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No. of Recommendations: 6
Welcome, welcome.

I know things don't officially get started until Monday, but I figured it would look bad if I didn't have the first post on this board (besides Twitty's "start the board" post) when it did kick off, so here I am. :-)

For those who don't know me, my Fool career began as a poster on the Fool's discussion boards over eight years ago, starting out on Foolish Collective back when Philip Durell (TMFAdmiral) ran it. I then became a freelance writer for Fool.com, subscribed to Hidden Gems and Inside Value and contributed to their boards, and then was invited to be a stroller for Stock Advisor. (A stroller is an official Fool, answering questions and providing company analysis. They're now called Coverage Fools, Home Fools, and Welcome Fools.) A while after that, I changed careers from life sciences to investing, got a job as an editor for Fool.com, and then transferred to full-time work as an analyst for Stock Advisor last summer. Finally, I'm also studying for the level II exam of the CFA program.

Over the next few days, I'll explain in more detail what I mean by Messed-Up Expectations, how James Montier and Michael Mauboussin and their thoughts figure into my thinking, and where I envision taking this port going forward. And I look forward to discussing companies, earnings, news, and whatnot, on both the ones I've chosen to buy (or sell) and others that come across my and your radars.

So please, stick around, introduce yourself, and let's learn from and laugh with each other as we fulfill the Fool's mission to educate, amuse, and enrich through this board and the MUE Port.

Cheers,
Jim
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No. of Recommendations: 0
Jim:

Cool idea!

How much $ will you have to invest?

HardRain
Who is long HTH. Like the price to tangible book and the fairly cheap cost of getting on board with Gerald Ford. Any cheap banks out there? ;-)
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Cool idea!

How much $ will you have to invest?


Hi HardRain,

Thanks, we think it's pretty neat, too.

We're each going to be allotted about $17,000. We're expected to average at least one buy recommendation per month and write several articles for Fool.com per month, as well. My first pick, Transocean, is outlined at http://www.fool.com/investing/general/2010/11/01/buy-opportu....

Cheers,
Jim
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No. of Recommendations: 1
Hi Jim,

I'm glad you made this pick as I have a large chunk of RIG that I purchased under much the same reasoning that you've outlined. RIG and the whole notion of MUE investing makes sense to me; ten years (or so) ago I remember thinking long and hard about Altria (then Philip Morris), knowing that smoking was not going to go away, knowing that politicians depended upon the taxes that PM paid and knowing that even if they paid hefty fines that they would continue to grow. Alas, I didn't invest, and as I recall, decided (remember, this was a decade ago) to invest in, oh, I dunno, JDSU or CSCO or one of those. You remember. Anyhoo, as PM became Altria and my thesis played out to the tune of many thousands of dollars that I didn't make, I promised to be on the lookout for the next, well, Messed Up Expectations opportunity. Enter RIG.

I first bought RIG back in 2009 when it fell to 50. It quickly went to 90 and I was sorry that I hadn't bought more of what I knew was an ongoing story. Well, the gulf spill happened and then all of a sudden, RIG was back at 50 and even lower. At this point I was reminded of Buffet's salad oil scandal with AMEX and decided that this was an opportunity to take advantage of a similar situation. And so I got in in big at 50. I'm very confident that this is a company that pays huge taxes that are important to political interests (like MO) and will continue to grow even if they have to pay big fines (like MO) and, though presently looked upon unfavorably, will continue to generate large returns through all the disfavor (like AMEX). The only thing this story has been missing, as far as I'm concerned, is the fact that none of the TMF newsletters have recommended it (or at least the ones that I subscribe to).

So. Thanks for recommending and following RIG. I look forward to watching this story play out, hopefully in both of our favor.
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Hi Mr. S,

Thanks for your post. And thanks for reminding us of the American Express salad oil scandal. That was definitely another example of MUE, where the market was so focused on one aspect that was not the true story of the company. It worked out really well for Buffett, and I hope Transocean works out really well for me (I own it, too), the MUE port, and for you.

I'll have to run Altria and Philip Morris Int'l through the MUE model and see where they are. Might be a compelling purchase or at least onto the watchlist.

Cheers,
Jim
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So please, stick around, introduce yourself, and let's learn from and laugh with each other as we fulfill the Fool's mission to educate, amuse, and enrich through this board and the MUE Port.



Hi Jim,

Not sure what caught my eye regarding this board; but, it is very interesting and I will continue to read and possibly post there.

I am interested in the valuation part of the board so far.

One of the things that is perplexing me is the "value" of 2 stocks I own. COHU and KVHI.

I have made a nice amount on then in the past - pretty far in the past.

I am at the point that I have too much of them on a percentage basis for my portfolio.

I could just dump a portion and my precentage would be fine. But, I do not want to miss a nice upside movement on them.

On the other hand, there are quite a few stocks that could make more that they will.

They are equally in tax/tax deferred accounts.

Do you think a valuation model would be helpful to me? I am not looking to become an expert in valuing stocks. What do you suggest?

RunTex
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No. of Recommendations: 1
I am at the point that I have too much of them on a percentage basis for my portfolio.

I could just dump a portion and my precentage would be fine. But, I do not want to miss a nice upside movement on them.

On the other hand, there are quite a few stocks that could make more that they will.

They are equally in tax/tax deferred accounts.

Do you think a valuation model would be helpful to me?


Hi RunTex,

Welcome aboard!

While I can't give you specific advice about your stocks, we discussed a similar situation over at Stock Advisor a couple of issues ago, with the runup in Netflix that had lead to a similar overweighting for many people, including me.

In general, we advise that you should be able to sleep at night with your investments. If a position is getting too large where you begin to worry about it, it's probably time to trim back to something you're more comfortable with. As for worrying about missing out on further gains, believe me, I understand that too. I sold 2/3 of my Netflix position at about $140 or so, so I've given up about $50 of upside since then on those shares I sold. What's worked for me is that I was able to put the money to work elsewhere where it's doing well (though maybe not as good as the Netflix has done since). I also have some shares remaining, so I didn't give up all the upside. Finally, I've realized that such a feeling is based on fear (fear of missing out, that is), and emotions have no place in investing decisions. Just consider if you let that fear drive your decision and then the stocks tank (which they could). You'd feel even more terrible for not having sold some at a good profit. There's nothing wrong with lightening a position down to the point where you feel comfortable again, especially if you have another place for the money.

As for valuation, that comes more from an understanding of the company than it does from plugging numbers into a spreadsheet. Before you can do the latter, you've got to learn what makes a company tick, what drives its revenue, earnings, and growth prospects. From that, you can build a valuation model. Better yet, build several with different sets of assumptions, because no one model is going to get it right. Last February, I valued Netflix at anything between $38 and $120 (or thereabouts), at a time when the shares were trading at $60, just by changing some of the growth and margin assumptions. Today? $190. I thought I had the possibilities pegged and the company and the market blew past my most optimistic scenario without breaking a sweat.

Study the company, learn what makes it tick. Then build a valuation model (or two or five) but know that you'll probably be wrong one way or the other. The exercise is good because it forces you to think about the company and the business, but don't expect to be right on the model(s).

If you have any questions about the MUE valuations, ask away.

Cheers,
Jim
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No. of Recommendations: 0
Welcome aboard!

While I can't give you specific advice about your stocks, we discussed a similar situation over at Stock Advisor a couple of issues ago, with the runup in Netflix that had lead to a similar overweighting for many people, including me.

In general, we advise that you should be able to sleep at night with your investments. If a position is getting too large where you begin to worry about it, it's probably time to trim back to something you're more comfortable with. As for worrying about missing out on further gains, believe me, I understand that too. I sold 2/3 of my Netflix position at about $140 or so, so I've given up about $50 of upside since then on those shares I sold. What's worked for me is that I was able to put the money to work elsewhere where it's doing well (though maybe not as good as the Netflix has done since). I also have some shares remaining, so I didn't give up all the upside. Finally, I've realized that such a feeling is based on fear (fear of missing out, that is), and emotions have no place in investing decisions. Just consider if you let that fear drive your decision and then the stocks tank (which they could). You'd feel even more terrible for not having sold some at a good profit. There's nothing wrong with lightening a position down to the point where you feel comfortable again, especially if you have another place for the money.

As for valuation, that comes more from an understanding of the company than it does from plugging numbers into a spreadsheet. Before you can do the latter, you've got to learn what makes a company tick, what drives its revenue, earnings, and growth prospects. From that, you can build a valuation model. Better yet, build several with different sets of assumptions, because no one model is going to get it right. Last February, I valued Netflix at anything between $38 and $120 (or thereabouts), at a time when the shares were trading at $60, just by changing some of the growth and margin assumptions. Today? $190. I thought I had the possibilities pegged and the company and the market blew past my most optimistic scenario without breaking a sweat.

Study the company, learn what makes it tick. Then build a valuation model (or two or five) but know that you'll probably be wrong one way or the other. The exercise is good because it forces you to think about the company and the business, but don't expect to be right on the model(s).


Hi Jim,

Thanks for the warm welcome!

COHU and KVHI have been interesting stocks to own. They follow the market up and lead it down....it seems! :-) With the market in a correction now, you know where they are going. Fun going up and not so fun going down.

Great story on Netflix stock. It is the premier leader (for now).

As far as COHU/KVHI go, I have too much invested in them and need to re-balance. I have a pretty good understanding of their business and have followed them for years. Modeling is another story.

I have never spent the time doing a value model on them, unless I did it mentally (mainly because I do not know the nuts and bolts of doing so). Thus, when I see you and other Fools discussing the values of stock (value model), I am seeing another side of investing worth discovering.

Thanks for the help.

RunTex
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No. of Recommendations: 4
Hey Jim:

Just discovered your Messed-Up Expectations adventure and it really appeals to me. Reminds me of my first three marriages.

I'll be following along.
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Just discovered your Messed-Up Expectations adventure and it really appeals to me. Reminds me of my first three marriages.

Hi Champico,

Thanks! I'm not quite sure how to take the marriage comment, though.

Cheers,
Jim
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I took it with a great deal of laughter.

;)
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