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

To: Chuzzlewit who wrote (771)	12/24/1998 1:03:00 PM
From: Robert Douglas	Respond to of 4691

Dear thread, I hereby retract my apology to Chuzzlewit. -Robert PS –Note to Chuzzlewit- I read “A Random Walk Down Wall Street” as an undergraduate student in finance almost 20 years ago. Strange that you mentioned this quite outdated, elementary book as one to read first. I have studied the CAPM extensively in school and while testing for my CFA. Again, elementary. I suggest you broaden your reading, you don't seem to be able to grasp simple progressions of logic and valuation techniques. Indeed elementary school might be a good place for you to return, you don't seem to work and play well with others. A course in manners might also do you some good.

To: Chuzzlewit who wrote (771)	12/24/1998 3:06:00 PM
From: James Clarke	Read Replies (2) \| Respond to of 4691

<<Economists, financial academics and business appraisers have understood for years that there is no such thing as intrinsic value. This means that value is really an empirical concept, and it is relative rather than absolute.>> Thats a pretty bold statement. I think you would find plenty of economists, business appraisers, financial academics, and yes even investors who believe firmly that a cash producing asset has an intrinsic value - though it may be very difficult to estimate. Sure, the notion of intrinsic value is at a point in time, and could change with interest rates. (I am talking about the intrinsic value of a business or a commercial real estate asset, not a barrel of oil). What is a discounted cash flow analysis, except a calculation of intrinsic value? When you said before that the value of a stock is the value of its future cash flows discounted back, what is relative about such a valuation? Or maybe you are referring to everything being relative to interest rates. That I can't argue with, though I'm not quite sure where you go with that. Maybe I should just say, as Buffett just about does, a business with predictable cash flows has an intrinsic value given a level of interest rates. And at the point in time you are making the investment decision, a given level of interest rates is exactly what you've got, unless you believe you can forecast interest rate movements. And anybody who can shouldn't be wasting their time on stocks, they should be trading the most leveraged zero coupon bonds they can find. Jim

To: Chuzzlewit who wrote (771)	12/24/1998 3:20:00 PM
From: Paul Senior	Read Replies (1) \| Respond to of 4691

Chuzzlewit: Would appreciate some comment from you regarding your core portfolio criteria; how you are able to hold so long (decades), and how you finally, if ever, come to sell. You mentioned (#737) holding T, IBM for multi-decades for example. Are there some guidelines you use that assist you? I see that you are looking for companies "that grow earnings over many years". With T, and IBM weren't there many times -- and maybe for long periods - when not only was the stock down, but analysts and pundits assessed the business outlook and management skills as bleak and weak?. Yet you did not sell. Do you use some analytical methods to assist you at these times? Is it just persistence and/or an ability to foresee that over time that these companies will grow those earnings? Is it that in your core portfolio (I'm assuming that T, IBM - those are not among the rapid grower portfolio stocks), you only hold very few stocks that you follow closely(?) and do you also routinely perform cash flow analyses on these to make some assessments? Note: I'm not looking to debate you or your methods or your stock choices. I'm trying to get some understanding for my own struggle on how the heck do I - basically a value investor--hold on to some stocks for decades. ('Value investor' would be in my own mind -- assuming I still have a mind after some of the recent posts here and on the value thread -g-.) I have one Buffett stock, held for more than 10 years; it grows roughly 20+% every year in earnings and price. I think it's overpriced - I always thought it was overpriced (value investor criteria), but I don't sell -- primarily because I think Warren is still holding too. Plus now, after so many years - this thing is almost like a part of me. These are very poor reasons to hold a stock IMO. But hold I do, and it's become a real component of my net worth. With your 10-30 year holdings, is it just a cut-and-dried analytical decision that you make when you periodically? review each security? When these long-termers really get up in price (I'd say 'overvalued', but right now I'm a little gun shy with that word -g-), even overcoming the tax sell implications, you still hold, do not sell or even sell and swap into another hold (e.g swap T for IBM)? What enables or encourages or gives you the confidence to do that? (Surely, in some of the 30 year time frame - there must have been times you were tempted to sell.) Also, is there some 'excitement' factor that needs to be addressed too? If you have held a stock for 30 years, you are probably? not going to easily part with it now or in the next few years-- so for the investment "fun" part of it you do something else also which would be buy calls/seek growth stocks for that portfolio/buy some 'undervalued' GLM issue/??? (Asking with respect to my own 'growth' stock. All I do is read the quarterly and deposit the div. checks-- profitable, but not fun.) Sorry about being disjointed here, but if you would comment on any of these areas, I'd like to read it. Paul Senior