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Author: gocanucks Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 46821  
Subject: BMW method Date: 3/22/2004 8:09 PM
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Recently, there have been a lot of stock ideas thrown around as potential candidates for the BMW method. Most of the posts are about the mechanics of the BMW method, i.e. which points to use for calculating the CAGR.

I haven't tried the BMW method personally, but I feel those posters are missing the point. The hard part is not connecting dots and drawing curves. Rather it is the due diligence involved in figuring out why the company is deviating from their historic CAGR and whether those problems are short-term and curable. Frankly, I have not seen that part discussed in any detail, and imo, that is quite dangerous. "Turnarounds seldom turn around" according to the Oracle of Omaha.

BMW's initial post was absolutely amazing, and his method sounds so good and easy to apply that I feel some people have underestimated the work behind that process. If there is anything I have learnt over the last few years, it is that there is no simple formula guaranteeing success. It always comes down to hard work and lots of research.

I am mostly a lurker on this great board. If I sound rude or arrogant, i certainly don't mean it.
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Author: FoolishCop Big gold star, 5000 posts Coverage Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29567 of 46821
Subject: Re: BMW method Date: 3/22/2004 8:54 PM
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gocanucks,

I certianly didn't take your post to be rude or arrogant, and I don't think others did as well. What I did find it to be was right on the money. BMW has said that it's the due diligence behind the graphing that's made his strategy so successful and I hope those who are working out this method take that part of it as seriously as they do the charting.

I've always been enamored of charts and graphs. I'm sure somewhere in my personality test there is a reason why part of me needs to see it all laid out in black-and-white. Yet I've also learned that I need to dig into the financials, too, to find out why a company is underperforming or why it's poised for growth. Just because a company has been around for 30 years does not guarantee its continued existence or future over-performance.

I'm still skeptical of this method, perhaps because it seems to so easily identify undervalued candidates. Why CAGR and not P/E or P/S or some other number? I like the method because it appeals to my love of graphing results, but I'm wary that it may be too simple. I think that is why the second part of the equation, the digging into the financials, is crucial.

Rich

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Author: gocanucks Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29568 of 46821
Subject: Re: BMW method Date: 3/22/2004 9:15 PM
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Rich, thank you for your kind response.

"I'm still skeptical of this method, perhaps because it seems to so easily identify undervalued candidates."

Not meant to detract from BMW's discovery, but I think a similar procedure has been outlined in Lynch's two books, in which he plotted the stock price along the earning line. My major concern with the BMW method is that virtually every company will see their CAGR decline over the years (simply by the law of big numbers). Thus how does one actually differentiate the true values from the value traps?

I actually had hoped that BMW could go into more detail on how he analyzed the company so that his picks always worked out. Not just the financials but also the qualilitve side. It is that exact area that I feel I need the most improvement as an investor. I have only seen his analysis on the Philip Morris board, but I don't think that is a very good example, as I feel investing on MO is largely betting on the US justice system.

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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29569 of 46821
Subject: Re: BMW method Date: 3/22/2004 9:43 PM
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gocanucks posted the following thoughts. I would like to turn them around from their original order to answer them more properly.

Lastly, gocanucks said, "I am mostly a lurker on this great board. If I sound rude or arrogant, i certainly don't mean it."

I never would have considered your points to be either rude nor arrogant. You are perfectly correct in your interpretation and I thank you for the comments concerning the BMW Method.

You said, "BMW's initial post was absolutely amazing, and his method sounds so good and easy to apply that I feel some people have underestimated the work behind that process. If there is anything I have learnt over the last few years, it is that there is no simple formula guaranteeing success. It always comes down to hard work and lots of research."

Exactly true and well said. The BMW Method is a tool to spot undervalued stocks at rock bottom prices. However, the BMW Method is fairly simple and it goes a very long way toward guaranteeing success. It has never failed for me. But, I expect that there wil be a first time in my future. I have found that I learn best from my mistakes...thus, when this method fails to work for me, I will surely be trying to figure out where I went wrong.

You had previously said, "I haven't tried the BMW method personally, but I feel those posters are missing the point. The hard part is not connecting dots and drawing curves. Rather it is the due diligence involved in figuring out why the company is deviating from their historic CAGR and whether those problems are short-term and curable."

That, my friend is absolutely a fact! The question is always, "Why am I getting such a great deal here? What have I missed?"

And, that is why the BMW Method has never failed me. I have always known the reason for the low price situation. It is normally all over the news. The key is to do the work to make sure the next move is not "Out!" But, this is where I have to disagree with you.

You point to Warren Buffett and say, "'Turnarounds seldom turn around' according to the Oracle of Omaha."

There is a perfect reason as to why I have come to lose respect for Warren Buffett. His litle witacisms screw up people's thought processes. I have to say that my experience is almost 180 degrees different from Warren's. I would say that, "Turnarounds always turn around if the underlying business is sound." And, that is the key to the best deals I have found using the BMW Method.

The market continually makes dire mistakes about stock pricing. The underlying business is many times worth far more than the selling price of the stock. Peter Lynch has become famous for finding these situations and selling books to tell what he thought to justify his insightful buying decisions.

I am here to show you how to do the Peter Lynch thing much easier. The BMW Method spots those great deals very easily. Peter Lynch never bothered to explain the BMW Method, but I know from reading his books that he understands it 100%! However, if he took the effort to explain it to you, he would never sell another book! I have no books to sell. I am trying to help folks for free.

Due Dilgence on the business is important. However, if that looks good AND the business is severely depressed in price, you will be set to make huge capital gains. Use all of the tools at your disposal. However, my most powerful tool is the BMW Method. The due diligence just confirms the deal. Conversely, you can do due diligence all day long and find a business that looks great. However, if it is already at its 30 year high CAGR, you will likely lose money. Stocks cannot grow at unsustainabke rates for very long. BUt, the can neither stay at historical low prices at high dividend yields without attracting lots of favorabkle attention. And, that is why the BMW Method has never failed me. IT may not be fool proof, but it is damned close!

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Author: kitkatklub Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Feste Award Winner! Old School Fool Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29571 of 46821
Subject: Re: BMW method Date: 3/22/2004 11:16 PM
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I am mostly a lurker on this great board. If I sound rude or arrogant, i certainly don't mean it.

Thanks for decloaking and posting this excellent observation. It was not rude or arrogant, but thoughtful and worth saying.

>^..^<

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Author: haywool Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29574 of 46821
Subject: Re: BMW method Date: 3/23/2004 7:58 AM
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Warren Buffett says, "Turnarounds seldom turn around."
And BuildMWell says, "There is a perfect reason as to why I have come to lose respect for Warren Buffett."
And I say: The word that WEB used in the statement was "seldom". And I also say that maybe, just maybe, BMW has found a way to sort out those few that actually will make the turn around. And I further suggest that we do a BMW method study here on the FC...perhaps led by BMW himself. I would like to take this thing apart and learn it as I don't quite understand it yet. Is anyone else interested?

Rich

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Author: FoolishCop Big gold star, 5000 posts Coverage Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29576 of 46821
Subject: Re: BMW method Date: 3/23/2004 8:30 AM
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Rich,

I would like to see this method in action and would be willing to participate. As I've mentioned, I'm skeptical but I'm willing to learn. So count me in.

Rich


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Author: haywool Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29577 of 46821
Subject: Re: BMW method Date: 3/23/2004 8:48 AM
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I would like to see this method in action and would be willing to participate. As I've mentioned, I'm skeptical but I'm willing to learn. So count me in.


OK ... that's two of us willing to learn from BMW about the BMW method.
Now, all we need is a leader ... like maybe Jim himself :-)

Rich

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Author: IcyWolf Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29578 of 46821
Subject: Re: BMW method Date: 3/23/2004 9:36 AM
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Howdy,

If ya'll don't mind me padding about under foot, count me in too.

Take care,
IcyWolf

Disclaimer - I am already building the BMW method into my investment strategy

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Author: sean1arch Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29579 of 46821
Subject: Re: BMW method Date: 3/23/2004 9:41 AM
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First, let me say that I have enjoyed these discussions and especially appreciate gocanucks perspective on this method. But, I do have a question about the following,

There is a perfect reason as to why I have come to lose respect for Warren Buffett. His litle witacisms screw up people's thought processes. I have to say that my experience is almost 180 degrees different from Warren's. I would say that, "Turnarounds always turn around if the underlying business is sound." And, that is the key to the best deals I have found using the BMW Method.

Huh? Usually a sound business does not need to "turnaround". Unless you are talking about smaller fluctuations than is typically thought of as a "turnaround" situation, I don't think the above statement is necessarily true. In a typical "turnaround" the underlying business has some major problems and a new management team is brought in that have a reputation for "turnarounds" that try to right the ship. For example, this is what they are trying to do at MCI, Adelphia, etc. and what they tried to do at ATHM.

Other than this one small point, I agree with the underlying discussion and appreciate the perspective.

Best regards,
Sean

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Author: haywool Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29580 of 46821
Subject: Re: BMW method Date: 3/23/2004 10:01 AM
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Hi Sean !

Buffett did say that turnaround companies seldom turn around. But, there are some that do and I believe that the BMW method might just be the way to find 'em.
You said:
Huh? Usually a sound business does not need to "turnaround". Unless you are talking about smaller fluctuations than is typically thought of as a "turnaround" situation, I don't think the above statement is necessarily true. In a typical "turnaround" the underlying business has some major problems and a new management team is brought in that have a reputation for "turnarounds" that try to right the ship.

Alderwoods Group (AWGI) is an axample of a good turnaround. Here's a blurb blatently stolen from the AWGI board:
"This is a turnaround story called Alderwoods (AWGI). Alderwoods is the second largest death care business in the United States (behind Service Corporation International). Alderwoods is a company that started operating in January, 2002, as a result of the reorganization of the Loewen Group which entered bankruptcy in June, 2001."

This reorganized company has a new financial plan and is executing that plan even better than expected. They have paid down debt, sold off areas of the business that were unprofitable, and are generating cash to further pay off consolidated debt.

I do hope this BMW study is carried out.

Rich

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Author: admiraltroll Big gold star, 5000 posts Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29582 of 46821
Subject: Re: BMW method Date: 3/23/2004 10:27 AM
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Hi Rich,

With respect to BMW it is not his method that will find turnarounds that will turnaround but the fundamental analysis that BMW incorporates along with the charting of growth rates.

IMO no chart based system could possibly have found Alderwoods as it is only two years out of bankruptcy.

As to the WEB comment WEB was talking real turnarounds from deep deep trouble and the fact that they never come back to where they were before. He was not talking about a temporary dip in popularity, like Home Depot or Altria last year, which would show up well with BMW's charts.

However it wasn't too difficult to find those last two using a simple DCF or price ratio comparison either.

Regards
Philip

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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29585 of 46821
Subject: Re: BMW method Date: 3/23/2004 12:57 PM
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"OK ... that's two of us willing to learn from BMW about the BMW method.
Now, all we need is a leader ... like maybe Jim himself :-)" - haywool

I am here to do whatever you folks want. I will agree to participate in any way that benefits a detailed study to solidify the belief in this method. I have never led a study here before so I have limited knowledge concerning how to set something up. Therefore, I will need all of the help that you folks can offer.

IcyWolf has done some phenominal work in putting the BMW Method onto an Excel spreadsheet to evaluate a number of stocks. That may be very helpful in doing some back-caculating to determine the reliability of the BMW Method. I know he has sent copies to many of you already.

So, I am here to serve you in any way I can. Where do we go from here? If you have specific questions, ask away. If you want specific stocks eveluated, I can do that. I have approximately 30 to 40 real life experiences with stocks I have bought and sold using the BMW Method. There are no flops. All of my bad choices have come from listening to someone else and failing to use the BMW Method...or worse, I used the BMW Method and then ignored what it told me.

I did that with CAT in 2001. The BMW Method told me that CAT was a real strong buy in early 2000 at $34/share. I bought several thousand shares and knew I had a stock that could easily grow to over $70/share in two to three years. However, I sold it 14 months later at $48/share just to see it continue up to over $70/share like I thought it would. I failed to believe my own research! The rapid rise from $34/share to $48/share in just over a year scared me into selling. I had a 41% gain plus a swell dividend...but I ignored my own advice to myself..."Hold it for a double." By the way, I would be selling most of my CAT right now. The BMW Method tells me it is over done. Everyone I hear is saying to buy it and they point to the great growth since 2000. But, a double in under four years is a 20% CAGR. Can CAT continue to do that? You know they can't. Try doing the BMW Method on CAT...you will see what I mean.

I am really looking forward to this study...I just wish I knew where to begin. Anyone have a suggestion?

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Author: IcyWolf Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29586 of 46821
Subject: Re: BMW method Date: 3/23/2004 1:24 PM
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Howdy BMW,

Hmmmm ... I wonder if I know you well enough to call you by your nickname yet (B)<g>?

Anyways, It seems to me the plotting portion of your method (whether computerized or free-hand or french curved), has been very well explained by you in previous posts. Maybe if you picked the one post you thought explained that best and set a link to it? Alternately, why not review your previous explanations and edit them into something you feel is better than any of the previous ones? The only thing that might warrant a bit more of your insight would be if you could outline / codify what kind of price curves render a company's 30 year price history unsuitable for your CAGR method. Maybe some volatility measure or another? Is there a more quantatable means of determining a company's suitibility for BMW's CAGR/FA based analysis - or not?

Probably of more interest to many would be some outline / organized format for doing DD the BMW way? After all, it does really seem to be at the heart of things ... we don't ever invest in charts (unless we are possessed by the TA spirits <smile>). What is it you look for first, second, etc. in a company to determine its suitability for believing what your CAGR charts might be saying?

I personally look for things like FCF YoY and QoQ for the past few years. I Also look for D/E to be below the industrial average and generally trending downward. An Increasing % short interest scares the begeezers out of me! I like to see steady revenue and earnings growth MORE than lots of spurts and stops ... I like to see inventory and receivables gradually and consistently improving ... I can sometimes (not all the time) find how long the key officers have been with the company and whether there is any talk by them (in annual reports) or by industry analysts as to changes in their business model / strategy. I like to see some core management having been with the company through a market cycle or more. If a company has had acquisitions, how well have they been at integrating and realizing synergistic gains, etc. etc. ? But thats just me ... what do you favor examining?

I also know you not only have a nose for specific company news, but you also seem to know / study / have years of experience? with whole industries. Care to try to offer us 2 and 4 leggers hints on your more general perspectives with regards to the context(s) in which you interpret company / industrial / economic news?

Hmmmmm ... Lastly, I think for those of us who wish to employ / study the BMW CAGR/FA methodology, some sort of library function of prices and or curves on an individual company basis might be mucho helpful. I've started to try to do that in a small way with my spreadsheets, but it obviously can be done better.

If I had my wishes (Hmmm .... well, if I did I wouldn't be here as the blonde Sweidsh wolfette and me would be elsewhere with nary a concern about mundane things like investing <smile>), I would like to see a detailed summary of each aspect of your method that could be easily linked to .. and then a series of "studies" of individual companies - their DD, their CAGR charts, etc. where various folks can bring to bear their unique perspectives and news etc. etc.

Anyways, maybe you should have excluded 4 leggers from making suggestions <smile>?

Take care,
IcyWolf



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Author: 2828 Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29588 of 46821
Subject: Re: BMW method Date: 3/23/2004 2:01 PM
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http://quotes.fool.com/custom/fool/html-chart.asp?osymb=&osymbols=dpl&symbols=dpl&currticker=DPL&time=all&uf=0&compidx=aaaaa%7E0&ma=0&symb=dpl&freq=1dy&lf=1&comp=&type=2&sid=1504

I just heard about DPL recently on CNBC. It trades at around 18 dollars and has a yield of 5.2%. It's been touted as an Enron like company because of some stuff the management has done. I guess they have like $8 a share in investments and $1.50 in cash according to CNBC. From looking at the chart it looks like it would be approaching a buy at around $14-15. It's a utility with 500,000 customers. Anyone have any familiarity with it as an investment?

2828

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Author: Walk3r One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29593 of 46821
Subject: Re: BMW method Date: 3/23/2004 3:59 PM
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For DPL, I get:

5.5% average 1974 - 2004
8.2% high 1974 - 2001
3.9% low 1974 - 2003

So last year was a great buying chance at 12. The part that looks scary is the lack of stable recovery for 3 years now.

I'm using to seeing BMW's 'model charts' have short dips and generally plot along a fairly stable curve. Are my numbers close?


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Author: Chinwhisker Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29624 of 46821
Subject: Re: BMW method Date: 3/23/2004 11:23 PM
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Hi all,

May I offer an alternative to the BMW method?

First, look at VFINX, and see how this might fare using the BMW method. If you didn't know this was the Vanguard S&P 500 index fund, what would you think?

Now, let's use KO (Coke), and compare it with the S&P 500;

5 yr. chart
http://quotes.fool.com/custom/fool/html-chart.asp?osymb=vfinx&osymbols=ko&symbols=ko&currticker=KO&time=5yr&uf=0&compidx=sp500%7E3377&ma=0&symb=ko&freq=1dy&lf=1&comp=&type=128&sid=1272

10 yr. chart
http://quotes.fool.com/custom/fool/html-chart.asp?osymb=ko&osymbols=ko&symbols=ko&currticker=KO&time=10yr&uf=0&compidx=sp500%7E3377&ma=0&symb=ko&freq=1dy&lf=1&comp=&type=128&sid=1272

30 yr. chart (all data)
http://quotes.fool.com/custom/fool/html-chart.asp?osymb=ko&osymbols=ko&symbols=ko&currticker=KO&time=all&uf=0&compidx=sp500%7E3377&ma=0&symb=ko&freq=1dy&lf=1&comp=&type=128&sid=1272

What you think?

Chin

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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29636 of 46821
Subject: Re: BMW method Date: 3/24/2004 10:29 AM
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"May I offer an alternative to the BMW method?" - chinwhisker

Surely you may. But, first, try looking at your own comaprison this way:

http://quotes.fool.com/custom/fool/html-chart.asp?osymb=ko&osymbols=ko&symbols=ko&currticker=KO&time=all&uf=0&compidx=sp500%7E3377&ma=0&symb=ko&freq=1mo&lf=1&comp=&type=2&sid=1272

By choosing to look at a stock for just five years, you get very skewed results. However, looking at 30 years or more shows you real performance. The CAGR of KO has by far outpaced the S&P 500 since 1971. The same is true of all great stocks. That is why it is always possible to beat the index funds in the long run with individual stocks.

You may offer any substitiue for the BMW Method, but I have not found a one that does for me what the BMW Method does. However, I will be anxious to find one. I am all ears.

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Author: RGAnthony Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29647 of 46821
Subject: Re: BMW method Date: 3/24/2004 2:51 PM
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BMW,

Along the same lines as IcyWolf here is what I would like to see:

Selections: Where do you find candidates? I have seen you get more excited about some stocks than others. What causes you to initialy like a candidate? Do you look for bad news in the press and at the bottom of the growth curve? Do you read Business Week, WSJ, or what for candidates? Is your approach less structured and you use an awareness of all inputs? Must a stock candidate have a 30-year history or is 15 or 20 enough?

Plotting Portion. I would like a quick review of the mechanics of plotting the average, high and low. Do you throw out data points 20 years old? You may want to give everyone some homework here and plot some stocks of interest. I did not understand some of the concepts until I did some plotting and your coaching helped me understand the subtleties. Before plotting what do you look for? For example, your look at Kodak revealed that it was not a candidate that any more time should not be spent. This is getting inside your head and putting it on paper. You have done an excellent job on this in your previous posts. What do you look for? Smooth growth, volatility, etc.?

Due Diligence. When doing DD what do you look for? You appear to take a lot of industry knowledge and common sense then you apply it to the situation of the stock. What do you look for in the numbers FCF, ratios, etc.? From what I understand, you do very simple DD with the company financial and spend more time thinking about the outside influences and how they affect the future. If you can document the mental process for us to get some insight into your thought process. Or is the process free form? What part do dividends play in this process if any? What is your experience from using your method for 9-10 years? When has your DD been less favorable and when has it been excellent?

Buying Strategy. How do you buy? Let's take Pfizer as an example. You stated you bought at $34, had a limited order at $32, and planned to “back-up-the-truck” at $30/share. What is the strategy here? What percent of your investment do make at each step? What happens if the stock never reaches 2nd or 3rd level of buys? Do you continue buying if it goes below $30?

Selling Strategy. How do you sell? You have stated you sell half when the price doubles. You sell most of the remaining when it reaches it high CARG. Do you sell in stages like you buy? You stated that you keep some portion of your investment most of the time. Why? I know the strategy has not failed you, however what are your thoughts if the stock does not grow as fast as projected? When do you sell if it is not rising 100% in 3 to 4 years?

Reruns. Do you continue to track the same stocks over time? Have you been successful in re-buying stocks? Do you go through the same process or is it modified for reruns?

Managing Portfolio. How do you manage your portfolio? Review it monthly, quarterly, via alerts, etc.

Psychology. What are the psychological aspects of using this strategy? Ever strategy has some, so please share your experience. You have talked about selling too soon with CAT. How do you avoid the pitfalls? What mental toughness is required for this method?

Some random thoughts on what I would like to see. My suggestion is you take one section at a time and put out a post on it and then let us ask a zillion questions.

Cheers.


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Author: Chinwhisker Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29660 of 46821
Subject: Re: BMW method Date: 3/24/2004 7:10 PM
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By choosing to look at a stock for just five years, you get very skewed results. However, looking at 30 years or more shows you real performance. The CAGR of KO has by far outpaced the S&P 500 since 1971. The same is true of all great stocks

Hi BMW,

I think you misread my reply. What I stated was that looking at the 5, 10, and 30 years chart would accomplish the same thing.

The same is true of all great stocks. That is why it is always possible to beat the index funds in the long run with individual stocks.

This is a dangerous statement. The only person I know of who has beaten the index funds over a long period of time is Warren Buffett. I think you stated you had lost respect for him. I would ask, other than Warren Buffett, who else has managed to beat the index for half a century?

If no one else has, but you claim you can, then this would mean you know something no one else does. I personally would appreciate it if you were to back off from this statement. I don't feel it fair to make a statement like that, and mislead the "New eyes" that may enter these forums. Anyone following your lead could end up losing half, or all of their portfolios. I'm sure you wouldn't want to be responsible for that happening.

May I ask how you have your portfolio set up at the moment? Are you following your own advice?

As a game, this might be fun. I might even join in to challenge your abilities, but let's make sure we let it be known it is a game, and not reality.

Chin


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Author: scottymc1601 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29661 of 46821
Subject: Re: BMW method Date: 3/24/2004 8:03 PM
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Now, let's use KO (Coke), and compare it with the S&P 500;

5 yr. chart

10 yr. chart

30 yr. chart (all data)


Was I the only one that looked at these charts and automatically assumed KO was red? No wonder I was so confused...

-scottymc

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Author: TMFAdmiral Big gold star, 5000 posts Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29662 of 46821
Subject: Re: BMW method Date: 3/24/2004 8:16 PM
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May I ask how you have your portfolio set up at the moment? Are you following your own advice?

As a game, this might be fun. I might even join in to challenge your abilities, but let's make sure we let it be known it is a game, and not reality.

Chin


And if this is to be may I suggest a "BMW Method" board separate from the Foolish Collective.

The reason I set up my Focus Funds board last year to run my investing experiment was to avoid clogging up the FC with "AT this and "AT that" in every other post subject line

Regards
Philip

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Author: TMFLostInThought Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29679 of 46821
Subject: Re: BMW method Date: 3/25/2004 4:25 AM
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Hi TMFAdmiral,

And if this is to be may I suggest a "BMW Method" board separate from the Foolish Collective.

I would second that.

While the Foolish Collective has a wide remit, and while it can be dominated for short periods by specific topics (such as the Excel project, which was short term and encouraged in depth posts, and the Dam series, which was longer but didn't dominate the boards so much), when a topic is taking over, it is better for it to move to a new board, so that newbies to the board can find a more diverse range of discussions. I think that many FC regulars would not have become so interested in the board if it had had such a strong focus on one idea when they first visited.

It is easy to request a new board (just click on the 'Start a new board' link at the top of any post), and I see no reason for the TMFs that open boards to say no.

Lost

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Author: haywool Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29681 of 46821
Subject: Re: BMW method Date: 3/25/2004 7:47 AM
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Hi TMF's Lost and Admiral !

I, too, think a separate board for a BMW study is in order.

It is easy to request a new board (just click on the 'Start a new board' link at the top of any post), and I see no reason for the TMFs that open boards to say no.


Just let us know, Jim, when it all happens...thanx!

Over 100 new lambs to care for,
Rich

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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29682 of 46821
Subject: Re: BMW method Date: 3/25/2004 8:16 AM
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"The same is true of all great stocks. That is why it is always possible to beat the index funds in the long run with individual stocks." - BuildMWell

"This is a dangerous statement. The only person I know of who has beaten the index funds over a long period of time is Warren Buffett. I think you stated you had lost respect for him. I would ask, other than Warren Buffett, who else has managed to beat the index for half a century?"

I try my absolute best to never make a statement that I cannot back up with absolute fact! An index fund is just an average. If you do not think that you can beat the average...I give up. Have you no self confidence? Anyone can beat the averages if they just know what to look for. I am trying to help you see that right here.

You continue, "If no one else has, but you claim you can, then this would mean you know something no one else does. I personally would appreciate it if you were to back off from this statement. I don't feel it fair to make a statement like that, and mislead the "New eyes" that may enter these forums. Anyone following your lead could end up losing half, or all of their portfolios. I'm sure you wouldn't want to be responsible for that happening."

I will not "back off" on my statements. They are true. I have no desire for anyone to lose any money...that is why I am here. I want everyone to make money. But, first, we have to understand how to make money. First, we have to get our heads straight. Once you see the logic of my method, you will not argue with me any longer. I welcome the challenge to prove myself and the BMW Method to you.

You ask, "May I ask how you have your portfolio set up at the moment? Are you following your own advice?"

My portfolio is set up like any other portfolio...it contains equities, bonds and cash in various proportions at various points in time. Right now, it has more cash than normal, NO bonds whatsoever, and lots of equities. And, yes, I follow my own advice implicitly. I have not always done so, but I have learned to believe no one but me. I will listen to anyone and I will take everyone seriously...but I believe what I learn about a stock for myself. Then I do what I KNOW is correct. There is no guesswork here. I use the BMW Method exclusively. That is why it has my name on it. I invented it.

"As a game, this might be fun. I might even join in to challenge your abilities, but let's make sure we let it be known it is a game, and not reality." - chinwhisker

Great! Lets play. You name the game...it is completely your call. I am up to the challenge.

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Author: Rozanovitch Big red star, 1000 posts Old School Fool Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29683 of 46821
Subject: Re: BMW method Date: 3/25/2004 9:03 AM
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TMFAdmiral says:
And if this is to be may I suggest a "BMW Method" board separate from the Foolish Collective.

TMF LostinThought says:
I think that many FC regulars would not have become so interested in the board if it had had such a strong focus on one idea when they first visited.

Excellent suggestion from Philip with a rationale given by Lost. A theme focused board is far easier for the readership to follow.

Regards,

Ro



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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29690 of 46821
Subject: Re: BMW method Date: 3/25/2004 11:11 AM
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"I, too, think a separate board for a BMW study is in order." - haywool

"It is easy to request a new board (just click on the 'Start a new board' link at the top of any post), and I see no reason for the TMFs that open boards to say no."

"Just let us know, Jim, when it all happens...thanx!" - rich

Hummm? Are you guys trying to get rid of me? I wonder?

Well, I can try the new board idea. I am surely up for that idea and will give it my best. I hope that you folks will agree to come over and participate. I can promise you one thing, I can help you to get rich if that is your desire. No foolin'.

OK, I am about to click the 'Start a new board' link at the top of this post. I agree, I see no reason for the TMFs that open boards to say no.

We shall see what happens...here I go.

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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29691 of 46821
Subject: Re: BMW method Date: 3/25/2004 11:15 AM
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OK, TMFAdmiral and TMFLost, I have done it! Here is what I asked for:

The name of the Board is "The BMW Method."

Here is what I wrote to explain the request:

Several posters over on the Foolish Collective Board have suggested that I start a new Board to help others to understand my methods for stock selection. My basic method is very, very simple. It ignores every other basic method and zeroes in on what I find to be the most important single factor. That is, "Buying sustainable growth at the lowest possible price.

If we think about it, what does an investor want? Obviously, the goal is to make money. But, that is a little to simplistic. What does it take to make money? That is the real question.

Some people say such things as, "Buy low and sell high." That always brings a laugh because they know that it is impossible to always buy low and to sell high...or is it?

I am here to show folks how to buy low and sell high consistently. In ten years the BMW Method has not failed me yet. I never say that it is perfect, but it has never failed me.

So, I have decided to give the TMF an opportunity to hold me to my word. I am willing to put my mouth where my money is. I will explain the BMW Method in detail and help anyone to understand how I have built my wealth.

My only advantage over anyone else is that I have a head start. I understand the BMW Method. Catch me if you can! I will help you. I have no desire to win. My only desire is to help people to help themselves.

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Author: missash Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29692 of 46821
Subject: Re: BMW method Date: 3/25/2004 11:21 AM
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<<<My only desire is to help people to help themselves>>> Not having followed this from the beginning, could you, on the new board, summarize the "method", including how you calculate the CAGR? tia.

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Author: sean1arch Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29693 of 46821
Subject: Re: BMW method Date: 3/25/2004 12:40 PM
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Well I have been biting my tongue, because I hate these kind of posts, but what you wrote is (in my opinion) a little dangerous for the less experienced investor.

For some of the “newer eyes”, let's place some of this discussion in context.
Here is a post from April 2000 on the Cisco board.

http://boards.fool.com/Message.asp?mid=12402208


Anyway, lately there has been a bunch of discussion about the possibility of Cisco Systems being valued at 2 or 3 trillion dollars. I earlier posted that it is very possible. That is because I see this as "Being on the curve".

<snip>

Disregarding future splits for this discussion, for Cisco to have a market cap of 2 trillion dollars, the price would have to be $285 a share. At 3 trillion, the price would be $428. For this to occur in the next ten years, the growth from today's price of $60 would necessitate a compound rate of 16.8% and 21.7% respectively. Either rate is reasonable and should not excite anyone.

<snip>

Now, do your math. The answer is right here. Folks, it ain't that hard!

Stock Price 04/14/00: +/- $60 per share
Stock Price 03/25/04: +/- $23 per share

Here is a chart of the DJIA vs. CSCO from April 2000 to March 2004

http://moneycentral.msn.com/investor/charts/chartdl.asp?ShowChartBt.x=61&ShowChartBt.y=18&Symbol=csco

I am sorry, but I would hate for a new investor to invest their retirment money based on some claims that you can help them to get rich and that it is really not even that hard.

It is very easy to think that the professional money managers, fund managers, analysts, etc. are a bunch of goofs that always underperform (I would question the claims of underperformance that seems to be taken as gospel around these message boards as well). I would submit that most of the professionals are quite inteligent and the reason for underperformance is because investing is a difficult, time consuming thing. For some context from some "professionals" there were a couple of FA'ers at the time saying that CSCO was overvalued that I would check out, notably read posts by LeBean, AtlantaDon and TMFOtter.

Best,
Sean


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Author: TMFAdmiral Big gold star, 5000 posts Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29694 of 46821
Subject: Re: BMW method Date: 3/25/2004 1:05 PM
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Hummm? Are you guys trying to get rid of me? I wonder?

Hi BMW,

I shouldn't think so.

From my experience with my own board it worked very well. It was easier to find related posts and in any case I posted updates here at the FC which were always well received.

Not only that it was easier for those who were following my experiment.

Of course I continued to post other stuff here

Regards
Philip


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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29696 of 46821
Subject: Re: BMW method Date: 3/25/2004 1:27 PM
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"Not having followed this from the beginning, could you, on the new board, summarize the "method", including how you calculate the CAGR?" - tia.

Absolutely, but you can get a head start right here:

http://boards.fool.com/Message.asp?mid=20281104

This was where this started on the Foolish Collective Board. You can get many answers by reading through this thread. It turned into almost 100 pages so we already have the start of a great book. However, I hopr that the new Board will suffice. I am not looking to sell a book. I want to give this away.

Selling things is what led to the problems we have in investing. Businesses have to sell stuff to make a profit. This is good. However, some businesses have no real product...they have to sell their expertise. People then get used to paying for this expertise. What I have found is that most investment gurus have a vested interest in selling their ideas whether they make sense or not. I want to change that.

Here you get sound logic for free. I will try to base my investment ideas on sound, rational logic. I, however, will not recommend any stocks to anyone. That is not my goal.

Instead, I hope to generate lots of discussion on various stocks based solely on the BMW Method. Once we uncover some great candidates, it will be up to all of us to decide what to do with the information. We will all buy at our own risk. BUT! We will absolutely know we are going to get a really great return on our investment dollar. Then when we do get that nice return, we will pat each other on the back! There will be no losers...NONE! I have not lost any money investing using the BMW Method. Every stock has come through for me.

I can show you why this has to work in just a few minutes. The logic is irrefutable. I have proven it to myself...now I have to prove it to you. But, it is not that hard to do. Stick with me here and we will make money together.

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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29700 of 46821
Subject: Re: BMW method Date: 3/25/2004 2:21 PM
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"Well I have been biting my tongue, because I hate these kind of posts, but what you wrote is (in my opinion) a little dangerous for the less experienced investor.

For some of the “newer eyes”, let's place some of this discussion in context. Here is a post from April 2000 on the Cisco board." - sean1arch

I hope everyone will read my post from April 2000. It is precisely what the BMW Method is all about. Read it and understand it. It told the truth and it said that CISCO could NOT continue growing at 50% per year. I was warning the reader to do his or her own math.

I never try to discourage a person into selling nor will I try to encourage anyone into buying...that is not my job. My job is to help people to think for themselves.

I sold my Cisco several weeks before I wrote that particular post. My intent was to show the reader how to evaluate Cisco using the BMW Method. I still have my curves right here and I can show you precisely why I was selling. But, the fact that I was selling was of no consequence...I could have been wrong. Cisco had been at $82/share just a month before. I knew why I was out of the stock...but it was not for me to discourage someone else. I just tried to state the facts.

However, the BMW Method told me that CISCO was way, way over-priced. The long-term value was there at 2 to 3 Trillion dollars at a CAGR of 21% or even 15%, but was that reasonable? That was what I was asking.
Personally, I did not think that it was at all reasonable and I was trying to show why. A 50% CAGR is not sustainable. But, the stock was priced for that assumption.

I tried to ask the right questions. Read the post again.

Since then, I have decided that asking questions does not work. I have decided that I need to show people the BMW Method so they will have to answer the hard questions for themselves. They can just look at a chart and see what is going on. I use Cisco as one of my examples, by the way. It is a perfect example of how to buy and sell using the BMW Method. By the way, I sold Cisco again last month at $29/share and have an order in right now at $22/share. If I get it, fine, if not fine.

I did not buy my Cisco stock using the BMW method. It had no 30 year track record. I lucked out. I bought it on the recommendation of a friend who recognized what was going on with the internet. I was barely using a computer at the time. I bought my first one in late 1994 about three months after buying my Cisco stock. I bought the computer the month before I retired from work. Investing was going to be my hobby.

The BMW Method evolved from my experience with investing. The computer allowed me to find data that I never had at my disposal before. I used my past experience as an engineer, a project manager and as an inventor to put the whole concept together.

By late 1999, I was using the BMW Method most of the time. However, I still listened to other folks and I rarely applied the BMW Method to those purchases. I figured the experts that I was paying for their newsletters had already done the due diligence...what good would my method do? They were the experts...I was still just learning.

I did keep raising my bar though. Initially, I just hoped to beat my past record which was piss poor. I had worked with brokers. Later, I bought some index funds and they became my competition. After I was beating them consistently, I took on Warren Buffett. I began to use BRK.A as my standard. I performed the BMW Method on BRK.A and found a 22% to 25% CAGR over 30 years! But, if I could not beat Warren, why not just buy BRK.A? I had to beat Buffett or I would give up.

But, soon I found that I was beating the experts including Warren Buffett. Their stock picks were as likely to go up as to go down...they had no "lock" on good picks. But, I did. My stocks always went up. I was picking winners with my method. I still did not believe it. I figured I was just lucky. I had not seen the irrefutable logic of my method. It started as a test...it proved to be 100% successful.

I saw the internet bubble as it formed and I knew it had to burst. I had it plotted on my BMW charts. I wrote about it on TMF often. I talked about nosebleeds and I warned about high valuations. I was laughed at. But, according to my data, the NASDAQ should never have seen 2400 in 1998, 1999, or 2000! IT went over 5100! However, it is 200 points undervalued right now! That is what I see. IT all makes complete sense to me. I can see it all clearly.

Long-term compound growth is what has built America. Why will that not continue? The rest is just a matter of time, proper investment and recognizing what is going on. The BMW Method does just that. I shows us what is going on.

I promise not to be as obscure as I was with Cisco in 2000. I try hard not to be a doom and gloomer...there is no reason for any of that negative stuff. The future is bright for us all and I want folks to see that. There are fortunes to be made right here. The key is to spot the way. The way is pot-holed with all sorts of diversions. But, buying sustainable growth at the lowest possible price is a sure way to get rich. I can prove that fact to anyone who will just listen and wants to learn.

Thanks for the fond memories. I had forgotten that Cisco post from four years back.


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Author: TMFCop Big gold star, 5000 posts Coverage Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29705 of 46821
Subject: Re: BMW method Date: 3/25/2004 2:58 PM
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BMW,

I'll probably regret jumping in here, but I think the point sean1arch was making was that you were as emphatic about your analysis of CSCO back in 2000 as you are today about your BMW Method never picking a loser. Rather than suggest CSCO was overpriced back then, as you say now, it certainly seems to suggest you were saying it was incredibly undervalued. How else should one interpret your comment that a 16% to 21% 10-year CAGR was reasonable, which would lead to a $2-$3 trillion valuation and a stock price of anywhere from $250 to $400 per share?

Nor would one get the impression you thought it was overvalued and had sold your shares in the company weeks before writing the post, when you asked them to consider a $4 trillion valuation too. And it certainly sounds to me like the only reason you are asking people to "do the math" was to validate your valuation and the probability (certainty?) that it would attain those levels.

Rather than taking issue with your Method, of which I really have none, I think the exception most people register is your claim to infallibility. That you think you've discovered a superior way of finding undervalued stocks is one thing and I don't think is in dispute, to claim you can never be wrong is quite another.

I'm still interested in following your discussion of your Method--on this board or another--because it does intrigue me, but I will remain skeptical about your claim to omniscience.

Rich

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Author: TMFOtter Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29707 of 46821
Subject: Re: BMW method Date: 3/25/2004 3:12 PM
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I sold my Cisco several weeks before I wrote that particular post.

This doesn't jibe with your posting history on that board. The post referenced was on 4-14-00

From the day previous: 4-13-00 http://boards.fool.com/Message.asp?mid=12394285&sort=username

I, for one, do not see a turn-down of any significance for at least three more years

From a day later:

4-15-00 http://boards.fool.com/Message.asp?mid=12408850&sort=username

But, I own lots and lots of CISCO stock. You see, some of us 'value investors' recognize "real value"! That is what makes us the 'real value investors'.

From 4-21-00: http://boards.fool.com/Message.asp?mid=12446455

For now, I am holding 100% of my CISCO

From 5-8-00: http://boards.fool.com/Message.asp?mid=12533814

No one, including you and me, has any idea what the future will bring for CISCO. But, I am betting on them to continue to grow. If they happen to be overpriced today, then that is a temporary phenominum.

From 5-12-00: http://boards.fool.com/Message.asp?mid=12559545

He admits he does not consider CISCO to be a good value, he admits he does not believe the stock price will necessarily be greater than it is today in the future and he admits he has no plan to buy any CISCO stock.

From 5-20-00: http://boards.fool.com/Message.asp?mid=12602475

Meanwhile, I'll take the 18.42% yield and like it!

From 8-10-00: http://boards.fool.com/Message.asp?mid=13103112

Some of us have held Cisco stock for six yeras or more.

From 3-3-01 (nearly a year later): http://boards.fool.com/Message.asp?mid=14467208

I am a major owner of Cisco stock. I watched it go from 80 to 70 to 50, etc., etc. But, I see things completely the opposite from you. Is the cup half full or is it half empty

I didn't see any selling. There were a bunch of other posts in there, but none that I saw referred to a sell and then a rebuy. Certainly your posts surrounding this certain one tell a different story than the one I see spelled out here.

Bill Mann


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Author: LeBeancountiere Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29711 of 46821
Subject: Re: BMW method Date: 3/25/2004 3:51 PM
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Hi BMW:

Your passion for investing and the use of your model is certainly reflected in your posts on this board. However, after your recent post that included the following remark, I grow even more skeptical of some of the claims you have made:

"I sold my Cisco several weeks before I wrote that particular post."

However, in the following month (May 14, 2000) at post number 17785, you state the following:

"So, I am holding onto my thousands of CISCO shares until I can figure this all out."

http://boards.fool.com/Message.asp?mid=12567582&sort=username

At the following posts (and there are certainly much more that I did not include), your comments reflect further hubris in the outlook of Cisco:

http://boards.fool.com/Message.asp?mid=12602475&sort=username

http://boards.fool.com/Message.asp?mid=12779564&sort=username

Heck, you even replied to one of my posts on the Cisco board back on May 19, 2000:

http://boards.fool.com/Message.asp?mid=12599498&sort=username

You have made posts on the JDSU, XRX, and EMC boards that imply that you have been invested in those companies as well; however, you still claim that you have never lost money through the use of your method. :-)

Perhaps you can see why some of the folks here, including me, are feeling a little bit skeptical about some of your claims.


LeBean :-)







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Author: Chinwhisker Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29714 of 46821
Subject: Re: BMW method Date: 3/25/2004 6:11 PM
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TMFLost,

Alrighty then. :o)

I'm glad TMF recegnized your talents.

Chin

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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29715 of 46821
Subject: Re: BMW method Date: 3/25/2004 6:13 PM
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"I'll probably regret jumping in here, but I think the point sean1arch was making was that you were as emphatic about your analysis of CSCO back in 2000 as you are today about your BMW Method never picking a loser. Rather than suggest CSCO was overpriced back then, as you say now, it certainly seems to suggest you were saying it was incredibly undervalued. How else should one interpret your comment that a 16% to 21% 10-year CAGR was reasonable, which would lead to a $2-$3 trillion valuation and a stock price of anywhere from $250 to $400 per share?" - Rich

Why would you regret jumping in here? I love to discuss this stuff.

OK, you are confused about the $250 to $400/share price and the 16% to 21% growth. Let me clarify for you.

Look at Cisco Systems...draw up the BMW Method onto the charts. Here is what you will see. Today, the stock is selling at $23/share and plotting solidly between the 30% and the 35% CAGR curves. At least, that is what my curves show me.

30% growth for 10 years will set the stock price squarely on $317.00/share...about halfway between my two estimates. Conversely, back in 2000, the price was, I recall sean1arch said $60/share. If the company grew at 21% as I said, the price would be $400/share and at 16% it would be at $264/share. If it grows at 35% from today's price, it will be at $462/share in 2010.

My point back then was that Cisco had every reason to meet that goal in time. I still stand by that statement. Maybe you can show me why I should not expect to see CSCO selling between $250 and $400/share in ten years? I can show you exactly why I came to that conclusion.

And, by the way, at $400/share, the 9 billion outstanding shares will have a market cap of $3.6 trillion. Try the math!

This is not rocket science. This is America, my friend. Things are growing and no one wants to see it. I remember the day that I wrote that post, in fact, I am looking right now at my notes from that post. What I did was to take the DOW 30 total market cap in April of 2000 and recalculated out to the market cap of ten years later. Then, it was $3.8 Trillion...I projected that it could easily be $8.9 Trillion in 2010. The relation ship to CSCO would set the market cap at between $3 and $4 trillion. It all made complete sense. I said so.

So, what is the problem? Do you think anyone bought or sold Cisco according to my post? I hope they did what I asked them to do. I never said to buy or to sell. I just said that the long-term predictions by the gurus made sense to me....in ten years!

The stock price is not that relevent in a fast growing company. Cisco was over-priced in 2000 but it will be under-priced in few more years at the same price. Investors need to do their math. They need to see where the stock has been and where it is headed. Then, and only then can they plan for the future. That is what I do with the BMW Method.

Now, if you have a problem with my system...please, please ignore it! You have no obligation to even consider it. That is totally up to you.

You say, "That you think you've discovered a superior way of finding undervalued stocks is one thing and I don't think is in dispute, to claim you can never be wrong is quite another."

OK, where was I wrong? Do you want to argue that Cisco will not have a market cap of $3 trillion to $4 trillion before 2010? It may or it may not. All I said was it was reasonable. What was not reasonable was the 16% and 21% growth numbers...they were entirely too low for Cisco. They were entirely correct at the present price of $60/share in April 2000. But, if a stock has been growing at 50% per year and someone tells you that it is not going to grow but at 16% for the next ten years, what does that say? It tells me the price is in big, big trouble.

This is one real problem with the BMW Method on stocks with short histories. That is why I use 30 years now. I knew that 16% to 21% were entirely rational; growth rates for Cisco...but 50% was not. That is what I said in the post. Then, I asked lots of questions to make the reader think about the CAGR that made sense to them.

Here is what made no sense to me and I made the point in the post. If one was to look at the total market cap of the DOW 30 in April 2000 at $3.8 trillion, did it make sense that Cisco could have a market cap equal to the entire DOW30 in just a year or two? That is why I discussed the DOW in that post. I assumed that other people were looking at things like I did. That was a very bad assumption. I have learned that almost no one looks at things like I do. I am trying to change that through honest communication.

The fact remains, the BMW Method has never let me down...I was out of CSCO except for my original shares in March of 2000. I had no desire to own it at a 16% CAGR...nor at 21%. Today, I would back up the truck at the 21% CAGR! That would be at a price of about $11/share. I do not think I will get there...but it could. I am a buyer of a few shares at $22/share.






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Author: Chinwhisker Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29716 of 46821
Subject: Re: BMW method Date: 3/25/2004 6:15 PM
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Great! Lets play. You name the game...it is completely your call. I am up to the challenge.

Hi BMW,

We can do it on your board. Let's just set up an amount, maybe $1,000 a month to invest. You buy stocks, and I'll buy Vanguard index funds.

We can use the "My Portfolio" tracking tool.

I marked your board as a favorite, so just set it up there.

Chin

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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29724 of 46821
Subject: Re: BMW method Date: 3/25/2004 7:33 PM
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"You have made posts on the JDSU, XRX, and EMC boards that imply that you have been invested in those companies as well; however, you still claim that you have never lost money through the use of your method. :-)" - LeBeancountiere

I can see the confusion. First to Cisco. I kept my original shares of Cisco and held them all along. I rode Cisco down and back up again. I almost never sell my position totally. I believe that I posted here that I dance with the one who brought me. I was very happy with my Cisco gains but thought the stock would never drop as far as it did. That was not the BMW Method at work, that was my better jugdement which was wrong. The BMW Method was never a factor with Cisco, JDSU, or EMC. It was a factor with XRX.

With XRX, I did the BMW Method and thought that I spotted a real potential coming. All of the news was bad and I was watching XRX closely. I am looking at my charts from back then and I see that I bought my first 100 shares at $21/share. That was on my 5% CAGR curve. I thought that was a sure winner. But, XRX went lower. I bought more at $12. The way that curve was drawn, the bottom was at $4/share. that was at 0% growth! I quit buying at watched the carnage as the stock droppd below $6/share. I was started buying strong at $5 and all the way down to $4/share...and that was the bottom. My average cost per share was $5.12. I would be embarrassed to tell you how much I bought below $5.

Now, at that point, I was in the hole...so, I guess you could say that I had lost money. But, the way I see this thing, I was holding a great position at just over $5/share. I did not see that as "losing money." If you do, that is fine by me. I was happy as a clam!

At about $11/share, I sold much of my position. I still own some and I will hold it for the time being. XRX actually helped me solidify my trust in this method. The biggest problem with the BMW Method is starting to buy too soon. I am bad about getting impatient thinking the bottom is here. You have to fight that impulse like crazy.

JDSU was a real loser for me. I could not use the BMW Method on it. I saw the stock at over $170/share and wondered who was buying it? The hype was just intense. Everyone was calling for a "buy" on JDSU. I never bought any until after the bubble crashed. Then I bought some at about $12. Just like XRX, I chased it all the way to the bottom. I still own it. However, this was not the BMW Method working. This was some friends making recommendations. Please do not assume that I never lose money! That would be wrong. However, I have never lost money using the BMW Method.

I thought that I clarified that earlier. The BMW Method has been evolving for ten years. At first, I went back ten years. That was what screwed me up with XRX...I was looking at 1991 on. That was one reason that I started going back 30 years to really see the growth trends.

EMC came to me from some friends recommendations also. I tried to plot out something sensible on EMC but there was nothing there to plot. I gambled at $12/share and bought it all the way down based solely on the knowledge of my buddy. He swore it was at the bottom all the way down. I ended up with an average cost of $8 to $9/share. I still own it.

Today, I would not touch it. I have no real data that I trust. I have picked 30 years and I plan to stick with it. I also stick with the tried and true blue chips as much as possible. I have found that I can make more money buying at the low CAGR than I ever hoped to make with any other method. I have the proof.

As I have said before, This BMW Method is a compilation of all that I have learned about investing in the past. I have been buying and selling stocks since 1969, but I never knew what I was doing. I trusted my brokers and bought and sold when they made recommendations.

That did not work, I finally discovered. I am embarrassed to admit that took me until about 1989. I was not really losing money, I just never thought to really look at it. I was saving lots of money and I assumed that it was growing as fast as it could. Heck, I was in the stock markets. When I finally sat down and compared my portfolio to the S&P 500 or the DOW30, I realized how screwed I was. I fired the brokers and stated on my own. However, I was still working and I had limited time for studying stocks. I ordered several newsletters and began relying on their recommendations. That worked better but did not beat my funds which I bought as a "tell tale."

Things went South at my work and I quit in October 1994. I have been living off of my investments ever since. This is my only income. I have a whole new outlook on investing. If I fail, my family will not eat. That is what led me to really think about what was going on. The BMW Method is that thought process. I promise you, it has to work. I have no choice. This is self-preservation. I have put all of my best engineering, inventiveness and thought power into this thing. It is the best that I can do. It is not perfect...nothing is perfect.

I wrote about that earlier. The BMW Method is the bottom line in investing. I have lost lots of money learning what works...I do not deny that. But, the BMW Method has never let me down...not once. Maybe you can tell me how it can? Try it for yourself.

Take any great business. Draw up the CAGR curves as I suggest. Look at what you see. The stock will drop to the lower curves...it then rebounds to the higher curves. It happens over and over again. Some stocks like XRX, JDSU and EMC go far lower than I would ever expect. I never said the lower curves are a limit...they are just the previous bottom. However, you have to know that you are in pretty safe territory when the business is selling at 30 year lows...or below! The lower the better! But, that is impossible with EMC and JDSU...there is no data to rely upon. It is all new territory...I do not like that. It gives me the willies.

DUK was a perfect example last year for the BMW Method. It was at a 3% CAGR and paying an 8.5% dividend when it had a history of 6% to 8% growth for well over 30 years. Were their customers just going to stop buying electricity? The FCF looked solid...I backed up the truck and bought more DUK than I ever wanted. I am not a utility fan to begin with. I bought it for my wife, my mother and I bought more for me. Was I gambling? Or was I being smart? You decide.

Two weeks later, the news hit that Warren Buffett was buying DUK...I must have been doing something right. Warren sold his position...I still own mine. I would buy more today but I have my limits. It is still way below the CAGR lows for 30 years at $22/share. I like my position. The BMW Method tells me I am sitting just fine. If I am wrong. I will find out later. Now, I bought some shares at $17 and more at $14 and I was buying way, way too much at $12.74. I was working on a home equity loan to buy more if it went to $12 or lower. I hoped for it...but DUK let me down...it started back up like I knew it would. Good deals get only so good. Look at the chart...the truth is obvious.

Anyway, I hope this helps. Once you see the growth in the economy, in the overall markets and in individual stocks, you will see the BMW Method. I did not really trust it until it proved itself to me. Today, I trust it implicitly. My welfare is tied to it. If I did not trust it, I would be doing something else. But, it is all I have. It is the best I can do.

I honestly want to find some weakness in the BMW Method. If you can find it, I will be eternally grateful to you. I just know there has to be a weakness. But, I just keep buying stocks and making a great return. That is why I have choosen to share the method. I hoped that someone would find the flaw. Please do not let my zeal put you off. I will fight for the BMW Method but I need to find the flaws. If anything, we can make it better together! I would like that immensely.

Thank you all for your comments. I appreciate every one of them. They all help me to think more about this whole idea.

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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29727 of 46821
Subject: Re: BMW method Date: 3/25/2004 8:02 PM
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"We can do it on your board. Let's just set up an amount, maybe $1,000 a month to invest. You buy stocks, and I'll buy Vanguard index funds.

We can use the "My Portfolio" tracking tool." - chinwhisker

OK, that sounds like a winner. But, let me warn you of something, this is a very boring method and nothing changes real fast. Your Vanguard fund may look good for several months before I catch up. I am talking about years to get my expected double in a stock price. Sometimes it happens in one year or less...usually it takes several years.

Thus, your index fund will be a long-term measure of the BMW Method's ability to pick winners. Another approach is for me to give you my selections from a year ago and we can plot them out as a starting point. Or, we can go back two years and three and I will send you the stock confirmations to verify what I bought. I can already tell you...Vanguard lost! But, it might be fun to just do the numbers as a starter.

There is another little thing here. I have no really great picks today. I have not bought much in the past several months though I have been raising cash for some purchases. The few things I have bought were not really "super great" according to the BMW Method. WE can use them though since I did buy them. As for others that I buy, I will let you know when they happen.

What I really hope will happen is that we will find some great equities with the help of the people who participate on the board. Those will be the stocks we will use for the comparison. That should get everyone involved and we can all learn together.

Anyway...lets rumble! This should be fun.



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Author: Chinwhisker Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29728 of 46821
Subject: Re: BMW method Date: 3/25/2004 8:21 PM
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Anyway...lets rumble! This should be fun.

Hi BMW,

Seems I have already beaten you to your own board. :o)

Where you are?

Chin

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Author: Bullpug Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29730 of 46821
Subject: Re: BMW method Date: 3/25/2004 9:45 PM
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Where is the board??

Bullpug

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Author: gebinr Big gold star, 5000 posts Top Recommended Fools Old School Fool Supernova Phoenix 1
Mission Team Member CAPS All Star SC1 Red Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29732 of 46821
Subject: Re: BMW method Date: 3/25/2004 9:49 PM
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http://boards.fool.com/Message.asp?mid=20540090

First post, TMFTwitty's welcome message.

gebin


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Author: iamski Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29747 of 46821
Subject: Re: BMW method Date: 3/26/2004 9:42 AM
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Excellent post. For clarity let's understand that there is a big difference between a business "turn around" and a turn around of stock price. Buffets quip and BMW's method are a bright yellow highlighter of that difference.

Ski

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Author: yitz99 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43950 of 46821
Subject: Re: BMW method Date: 11/25/2007 12:44 AM
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Hello - I have been reading through some of the old posts to learn about the method...


from 3/23/2004
I did that with CAT in 2001. The BMW Method told me that CAT was a real strong buy in early 2000 at $34/share. I bought several thousand shares and knew I had a stock that could easily grow to over $70/share in two to three years. However, I sold it 14 months later at $48/share just to see it continue up to over $70/share like I thought it would. I failed to believe my own research! The rapid rise from $34/share to $48/share in just over a year scared me into selling. I had a 41% gain plus a swell dividend...but I ignored my own advice to myself..."Hold it for a double." By the way, I would be selling most of my CAT right now. The BMW Method tells me it is over done. Everyone I hear is saying to buy it and they point to the great growth since 2000. But, a double in under four years is a 20% CAGR. Can CAT continue to do that? You know they can't. Try doing the BMW Method on CAT...you will see what I mean.


3.5 years later...
Looks like CAT did continue to do that. It went up to 160+, taking the split into consideration.

Any BMW guru's care to comment on this? How did CAT defy the odds here?

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Author: yitz99 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43951 of 46821
Subject: Re: BMW method Date: 11/25/2007 1:16 AM
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Any BMW guru's care to comment on this? How did CAT defy the odds here?

This was reposted to the BMW board. Anyone that cares to comment should surf to:
http://boards.fool.com/Message.asp?mid=26127899

thanks

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