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

To: James Clarke who wrote (580)	11/21/1998 1:19:00 AM
From: Shane M	Read Replies (2) \| Respond to of 4691

Thread, I recently reran some Buffettology screens and applied valuation methodology. Here's some of what's showing up at the top of the list: Alot of these are tech stocks and I know most would discard becuase tech isn't predictable enough. But I put them out there because I think sufficient insight into a particular technology area can be gained with study; and in general tech has been a historically great place for investments. Cisco CSCO - routers Safeway SWY - grocery Ralston Purina RAL Tellabs TLAB - tellecommunication Champion CHB - manufactured housing. Peoplesoft PSFT - Enterprise software 3 Semi manufactureres Maxim MXIM, Altera ALTR, and Linear Tech LLTC. Belden Cable BWC Fastenal FAST Cambridge Tech CATP Apollo Group APOL Personally, I'm most interesting in the following stocks right now, although I'm waiting for a general market pullback. RAL at 29, if possible. PSFT when it finds a bottom, hopefully in mid teens. FIC (Fair Isaac) should it fall into the low 30s. CHB under 20. Would've bought a few shares if not for my current negative market sentiment . I'm trying to understand the semi sector better, because basic valuation methods make LLTC and ALTR in particular look attractive. I just don't understand their biz. Shane

To: James Clarke who wrote (580)	11/21/1998 6:37:00 PM
From: cfimx	Respond to of 4691

James is right. You have to look at the sources of earnings growth. Is this company producing good earnings growth because owners are throwing ever larger amounts of capital at it every year? That might be a company that shows up as a "buy" with these "formulas" being bantied about, but you probably wouldn't want to OWN it—at ANY PRICE. For example, WEB figured out that a newspaper company, requiring little incremental capital to grow, should be able to increase its cash earnings at 6% rates—forever. That may not SOUND impressive but WEB demonstrated that an investor would be on SAFE ground paying 25x those earnings. One of the formulas on this thread postulated that a company growing EPS at 20% a year gets a multiple of 18! Throw the formulas out and start LEARNING THE BUSINESSES. What you pay for it depends on HOW MUCH CAPTIAL it uses and what it RETURNS on its capital. That ANSWER will assist you in getting to this: the discounted value of all the cash a business generates less the amount it uses from here to doomsday (to paraphrase our dietey).

To: James Clarke who wrote (580)	11/22/1998 1:36:00 AM
From: Fredman	Respond to of 4691

P/E vs. Growth: From all the DD i see, P/E or Growth rates do not apply to anything anymore. I know, i know: go look at AOL or AMZN. These are a TON of Oil Sector stocks that have FANTASTIC P/E's - many of them are (or were) under 10, but how do you judge Growth in the Oils ? Because maybe you cannot assess Growth in them does that make them a bad buy ? No, they are just something WEB wouldn't want to buy. I really wonder what Peter Lynch would be buying TODAY if i gave him a million bucks and said 'here Peter - start from scratch'. AMZN - i see where Barnes and Noble is buying a bunch of the SUPPLIERS of books to AMZN - does not bode well for AMZN. Hell, i don't know what a 'good buy' is anymore because the Financials don't make any sense when you compare them to the per share price....... or at least in the 100 or so different stocks i watch.