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Strategies & Market Trends : Value Investing

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To: cfimx who wrote (9747)1/26/2000 10:51:00 AM
From: Michael Burry  Read Replies (1) of 62537
 
I think the you hit it twister. When looking at net nets as individual picks in a concentrated portfolio in a frothy market, we're not following Graham's method very well anyway. So I insist on extra corroborating value analysis/evidence to help me when I add my one or two or three net nets to a portfolio. Tweedy Browne has done some proprietary research on this which which is mentioned here and there in various investing texts. Their feeling is that the net nets that actually did well when purchased as part of a broad diversified portfolio of them were the ones that had horribly negative earnings rather than positive earnings, and that had business models that didn't seem viable. This makes sense, because net net is really a proxy for a form of liquidating value, and becomes least relevant in an operating company that is expected to continue to run forever. Nevertheless, Jim and I and others here have had success picking up operating companies with decent futures and decent stories at less than 2/3 net net. Hence, inevitably we will each just have to reach our own conclusions given the available personal anecdote and evidence.

Good investing,
Mike
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