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

To: Axel Gunderson who wrote (497)	7/13/1998 11:41:00 AM
From: LemurHouse	Read Replies (1) \| Respond to of 1722

Hi Axel, and thanks for the post. Re technology and "circles of competence" : I think what's important is to understand the business -- the technology is secondary, and is only important with respect to how it impacts the business fundamentals. (If one can say "only" with regard to hi-tech businesses.) I don't think its necessary to be fully up to speed on the detailed engineering. Having said that, the pace of technological change is what creates a lot of opportunities in the tech sector, and it is a challenge to keep on top of even that pool of information which you need to understand the business. I think the internet is a huge help in this regard though -- it makes it much more possible to get the significant info on both the technology end and the business end. I agree that some businesses are easier to understand than others, but I do think that one needs to make a certain investment of time and effort to become knowledgable of the sector, regardless of where it is. re Fisher and portfolio allocations. Its been a while since I've read "Common Stocks & Uncommon Profits", and I don't really remember his guidance about the A/B/C company stocks and so forth. One thing I really do like about Fisher though is his guidance on selling. Namely, that you should only sell when one of the following 3 conditions is true. (1) Business fundamentals deteriorate and the company no longer meets your criteria; (2) you made a mistake in your initial analysis and you come to realize that the company does not meet your criteria; and (3) a better opportunity comes along (he warns that against this one, citing the risk of giving up something you know for something that you probably know less about and is therefore more risky.) The implication of this hold/sell strategy is that your portfolio will become "imbalanced" over time -- that is, the stronger performing issues will proportionally outweigh the others. (I put "imbalanced" in quotes, because its a loaded term -- something of a sacred cow which assumes that balance/diversification is good.) Especially when compared with the allocation formula you refer to. What do you think of this issue, and what do you think Fisher would say? For myself, I've held to Fisher's sell guidance, with the result that my portfolio is concentrated, with a capital "C". Risky? Sorry for the quick, stream-of-consciousness response. I've got to run to the airport. I'm off to Botswana of all places. God help me. Cheers. Andy