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

To: Chuzzlewit who wrote (746)	12/23/1998 10:58:00 PM
From: cfimx	Read Replies (1) \| Respond to of 4691

About our hero, diety and father figure, WEB, you said: >>If he didn't there would be considerable churning in his portfolio. After all, why hold on to a stock that is "properly" valued if you are a value investor?<< As a matter of fact, Buffet's largest PERSONAL holding, Berkshire Hathaway, makes up about 98% or more of his net worth. One of his overarching goals as Chairman is to have BRK trade as CLOSE TO ITS INTRINSIC VALUE as possible, as often as possible. I guess Mr. Buffet, by your definition is quite irrational, since BRK is more often than not, trading at its APPROPRIATE value, and he continues to hold. You dummy Warren.

To: Chuzzlewit who wrote (746)	12/24/1998 12:23:00 AM
From: James Clarke	Respond to of 4691

Of course hypergrowth demands a high P/E ratio - IN HINDSIGHT. And if you are absolutely certain that a stream of cash flows will grow at 50% for five years, tell me what it is and I'll pay 50x earnings for it. But what does that mean? $1, 1.50, 2.25, 3.38, 5.02, 7.50. Wow. Easy to do on the calculator, but you're betting that it happens for real. So you're asking me to believe that a company that is already pretty big, and hitting on all cylinders, is going to have seven times more earnings five years from now? If that is where Dell goes, and you called it, you deserve to make a fortune. But those are not the kind of odds I consider a sensible bet. Its not mathematically impossible, but its...lets just say, risky. I will call the dogs off you on one thing. If I had bought Dell five years ago and had a cost basis in the single digits, to sell would trigger a tax hit of roughly 20% of my investment. (For Buffett paying corporate tax on a Coke or a Gillette it costs 38% I believe). In that case, you would have to believe it is overvalued by 20% (or 38%) for that to be a rational sell. In that case the buy decision is very different from the "not to sell" decision. And that is why I think many many people misunderstand Buffett's decision to hold stocks I think he knows are overvalued temporarily. Jim