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No. of Recommendations: 11
Sand105 and Philip -

Thanks for your comments.

IETC has been quiet. Partly this is my fault; it is triathlon season and I am spending most of my free time swimming, biking, and running. I do not move too fast, but I have yet to finish in last place.

I also view this board as a place for readers to ask questions about the Earnings Power Chart that perhaps weren't adequately explained in the book. If no one is asking questions, then maybe everyone has the methods down pat.

While on the subject, it is a fair question of readers to ask how my portfolio is doing. Presumably, the effort of running a company's financials through the Earnings Power Chart leads to above-average returns; if not, then why waste your time? Theories are fine, but results count most.

Happily, my Earnings Power fund (which is every single penny of our family's investable net worth) is beating the market. Since inception on Nov. 1, 2005, the Earnings Power fund is up 48.2% per the TWIRR method that Jim Gillies wrote about a while back, and up 53.3% according to my accountant. (Gillies: Next year my accountant gets the steaks!) The S&P 500 is up 26.7% for this same period. (Prior to Nov. 1, 2005 we had some of our money in mutual funds, and I have not taken the time to separate the results of the stock portion and mutual fund portion of the portfolio.)

Of course, I have made my share of errors (but not as many as the Yankee's Derek Jeter, who has 13 miscues in the first-half of the season).

To wit:

1. In a letter to the editor that Barron's printed soon after Google went public, I said the Internet search engine was overpriced at $175.

2. In early 2006 I said to sell Blue Nile because management was touting a misleading free cash flow number. At the time NILE was selling in the mid-$30s; shares of the Internet jeweler now fetch in the high-$60s.

3. And then there is First American, which I sold last Fall and Philip has kindly not reminded me of this error. The reason I sold FAF is because I was not able to get a fellow the company said could help me out to answer some questions about the business, despite repeated attempts.

4. Let's not even talk about First Marblehead! (I own it now.)

The long and short of it is this: investing is a business where you are going to make mistakes. But...much better to make mistakes like selling GOOG or NILE or FAF too early and forgo a lost opportunity rather than owning an Enron which for many was a realized loss. Tough to recover from a realized loss.*

As always, if I can help in anyway, please post your questions here. I do check in from time to time.


*Own a stock that declines 50% and you need a double to get back to even. Own a stock that declines 75% and you need a triple to recover. Not many stocks triple in value.

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