a year of purchase. Not conclusive by any means, but I only wish I could find more of these. And Mike, don't tell me we're not following Graham. Sure, he advocated buying a bunch of net-nets in good businesses. We clearly can't do that today. But when the alternative is buying systematically overvalued stocks or parking in cash, at my age, I will try to do the best Graham act I can. Buy what undervalued stocks I can find, stay at over 50% in cash or uncorrelated stocks (Asia or high dividend REITS). And pick off relatively good net-nets whenever I can find one. Something tells me Graham would have done the same thing in this kind of market. Its a matter of keeping powder dry for the inevitable time in the next 10 years when value investors can do their thing while everybody else is licking their wounds. So what you look for is first LOW RISK, and only secondarily return. If the market were to drop 50%, would PSO trade at 1/3 of its net-net value? I don't think so. The criticisms of PSO have deepened my conviction, though I do commend the thought process. That's the reason why I take the time to post on this thread. But this business trades at below the value of its net current assets! And its got another $2 a share in real estate. And it pays a dividend twice the market rate. OK, there are warts, significant warts. I feel like I am being pushed to respond to these, and assure those who invested that PSO is the next Microsoft. Its not! I respond, look at the valuation. You should not expect perfection when you buy a dollar bill for 60 cents. Part of their product line, boots, has an inventory problem. OK. Management is less than stellar. OK, but I have no reason to believe they are dishonest. There is no reason for the stock to break out of its history of similar valuation. That's a tougher one, and that's where you have to step back and say, what is the risk/reward? Maybe the stock stays at 6 for two years. So I collect the dividend and sell. But if it gets discovered, or God forbid does something to enhance value, I make 40% or more. I am not speculating on a move before the market corrects. I am investing in real "stuff" worth $8 a share at the very least, and which is still going to be there no matter what the market does. If I could find that in a better quality company, I would. But I can't.

To: Michael Burry who wrote (4062)	5/12/1998 7:58:00 PM
From: jeffbas	Read Replies (1) \| Respond to of 78519

Mike, you have not persuaded me that taking a look at the historical discount for the specific company is not a good idea, especially with the forthcoming earnings comparisons on the iffy side. What has happened to make this worth more than the historical range, other than it has been mentioned here? We could run it to $8, but who would we sell it to?

To: Michael Burry who wrote (4062)	5/13/1998 2:28:00 PM
From: Jurgis Bekepuris	Read Replies (1) \| Respond to of 78519

Mike, Do you have an entry price on ELY if it continues to drop? BTW, thanks for you and James for bringing up PSO. I'll take a look at it. :-) Good luck Jurgis

To: Michael Burry who wrote (4062)	5/14/1998 5:01:00 PM
From: Allen Furlan	Read Replies (1) \| Respond to of 78519

In the early 90s I subscribed to a newsletter(Astute Investor) written by a PHD who simply ran screens and let individual investors do their own research. This was before I discovered the AAII and subsequently internet screening capabilities. The author always had one page that was a list of net-net value stocks. At the end of one year I recapped the results and was impressed that these stocks did significantly better than the S&P Index. In those days his lists contained from 25-30 stocks each month and there was a good turnover because many of the net-net stocks had good pops based on some surprise announcement. I guess the moral of the story is that net-net criteria is useful and if market corrects significantly the number of opportunities will increase dramatically. Also it is interesting to note that both hydea and pso were on those 90s lists. Corollary is that they haven't done much in 7-9 years. Another comment for the thread. If you believe that a major market correction is highly probable before the end of the year consider writing bear spreads using January puts. Today I did a 10 by 10 of Dell Jan 90 over Jan 85 for $2400 net of commissions. Havn't the nerve to sell short as a hedge but willing to speculate that Dell will fall from its own absurd weight. Choose your own favorite overpriced stock. For a last idea for any other conservative senior citizens consider ORU. In my opinion the ED buyout has a very high chance for success. Shareholders(2/3) would be nuts to turn down offer of 58.5. Because ORU is so small compared to ED, monopoly concerns not likely. Downside is that 3 state commissions must approve. I am willing to take risk for 14 % annual return if merger completes(20-25% loss if deal collapses).