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Investment Analysis Clubs / The BMW Method


Subject:  Re: My view of the Current Market - Expensive! Date:  8/25/2007  6:28 PM
Author:  captainccs Number:  26540 of 42233

If the market is too expensive it's best not to buy it. Most people can't even value a single company properly, how the heck do you do it for a whole market? Not only that, since a market is an average of all the things being offered in it, some things must be above average while others are below average. Why not spend the time looking for the bargains that are certain to exist? That seems a more profitable venture than worrying about the price of the market, unless you are into index funds, that is.

I have read a lot of books about investing and, frankly, Security Analysis is one from which I have not been able to extract anything really useful to increase the yield of my portfolio. The concept of "intrinsic value" is a Utopia, not something that you can buy or sell in the market:

This idea that owning stocks in good companies will pay off eventually has become an article of faith for modern investors, big and small. Loeb disagrees with it. In his view, it's foolish to risk money on something that might happen eventually, specially in bear markets when stock prices are depressed for 10-20 years. Ignore the general condition of the market and buy shares of good companies at the wrong time, and you can grow old and die waiting for the price to rise to reflect the "true value" that Loeb would say was a figment of Ben Graham's imagination (John Rothchild).

From the foreword to The Battle for Investment Survival by Gerald M. Loeb, another of my Summer reading books.

Warren Buffett studied under Ben Graham but people tend to forget that Buffett moved on beyond Graham to Philip Fisher, author of Common Stocks and Uncommon Profits. People look at Security Analysis as a bible and this clouds their imagination by holding it in veneration. Security Analysis is exactly what the title says it is, a method of analyzing securities. It is not the best guide to investing or speculating. For that I'll take Fisher, Lynch or the BMW Method over Security Analysis any day of the week.

Denny (taking refuge in my bomb proof shelter) Schlesinger
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