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There's something here that you and Snoop may both be forgetting (if you're not, my apologies): one of the reasons these funds do poorly is precisely because they cannot dump hundreds of millions into only 20-30 stocks. They are limited to no more than a 5% investment in any one company, unlike a private investor.

I think all of my current MI holdings have capitalizations >$1B. For a fund to put 5% of its portfolio into a company, and not have it be more than 5% of the company's stock, would enable the company to have only 20 stocks in a $1B portfolio. It wouldn't be hard to pick a 40-stock portfolio from MI screens (and still be fairly high in each screen), but 20 is a piece of cake.

But I would be more worried about a handful of $100-500 million funds doing the same thing we're doing. I'm not sure if hedge funds (which are private) have the same restrictions on concentration of investments as mutual funds, but this area is where I would see the threat coming, given the oft-mentioned problems MFs have with flow of funds, etc. And several of the funds dumping all their MI stocks is *exactly* what I'm concerned about (along with the attendant buying the stocks all at the same time). If I do my montly rebalancing on Monday, and they do theirs at 1PM on Friday (within minutes of Value Line being available), I'm going to suffer. In fact, they would probably come up with a model to roughly replicate the Value Line rankings (a ballpark approximation has been done on the board here) to do much of the trading on Thursday or early Friday, and act *ahead* of Value Line data.

Believe me, I don't lie awake at night worrying about this occurring, but I do have concerns. Or maybe it's just the conservative portion of my subconscious saying "it can't be this easy". :-)

--Terry
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