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

To: Shane M who wrote (4095)	5/20/1998 5:36:00 PM
From: Allen Furlan	Respond to of 78525

Shane, on another post you indicated you had a list of net nets from a year or so ago. Could you please provide those symbols to me. I have old copies of the AAII data base which I will use to rank companies purely on basis of each company's likely-hood for survival.(primarily financial but product risk also a consideration). My theory is that for net nets trying to rationalize the future is nearly impossible but rather some random event will cause some proportion of these companies to perform well. Therefore simple survival is the only selection criteria. Diversification using the topped rated probable survivors should outperform the S&P if business failures can be eliminated. I want to do this as a blind test(dont want to know successes so I wont peek at your other posting). I will share the rankings (and criteria used) in approximate quartiles along with price at time of AAII data base posting. Will be out of town for a week but hope to hear from you later. Thanks. P.S. re the options dialog, look at AMTC. New CEO will work without salary and compensation to be purely options profits.

To: Shane M who wrote (4095)	5/30/1998 6:15:00 PM
From: Allen Furlan	Read Replies (1) \| Respond to of 78525

RE net nets from Shane Milburn. Received your spreadsheets and reviewed company data from AAII data base of two years ago. For the benefit of the thread these were companies that had demonstrated net net properties in the past and to which a retroactive review was made. Three factors were used as primary screen ,free cash flow for each of preceding 8 quarters,current assets to current liabilities and long term debt. Only BELM had significant LTD. 8 of the 15 companies had negative cash flow in at least 5 of the past 8 quarters and were not considered candidates for purchase. Collateral data was also used,by comparing companies to peers(4 digit industry code used by AAII). These factors were P/sales, P/cash flow and Inventory turnover. Only 4 companies had 4 or more quarters of positive free cash flow and current net asset ratio greater than 5(arbitrary cutoff). Of these ESP was strongest but had inventory turnover which was only 25% of peer group and was eliminated. Only 3/15 companies seemed strong enough to consider,HBW,MAJ, and PSO.. None has performed well and in fact only 1 company(BELM)out of the entire list of 15 doubled since mid 96 (but then retrenched). Bottom line is that net net money was dead money for this small group of identified companies during this powerful bull market. Having said this I plan to follow ASFN in the near term, not from financial considerations but because of a Washington Post article about dissident shareholders winning control of the board. Best to all