Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: cfimx who wrote (5501)	12/20/1998 12:59:00 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78666

Twister: Right. I see the ECP. Could be a good investment, and without having access to Sanborn ratios (and having a belief in Sanborn) or knowing the industry - I couldn't tell. And right again. With the pe where it is, the price to book, no div. (I didn't check price-to-sales; this ratio might be affected by general decline I think in newspaper readership), it has no interest for me. And generalizing some more - it would be uncommon that I would consider newspapers which apparently trade on EBITDA or cable companies (is that $/POP or something?), or some other industries. And you are right again. I am not so sure I am doing "that well" with value methods -- Ben Graham or not. For Ben Graham - he said his way was a way to invest and garner a profit -- he never promised riches. So my "not well" is a relative term. I invest, my portfolio increases in $, but I own none of the biggest winners of l998 (I think). So as this year ends, if I had a 12-year old kid, and he came and said to me -- "How could you possibly not have bought any of the internet stocks?-- They were all over the place, that's what people want to invest in, you could have made easy, EASY money and FAST. And you could have bought almost ANY day in l998 and there were a BUNCH of stocks you could have chosen. How can you possibly call yourself an investor if you didn't buy anything internet related? Buying textile companies, oil supply companies, restaurant stocks, REITs, plus all those other companies that nobody ever heard about or cares about ---- that is really poor." I have no answer that would satisfy him. And if he were 22 and said, "Man, get with the program... Graham died more than 20 years ago. We've gone way beyond what he's done. Nobody who's anybody invests like Graham says anymore. You don't need internet stocks, but there are better ways now to invest with the same or lower risk." Again, I have no answer that would satisfy him.

To: cfimx who wrote (5501)	12/20/1998 1:31:00 PM
From: Paul Senior	Respond to of 78666

Twister, two fund managers with whom I have a problem with their investing choices not IMO meeting their stated style or choice of style are: Price: especially as relates to his purchase and holding of Sunbeam Yachtman: One particular stock in his portfolio. Of course I can not provide you "EVIDENCE". But given the general business media discussion about how many funds are becoming closet indexers, and the pressure I think I see for funds managers to show they add value - value that the fund investor couldn't easily or possibly do for himself/herself - like do sophisticated accounting or become personally knowledgeable of the top management - I am suspicious that such stocks are actually selected by the way the manager states.

To: cfimx who wrote (5501)	12/20/1998 1:33:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 78666

A Quick thought on Graham's Techniques I think the biggest problem with (let's call them) Graham's rules for finding value is that it is harder to find investments that fit his criteria in today's environment. There have also been some fundamental business and economic changes since then. I think the principals are still 100% correct though. Here is just one example: In Graham's time, a company bought below its book value (assuming it accurately reflected the value of the net worth) or a net/net could work out fine if the company was liquidated. Now that is not the case to the same degree. The business/worker social contract has changed since Graham's time. When you start breaking up a company now, there are all sorts of employee packages, golden parachutes, and other benefits to be paid to workers. So a net/net or liquidation has to be selling at an extraordinary discount to really be an outstanding value. Sometimes hundreds of millions or even billions of dollars go out the door to employees at restructuring time. Wayne Crimi members.aol.com

To: cfimx who wrote (5501)	12/20/1998 2:23:00 PM
From: Michael Burry	Read Replies (2) \| Respond to of 78666

Tweedy Browne comes to mind as closest to Graham currently among the institutions. Since 1983, Graham's methods would seem to have failed us. No doubt. It would be difficult to operate purely on Graham's relatively simple methodology in this day and age, especially as an institutional player. All the best-performing Graham values in the last few years tend to be illiquid with either small floats or small market capitalization. >1 billion market cap pretty much rules out the possibility of a Graham value of late. So it may be hard to find big-name players doing well with Graham, and it is indeed hard to find it even among individuals. As a result of my journalism, and contributions to internet discussion groups, I've developed e-mail contact with hundreds of investors, and I count just three successful Graham investors among them, just one of whom uses it exclusively. And if I count myself among those three, then maybe I shouldn't since I do tend to look for Tweedy's variation of Graham, which includes insider buying after a significant fall in price usually greater than 50%. When I started this thread, I took "in the Graham tradition" to mean "let's stay away from PEG's." So we end up with our variations on the theme of value investing. Great discussion of late. With financial analysis-challenged people I know still buying houses and sports cars with their stock market winnings in Microsoft, Cisco, and now some of the internet stocks, it's hard to argue or even defend value investing at the neighborhood barbeques. Good to see it still generates interest out here in cyberspace.

To: cfimx who wrote (5501)	12/20/1998 2:26:00 PM
From: Jurgis Bekepuris	Respond to of 78666

> I named TEN GREAT MMs plus Buffett/Mungerthat have > repudiated Graham. I challenged you to come up > with ONE WHO HASN"T and you couldn't. Marty Whitman at TAVFX. Mario Gabelli maybe. And I think the debate is pointless - every investor/manager modifies previous strategies as Graham and Buffett did themselves. Paul Senior's Graham is not exact Graham, as Robert Sanborn's Buffett is not exact Buffett. Which does not mean that the old strategies do not work anymore. Good luck Jurgis

To: cfimx who wrote (5501)	12/20/1998 8:39:00 PM
From: James Clarke	Read Replies (1) \| Respond to of 78666

All this talk about "repudiating Graham" is a little much. Warren Buffett has not "repudiated" Graham, as anybody who saw his discussion of the man on the recent PBS program would know. What did Graham teach Buffett, and me? 1) Look at an investment as a business which you can value. If you can't value it, don't look at it. 2) Recognize the difference between investment and speculation. 3) Diversify 4) The key is the concept of margin of safety. Graham went onto provide a specific way he used to come to a conservative valuation of a business. Buffett came up with another. Clearly Buffett disagrees with Graham on number three, but overall, I see Buffett investing AS PRACTICED BY BUFFETT as being an overlay of Graham, not a repudiation by any means. It is so much more important to recognize the first and fourth concept - being able to value the business and to invest at a margin of safety. Those are things Graham did, Buffett does, and investors like Sanborn certainly do. But as obvious as these concepts seem, investors who practice them with conviction are still the small minority of both amateurs and professionals in my opinion. Jim