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

To: Sunny Lee who wrote (276)	9/18/1998 12:04:00 AM
From: James Clarke	Read Replies (3) \| Respond to of 4691

Is now a good time to buy BRK shares? Oh God no. That is if you have any understanding of "margin of safety". There is easily 30% downside in Berkshire's valuation even at today's price. Maybe you make money buying today, but my thinking is that that would be speculation, not investment. I think Buffett would agree. Though I do believe that BRK will not go as deep into a bear market other stocks may. Because there are going to be people like you - and me 20,000 dollars lower, who just want to own it. As a result, I think I will do much better understanding what Buffett does, and trying to do it in a bear market. i.e. spend your time looking at Disney, Mattell, American Express, Gillette and Merrill Lynch and decide at what price these stocks have a margin of safety. BRK is still signficantly overvalued. If you really understand Buffetology, you will do better picking your prices on Buffett stocks which are getting creamed (and I don't think any of them are buys yet - according to his statement yesterday neither does he) than you will lining up to buy BRK at "bargain prices". You will never get a bargain price on such a hyped and loved stock. And I am skeptical that you will ever get a true bargain price on the ones I listed above either, but you've got a better shot. The best play of all is a "Buffett stock" which nobody except you knows is a "Buffett stock". For me those are Clayton Homes (CMH) - admittedly borderline - and Ambac (ABK) which I am sure the great one would look at if it were ten times bigger. Another one to get to know well is Dover (DOV) which I consider a buy at the current price, though I think you will get another shot at 26. If you want to look at the obvious Buffett stocks, in my view Gillette and Disney are the ones most likely to reach buy prices. Though, Sunny, looking at your profile and your favorite stocks tells me we have little to discuss. If Dell is still one of your favorite stocks, we have very little in common. I think Microsoft will be OK, though in 10 years will be looked back on as a mediocre investment. In ten years, Dell will be seen as the Avon of this bull market. (Avon was one of the darlings in the early 1970s that lost something like 80% of its value in a couple years.) I understand Dell's business model and have watched it and watched it but never shorted it, and I still don't get it. Warren Buffett says you should buy a stock if you are willing to go to an island without a quotron or broker for ten years. On that basis, I would give you $15 for your Dell share. Do you really believe a company can continue to grow earnings at 30-50%, or at all, in an industry which is not growing? With an ingenius business model which eventually will be copied? e-mail me privately with your response to this one unless you want to argue that Dell is a Buffett stock. I would love to hear that case. I have never heard it - the only reason I have ever heard to buy Dell is that "it performs". It goes up because it goes up. That is a disaster waiting to happen. Sorry for the diatribe. Jim JJC