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

To: Berney who wrote (994)	11/14/1998 8:35:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 1722

Berney, >>>I readily agree with you that the tide tends to affect all the ships in the harbor. Nevertheless, where we differ is that I believe there still exist reasonable valuations of individual securities (though getting fewer in number). I am not will to paint all stocks with a single brush stoke.<<< I don't disagree at all. This is my view on the matter. I prefer investing in companies that I believe are above average in many ways and have certain other attractive attributes. My present list contains about 70 companies. I accumulated it from scanning Value Line, S&P Tear Sheets, doing stock screens, and general business reading. I believe that only 2 of them are undervalued and I already own as much of them as I wish to have in my portfolio. A couple are fairly priced and I own them also (bought cheaper). The current aggregate market (S&P500) discounts an extraordinarily rosy future. That's the only way for the aggregate prices to make any sense. That's what several different models I use tell me. I've held that view for a little over 2 years. I believe the market has gone from moderate overvaluation and proceeded to what I now feel "COULD" be dangerous overvaluation. (emphasis on "COULD") With each passing month, the fundamentals have failed to develop in a way that could convince me I am wrong. S&P500 earnings are barely above where they were at year end 1996 and the S&P has gone from 740 to 1125 (1187 peak). 740 represented the highest non-depressed earnings PE in history. There has been some drop in interest rates that COULD justify some of that move, but it could well be argued that the original 740 in 1996 was predicated on rapid growth for as far as the eye could see that never showed up. That's what the bulls were telling us at the time. The drop in interest rates more or less reflects POOR worldwide economic developments and flight to quality as much as favorable inflation developments. Low inflation was already apparent and built in. (and in my mind no sure thing for the next 10 years even if very possible) That's why I use the term overvalued. I am not implying that you can't find anything that's cheap. Just in general we are "probably" very overpriced because almost everything I look at is overvalued by my standards. Those standards are not particularly different than most value guys. However, in the recent market break, there were good values all over the place and I took advantage where I could. Wayne