To: John Arnopp who wrote (2141 ) 1/8/1999 7:19:00 PM From: michael r potter Respond to
The speculative mania going on has seemingly shattered a couple of Wall Street maxims. "Trees don't grow to the sky" Well, don't look now but the buttonwood tree planted next to the NYSE was spotted by an AMR pilot- leaving the ionosphere above him. "Bulls make money, bears make money, but pigs get slaughtered." The only pigs having a rough time of it these days are eating corn in Iowa. There is one maxim that has only been deferred I fear and a lot of new "investors" who think making money from stocks is like taking candy from a baby will learn the hard way. " Its not the making money that's hard--its the keeping it." That said, fortunately, all the market is not in mania, and there are plenty of stocks that have sat it out and represent good value. Whether SFE is one of them is debatable, but one thing is proven. It is a new era of perception towards SFE by virtue of the premium going to what is probably 60% over NAV. That-without any rights offering! This doesn't say that something may be different, it shouts that it is now different. The debate comes in as to whether SFE will revert to the norm. If it does, it is a screaming sell. If it is a new era for SFE, then SFE will not revert to a modest premium to NAV and allow those who have followed it historically to buy. I fully agree that the interntet stocks are in a mania, the likes of which we probably have not seen this century, and am inherently suspicious of new era thinking, but I do believe it is a new era of perception re. SFE and it will not revert to the historical norms. Maybe it now becomes a buy when only a 25% premium to NAV. Technically, with the volume and price action since $30, it will not get to the mid 20s [with all due respect] IMO. If it started a correction tomorrow, the downside is to around $31 best estimate. One could say that it should not be trading at this premium, but one thing I had to work on when I left my job in '90 was to make a distinction between what should and what would happen. Before that I would sit in terrific value stocks and sell them when they were no longer a bargain. It usually meant I was sitting with workers not working. That was OK because I had regular paychecks to fall back on. Most of the return this decade has been from stocks that even though bought at a bargain price, produced the big $ when no longer a classic value after they doubled [letting winners run]; SFE $3 to $40, CCSC $2.50 to $50, SCAI $5 to $28]. Most of Warren Buffets return has been from the run his stocks made when they were far removed from Graham and Dodd. Discipline and principles are important but one should completely divorce ones ideas from ego and be willing to modify in light of new information. These comments are taking liberties, but it is only meant in the spirit of wanting those who regularly visit here to do very well. That said, I think it will become increasingly important to use technical information to help make buy/selll decisions regarding SFE. I am not a "Technician" and bought Timberland a week ago because it was 8 X engs.with good prospects. TA is just another useful tool in the toolbox along with fundamental analysis and psychology. [T/A gave the recent buy on SFE around $26 3/4 even though fundamentally it was trading at a 25% premium and did not appear timely]. If anyone has made it this far, thanks for listening, and best of luck to you. A great site for learning T/A is clearchannel.com. It is very well done-especially clicking on education. A great book geared towards futures trading, but with principles for anyone is Trading Is A Business by Joe Ross. , Mike
