Forum Archive Index - May 2002

["trader 100" <trader_100@hotmail.com>]

Hugh,

My reading on the investing approach of both Buffett and Brierley tells me 
that both these men identify what they perceive to be undervalued companies 
and then generally purchase a stake that is big enough to let them be 
involved in unlocking the value.  This tends to be achieved through taking a 
seat on the Board and playing an active role in the management of the 
company or through influencing the management via shareholder activism (eg 
TTP).

Both these men quite rightly view their purchase of shares in the same light 
as they would view purchasing a private company.  The more a company is 
undervalued the more attractive it is to them because they can be confident 
about their ability to unlock the value.  This is where their approach has 
to be distinguished from those of small individual investors.

Just because you or I purchase what we determine to be an undervalued 
company doesn't mean that we will be successful in making a good return on 
our purchase in a reasonable timeframe because we have no guarantee that 
there will be any event in the near future that will unlock the value in the 
company.  This is particularly so in NZ where shareholder activism is still 
in its infancy and fund managers aren't as pro active as there overseas 
counterparts.

I believe that looking at the psychology of investors via TA can be useful 
as it provides us with a clue about what the market is thinking about a 
company.  After all a share is only worth what you can sell it for which may 
be substantially more or less than the perceived fair value or worth of the 
share.

T100.



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