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At 01:07 PM 12/5/99 -0500, Dr. Hermansen wrote:
>...I still own my investment that is based in fundamentals, though the
>technicals are looking extremely poor. And if it continues a downtrend I
>have a mental stop out. Keep it on your long term list and see the price in
>a few years.
>
Dear Doctor,
I do belive a lot of money could be made in keeping stocks "long term" (for
years). The "minor" price fluctuation (even visible on the monthly charts)
are not the reason to sell the stocks (beside the tax consequences).
Normally, during the multi year industry "cycle" the stocks multiples ten
to twelve fold in price (to compare with its "cycle" low). Examples are
abounded and I am talking not about over-the-counter but bluest of the blue
stocks (IBM is an example).
On the other hand, (you knew that it is coming) there are stocks that came
down from the sky high highs to zero. Or stocks that get "stagnant" for
many-many years. A look at yearly stock charts would help to see this point.
So one should somehow (and I do not know how) distinguish between growing,
cyclical, dying and dead stocks. Mr. Baffet (presumable) know how to do it.
I do not understand so called "fundamentals". Just look at recent history
of computer stocks (we do not have yet history of the Internet stocks, but
we will soon). Is Microsoft (in its youth) had different "fundamentals" on
its balance sheet then other computer companies? We now know that it has
"harassment" management teem but we did know it then (and it was less
"harassment" then too). So how to analyze companies, their management when
they all produce the same products, and all managers look alike from the
pictures in financial reports? Which company will survive, which will be
the leader?
On the other hand, (that is the third one) I could see the price of the
company over the years, how it moves with the cycles in its industry
(relative strength) and try to guess that price will move higher (lower).
And, hopefully, if one buy the stock at its (and the industry) "cycle" low
and keep it for many years until it reach the "cycle" high and then either
sell or protect the profit with LIPS, that one could "catch" some of the
many fold multiplications in price.
Fundamentally inept Alex.
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