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

To: Michael Burry who wrote (774)	12/24/1998 2:39:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 4691

Michael, I came to this thread, neither to praise Buffet, nor bury him. I came in response to some rather vicious and uncalled for personal attacks. I happen to be a great admirer of Buffet, but, as your comments clearly indicate, his methodology is not applicable to emerging growth stocks in their early logarithmic growth phase. The very nature of these companies is that their histories are short and their expected earnings are explosive. But these companies are also quite risky. Today's darling could well be out of business in a year or two. For every MSFT there are hundreds of IOMs. I won't even mention the number of Pressteks's there are out there. Don't confuse the kind of investing I do with momentum stuff. I carefully analyze each company I invest in to try to maximize my long-term returns. And I make mistakes. The trick is to learn from those mistakes, and to add that knowledge to your arsenal of investment weapons. Here is an example of a mistake I made. Lucky for me that I still made some money (although not what I could have had I paid proper attention to the underlying fundamentals). Several years back I invested in PSFT. This was a wonderful growth company with explosively growing sales and earnings. About 9 months ago I read its earning statement, and while earnings met expectations the price of the stock fell by about 20%. I failed to understand why and continued to hold. I ignored the fact that license revenue growth was slowing significantly, and instead, focused on growth of deferred revenues. That was a mistake because I learned in the subsequent quarters that license growth is a harbinger for the future in this kind of company. Yo make a long story short, the price of the stock fell by about 70%, and my huge, unrealized gains of over 100% per annum dwindled to around 15% per annum. I exited half of my position in the low 20's, but when the price of the stock dropped to around $17 (it had been as high as around $56) I added to my position because I believe that in the long run this will be an excellent company. Management currently forecasts short-term growth of around 30%, and long-term growth should be higher, although I doubt it will once again see the days of 70%+ growth per annum. Anyway, have a happy holiday TTFN, CTC