Forum Archive Index - September 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Holden,

>
> 
>First off - thank you very much to SNOOPY for helping me learn
>something about what sort of questions and to ask for when
>initiating a fundamental search for value in a company. I really
>appreciate you taking the time.
>
>Something that hasn't felt right to me with
>looking for value in a company is that how long must you wait for
>value to be realized? The answer is probably until the market
>realizes it! This uncertainty sits uneasy with me - the investment
>just feels a bit to uncertain.
> 
> 

You are obviously learning fast as you answered your own question!  

Generally if a fundamentally undervalued company has an income stream 
then as the income stream improves the share price should march 
higher in time with (actually ahead of) the earnings improvements.  I 
have several such companies, and frankly, I don't care how long it 
takes the share price to appreciate.  I know that even if nothing 
happens to the share price I will still be gaining a higher income 
from those shares by holding than I would be by pulling the money out 
and sticking it in the bank.  With something that doesn't have an 
income stream, like FFS, but is nevertheless fundamentally 
undervalued, then all bets are off as to when it will reach 'fair 
value'!

You can't predict when the value of 'value investment' will 
increase.  You can only say that it is statistically likely that it 
will as earnings improve and the P/E ratio used to value the company 
goes up.   In my case I bought into WRI in July and was showing a 25% 
gain in a matter of weeks.  Others like BRY (except for this year, 
when it has done well) have been moribund or declining for years.  
However, I note that WRI -now- has a good dividend stream, whereas 
BRY doesn't.  So perhaps there lies the lesson!  

But it is also important to have a diversified portfolio as not all 
individual shares behave statistically as they should!  In the 
meantime a value investor wouldn't fret about 'when' things will 
improve.  They'd sit back and lap up the dividends.  Far less 
stressful than hanging over a computer looking at charts!

SNOOPY



---------------------------------
Message sent by Snoopy 
e-mail  tennyson@caverock.net.nz
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"Stay on the upside of the downside, 
Anticipate the anticipation!"



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