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

To: cfimx who wrote (496)	10/24/1998 7:03:00 PM
From: James Clarke	Read Replies (3) \| Respond to of 4690

OK, Yahoo has a potentially interesting franchise. No disagreement there. But there are a lot of companies that have currently interesting franchises that have actually made money before and which trade at multiples somewhat lower than 200x estimated 1999 earnings. The only rational reason I can think of to buy this stock is that some idiot is going to pay $10 more for it next week. But there's that four letter word...what is it...I forgot...I think it begins with r. Oh yeah, RISK. What is the downside if you're wrong on YHOO? I know the poster I'm responding to is probably not really recommending you buy YHOO. All I'm trying to point out is that Buffetology is about two things: franchises and valuation. Forgetting either will lead you into trouble if you are trying to practice a Buffett strategy. Jim

To: cfimx who wrote (496)	10/26/1998 11:51:00 AM
From: Axel Gunderson	Read Replies (1) \| Respond to of 4690

yahoo doesn't have the track record. But YAHOO has a potentially interesting franchise. My point was that it is a kind of circular logic to estimate the value of a company based upon other's valuation of a company. That is the weakness of the idea of looking at market value added per dollar of retained earnings. All that tells you is market reaction which of course is subject to considerable irrationality. It doesn't matter in this case if YAHOO has a track record or a potential franchise; it was selected as an example of how the method you suggested can be misleading. Axel