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

To: Paul Senior who wrote (7339)	5/27/1999 1:17:00 PM
From: Bob Rudd	Read Replies (1) \| Respond to of 78625

Paul: <<Well, I'd generalize by saying value investors focus on the balance sheet, and Buffett investors maybe focus on the income statement.>> I tend to think the most effective value investors look at not only the balance sheet, but also the income and cash flow statements, the business model and strategy [Competitiveness], the earnings estimates [Skeptically], and might even take a furtive glance at the charts [Behind closed doors<g>]. I see value investing as a balance of approaches aimed at determining if the market is mispricing assets and/or earnings flows without relying on or making a precise estimate of future earnings. Evaluation of competitive position and strategy comes to play when something is hit hard due to a dip in earnings...that the investment community prices as an indication that the business no longer works. The value investor must ask if this is true...is earning power forever gone, or is there really no change in competitive dynamics, just a blip due to temporary misfortune. <<Enhancing learning by broadening one's scope, one's outlook of the world, studying strategy, etc. -- all great stuff. Does it enhance an investor's stock market performance? It should-- but does it? Where's some evidence that this is a profit making activity for potential investors? Even anecdotal evidence. >> EMH adherents claim, and offer presumably irrefutable proof, that virtually all analysis is a waste of time. I doubt that, but I can't offer definitive proof. Is Buffet the investment equivalent that Sagans of Monkeys pounding piano's could compose a symphony? Or an example that qualitative and quantitative judgement can be honed and can produce superior results? I'm here reading learning and practicing because I believe the latter, though I can't prove it. Today, virtually every investor with net access has multiple screeners that can pull up PE, PS, PB and other quant items, and numerous articles covering how to mix these in a screen. Thus more and more it's the judgement of qualitative factors like competitive strategy and the robustness of a business model that separates the capabilities of investors. I found Porter and other sources to be helpful and believe I'm more capable for it. To the extent others in our thread community look at these areas, I think they will be better able to point to flaws in positive or negative assessments of a business's prospects for themselves and others in the community. <<The professors who teach us strategy - Porter, Mintzberg, Strickland, Grant, Worley, etc. -- they claim no success (as far as I can tell) in stock market prowess>> Neither did the guys who taught Einstein math, or Beethoven to play the piano, or Jordan to shoot hoops claim fame in the skills they imparted...but that didn't render their contributions meaningless.