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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: Reginald Middleton who wrote (369)	6/7/1998 12:30:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 1722

Reginald, I enjoyed the links that you provided. I have a couple of questions and comments. I agree with you about the problems with GAAP accounting and the importance of cash flow numbers etc.. On the other hand, I wonder if you are underestimating the predictability of EPS. I say this because EPS is a more volatile number than Cash Flow is. Much of the volatility has nothing to do with the long term business values or position. It has to do with cyclical forces within the economy, stage of aggregate business cycle etc.. If an investor can make reasonable judgements about these matters and normalize the earnings power, a much clearer picture of the values becomes possible. I am not sure how you could do a study on this because of the subjective nature of what I am proposing, but I do it all the time in my own investing. I am sure I get better results this way. It is this type of analysis that allowed me to buy brokers after the 87 crash while they had no earnings (everybody hated them) and banks in the early 90's when they were dropping like flies. It is the same analysis that leads me to believe that both industries are significantly overpriced now due to the most favorable environment possible. These types of booms and busts cannot be timed of course, but I believe that is the nature of value investing to begin with. This would also seem to be an issue in a cyclical industry like technology that is full of boom and busts. (with the current cycle being boom) Second, How much does your product cost? Third, would you be willing to provide us with S&P500 aggregate cash flow and free cash numbers? Wayne Crimi Value Investor Workshop members.aol.com June Market View members.aol.com