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

To: Chuzzlewit who wrote (765)	12/24/1998 10:44:00 AM
From: Robert Douglas	Read Replies (1) \| Respond to of 4691

Dear Chuzzlewit, In the spirit of Christmas, let my hold out a token of peace. Since I believe it was I that prompted your appearance on the board with my taunting post calling you a CNBC following, momentum playing lackey, let me try and end this war of words. I APOLOGIZE. Which, you will note I did in advance of the malevolent post already mentioned. But in return I ask for an apology from you to me personally (see below)and to all value investors that you smeared in your post. It was your egregious post that distorted value investing that prompted my similar return. Fair is fair. Now one final article in our peace agreement needs addressing. Some time ago I made the following post (#370) on this thread the first time jhg brought up Dell. Let me give you my take on Dell's valuation. Granted this is a crude approach, but given the possible variations on the inputs, precision is not possible anyway. Assume PC sales presently around $150 billion grow 15% annually for 5 years to about $300 billion. (I think this is generous.) Assume Dell will have a 25% market share in 5 years. (This too is generous in my opinion) Assume Dell's return on this $75 billion in revenue is 6%. (Lower than present, but still high for a retailer) Assume Dell's $4.50 billion in income is divided among 1.6 billion shares (5% growth due to options exercise) This gives Dell an EPS in 5 years of $2.81. Assume an above average market multiple for a company in a moderately growing industry. I estimate 30 is appropriate. Dell's stock price in 5 years = $84/share. This equates to a yearly return of 5.2%. Just about the rate of T-Bills with many times the risk. In response to my post, jhg relayed your sentiments in post # 373. rather than follow this fellow's convoluted* and often incorrect train of thought,* And now you wrote the following in post # 761: James, let me give you the math. It was estimated by Michael Dell that Dell will have approximately a 20 - 25% market share in five years. IDC and other sources estimate that the computer market is growing at around 15% per annum for the foreseeable future. That means that in five years the total market will be double what it is today. But currently, DELL is only about 8% of the market. That means that Dell will be between 5.0 and 6.25 x as big as it is today. On an annualized basis that implies an annualized growth rate of between 38 - 44% per annum. Eerily familiar isn't it? Is your logic convoluted as well? Granted we disagreed on the profit margin and the issuance of new shares, but these are reasonable sources of debate in any value equation. I don't think the label of convoluted and incorrect is remotely applicable. Do you? I will anxiously await your apology on this peaceful day. -Robert

To: Chuzzlewit who wrote (765)	12/24/1998 2:16:00 PM
From: Michael Burry	Read Replies (1) \| Respond to of 4691

CW, It's pretty simple. You say "Typical value investors focus on balance sheet items and historic earnings." Yes. Warren Buffett is known to favor predictable earnings, based on history, and he has been known to point to 10 years as a good start, but a longer history is preferred, and prefers that the company is mature with an unpopular stock, not a widely known growth stock in just the first of several stages of maturation. By projecting into the future, in any way, based on a short history and CEO statements, you're rejecting Buffett And rejecting Buffett isn't really what this thread is about. Mike