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

To: Michael Burry who wrote (6918)	4/23/1999 2:23:00 PM
From: Bob Rudd	Respond to of 78484

Dreman internet valuation study: The following was excerpted from an article entitled WHEN THE INTERNET BELL RINGS, WILL LIFEBOATS BE READY? By Pierre Belec <<David Dreman, head of Jersey City, N.J.-based Dreman Value Management, which handles $7 billion of assets, said his study found that Internet stocks are simply an extraordinarily big bubble. America Online, eBay, Yahoo!, Qwest Communications, Excite, Lycos, E+Trade, AmeriTrade, Amazon.com and Cisco Systems all went under the microscope in Dreman's analysis. But only Amazon.com and Cisco were judged to be close to reality. Dreman said the difficulty in projecting the future of Internet companies is that many still do not have any earnings. The analysis got around that problem by relying on analysts' forecasts of what the companies could earn in their first year of profitability. The analysis then projected a large 50 percent earnings growth for the companies in the first three years, followed by a 25 percent rise for the next five years, 20 percent for six years, 15 percent for seven years and a 7.5 percent income growth thereafter. The results were mind boggling. eBay, which has an incredible forward-looking price/earnings ratio of 8,600, was worth only $6 a share, compared with its current level of $187. Yahoo! was given a theoretical value of $31 versus $189; America Online, $38 against $147; Qwest Communications $25 versus $92; Excite $54 compared with $152; Lycos $34 against $100; E+Trade Group $25 versus $104; AmeriTrade $36 versus the current level of $127. Wall Street had reasonable expectations only for Amazon.com, which was calculated to be worth $103 versus its current level of $200, and Cisco, pegged at $118 versus $113. ''Any Internet companies would say that we're crazy and they'll earn much, much more, because, after all, this is a 'New World,''' Dreman said. ''But people have said the same thing about other speculative bubbles.'' >> What knocked my socks loose about this is it appears to have Dreman supporting Henry Blodget's Wacky Amazon forecast...ore at least a lot closer to it than I would have imagined.

To: Michael Burry who wrote (6918)	4/23/1999 6:17:00 PM
From: James Clarke	Read Replies (2) \| Respond to of 78484

Was going to ask you if you followed through on your discipline to cover AMZN at 200. That was where I blew it. My "danger price" was 140 but I watched it go through that twice, once 60 points in one day, once slowly where I could have covered easily. Both times I covered in panic/frustration at 185. My "danger price" is usually right - my mistakes come when I say "just wait, it will go up (go down) again". If you're going to play this game shorting Amazon, you've got to have that discipline. I didn't. My hat's off to you. On a happier note, Journal Register announced a good quarter yesterday and the stock has started to move. I think it is still a buy (though LKI at under 9 is even better). (I got in personally yesterday at $14 - my company bought it a couple months ago - after deciding that market timing is not the way to go when there are opportunities like this out there. Like I said before, my first market timing call saved me about 15% of my portfolio, my second cost me about 15% of my portfolio. No more market timing for JJC. Or am I just getting sucked back in at the top? No, Mike's tirades against me a month ago were right. I wouldn't have bought the stocks if I didn't think they were dollar bills selling for 75 cents. Maybe they can go much lower in a market correction, but if I'm right on my valuation, so what.) There are an infinite number of mistakes you can make investing, and there is no shame in making them once. The truly stupid mistakes are the ones you make over and over again by refusing to learn. JJC