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Technology Stocks : 3DFX -- Ignore unavailable to you. Want to Upgrade?

To: jttmab who wrote (5721)	7/23/1998 6:16:00 PM
From: Sun Tzu	Read Replies (2) \| Respond to of 16960

Jim I'm afraid you have figured me out so well. Not only I am short TDFX and Eric is my tag team mate, but the truth is that Eric and I are one and the same. I just signed up as a new member so that I can apply my devious plan and pretend that support for my point of view, void of any fact and reason as they are. I have invest a few million dollars buying puts on TDFX but since it has been going up steadily and I am afraid that the news of upcomming earnings/OEM announcements/Intel take over/... will send the stock soaring from the current heights into stratosphere, I have had no choice but to resort to such desperate attempts so that I can hope to break even. I see now that I was wrong and that you are just too smart for me. barely a week since my first post and you've figured me out so well. Sigh! <eos> # End of Sarcasm No Jim I'm not protesting anything, just that I'd rather to be blamed for what I am as oppose to what I'm not. So I thought to set the record straight. Anyways if you have a logical objections to what I'm saying, point it out. Otherwise... Now on to your points. Value investing is one of the most misunderstood aspects of investing. I really suggest that everyone reads Investment Gurus : A Road Map to Wealth from the World's Best Money Managers by Peter Tanuos ISBN 0132607204 (yes I get referral fee for every copy sold :D Ooops! I forgot sarcasm ws off ;) Tanous is a professional fund manager evaluator and in this book he interviews a wide spectrum of fund managers including Peter Lynch, Michel Price, and Mario Gabeli (sp?) He also interviews momentum managers, quants, and academics. If you're going to refer to someone's achievements and style, at least read how they've done it as oppose to quote hearsays about them. Here are some of the highlights from the value managers in the book: 1) None of them would seriously add to a loosing position (unless it was an asset play which TDFX does not qualify for) no matter how well the valuations (except Laura something who was debating between liqudating a 15% looser or doubling up on it). Now they did have varying ways of defining what the loosing position was, but that did not change the fact that they would not add to a loosing position rather would at the very least wait for some support and stability before indulging again (assuming the stock was down for no reason at all). 2) Almost everyone of them (esp. Price) emphasizes capital preservation which means not getting yourself into risky positions in the first place and getting out of a position if it establishes a downtrend. 3) They all wanted to invest in a sector that was out of favour, but that their analysis showed the sector will be coming back (this does not apply to asset plays) 4) Just in case they were wrong and the sector was not going to come into light, they wanted the company to be using its assets to build extra value while they waited it out (for this TDFX may qualify). Now the momentum managers on the other hand, did not care as much if they were down 10% or 20% but would drop the position if it did not show immediate sign of recovery. Here are a few more things for you to consider: The legends that you are talking about did trade and trade fast. Lynch for example would define what stocks he considered buying as well as a range of shares to buy (say 10,000 to 50,000 shares of XYZ) he would then relay this to his traders and let them trade him into the positions. They (the traders) would build the initial position, if it was not showing a profit by the time they had settled into the low end of the position, they would not add to it. In his book Beating the Street Lynch mentions how his choice of vacations was made by which time zone he would be in and if that time zone would let him get in touch with his traders. As an example of how the fund was getting out of hand he mentions how after finishing a down hill ski run in Switzerland he called his office and it took them 2 hours to go over the list of the stocks alone. Now you don't think that a person who'd believe in buying a position and mostly leaving it alone for the next 3 years would need to keep such a close eye on all those positions, do you? And Warren Buffett last summer bought a huge amount of silver and took delivery of them (the only reason for taking delivery of futures is to impact the the supply/demand balance and possibly trigger a squeeze or in any event help bring about an uptrend). A short while after he let it leak out that he was long silver (in Dec. or Jan I think) he sold most of his position (while everyone else was loading up on silver in the hopes that Buffett is holding this position for the next 30 yrs). Needless to say that the market dynamics and his tactics made him a load of cash. I can go on and on in this vain, but I think these two example of those that you named are enough. Also note that these people have large sums of money to manage and can do things that you and I cannot. If Lynch was to buy TDFX tomorrow, the stock would sudenly find all the visibality and support that it needs simply on the ground that Lynch has bought it (and make Lynch and all of us a load of money). Mario Gabeli promotes his stocks tirelessly. Everytime I've seen him he is tauting his largest positions and mentions why everyone should buy them (here is an idea, TDFX should just contribute 10,000 of its shares to the Gabeli fund and wait for Mario to do his magic :) I doudt that any of us here have such a power to make or break the stock by word of mouth (though some of the responses that I get indicates that unknown to me, I may have such a power and just don't know it :D) Finally, there is a place for technical analysis. Even the most ardent opponents of TA (James Rogers and Peter Lynch) use TA to some extent weather they want to admit it or not. Rogers for example, sees inflation everywhere and believes that the bonds and USD are highly overvalued. And anytime someone uses only TA or only FA, he is going to loose in the long run. Right now the technical picture for TDFX sucks (it can change in as quickly as a week, but I'm talking about now). Here is a good example of what I am talking about. James Rogers is one of the most outspoken opponents of TA. He often says that "I've never seen a rich chartist except for those who sell their services". He also often says that an investment horizon should be 10, 20, or 30 years. And he has made tens of millions from $4,000 in a matter of 14 years. So he should know what he is talking about and he sounds like the kind of person that I've seen many people like to quote and follow. So let's look at one of his sample investment moves. Rogers shorted bonds a few months ago when the yield was over 6.15. Two days later the bonds ralied big time and kept it up for a few days. When asked a week later if he was still short bonds, he did he say "Oh of course I am still short bonds. I am loosing a bundle but it is only temporary; the hell with the trend. The higher it goes, the harder it will fall and that is inevitable because the fundamentals demand it. In fact I am going to short some more at these rediculous prices"? No. Instead he said "Oh No! I've jumped enough times in front of freight trains in my youth and I don't do it anymore". Just something to keep in mind. As for Yahoo or Amazon, if you'd read my posts you'd know that I would never recommend buying such overvalued companies for exactly the reason that you've posted. Actually, YHOO looks toppy to me, but I would not short it until I see a serious down trend (when a $25 stock sells for $200, there is plenty of room to make money on the way down. I'd rather miss the top in this case). In conclusion, congrats on your 15 baggers, but what does that have to do with what I said? Best wishes, Sun Tzu