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To: Robert S. who wrote (25798)	7/15/1998 6:25:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 95453

Robert, as a confirmed buy and holder and TA baiter of long standing, I take exception to the description of buy and hold as presented in that Motley Fool article. The offending sentence (along with the thought process that goes with it) is this: The buy and hold approach should focus on selecting quality companies with current market values that are at a discount relative to their underlying economic value. WRONG! If you followed this advice you'd be in and out of stocks as soon as your valuation criteria were met. But more important, nobody has come up with a decent valuation model for growth stocks (including the venerable incarnations of Graham and Dodd). There are simply too many imponderables like what is the proper risk adjusted discount rate to apply to future cash flows. Beyond this, any economist will tell you that a commodity is worth exactly what a willing buyer and seller agree its worth. And that assessment is based on all of the available information in the public domain. Look at Cendant as an example. The risk in holding or buying the stock was clearly delineated when questions regarding CUC's accounting practices were revealed. But at that point a risk averse investor would have to figure that there was a substantial risk in holding the security. On the other hand, he might reason that since the news of accounting irregularities is out, there was a good chance that investor concerns might have been overblown. This is a classic example of uncertainty, and this is just one of the parameters that needs to be quantified in any valuation model. So my approach is to avoid valuation issues other than to calculate a normalized PEG (the PEG of the security divided by the PEG of the S&P 500). At this point I remain invested in the stock so long as the long term fundamental remain intact. This approach has stood me in good stead. I am still invested in stocks that I bought in the 1960's. TTFN, CTC