[Scorpion Man]

Red...I was not offended don't worry about it.
You are off to a great start and are obviously reading a lot. Unfortunately, reading is not a substitute for experience and cannot be applied in a vacuum. For starters, the academic constructs you cite like the Efficient Market Hypothesis are just that...academic hypotheses... They don't really hold in practice for many stocks. EFH is good for talking about the market overall IMO, but it breaks down at the individual security level.

Beta is a backward looking measure and can really misrepresent a stock's risk...for example you could have a stock that rarely moves but has a single large risky event coming...it would show low beta but then open down 50% in a day. Also, many companies go through fundamental changes that then change their beta one way or another...betas are calculated from history and do not take thoughts about changes in the future into account (I am not saying they are useless...just that they can be misleading). Also, there is nothing wrong with high beta stocks...they just move around more.

Debt...good or bad?...its a trick question...the answer is yes. It depends on a lot of things...but simply, the more right you are about the company you are involved in, the more debt, the BETTER. This is too involved to talk about at length here, but the simplest example of one of the reasons this is true is as follows.

You have the opportunity to buy shares in a house. I have the opportunity to buy shares in the one next door. THey are exactly the same, except that my house is capitalized with $20k in equity and $180k in bank debt. Your house is awesome cuz it has NO debt -- its capitalized with $200k in cash. Lucky you.

House appreciates 10%. We go to sell. You are up 10%. I am up 100%. Get it?

Works both ways...when you are really wrong, debt is a killer. High debt is best in a turnaround that is starting to work adn you have confidence the worst is behind you.

An extreme example would be Healthsouth, which people thought was going to file...it went to $0.08...then to $5-6. Was the debt a good thing or a bad thing?

Lastly, on second derivative...lets say there are 2 companies that are kinda priced like everyoen things they should be for now (whatever the heck that means). Company A has beeen growing at 50% for a long time adn is about to grow 30% in 2007 although people don't know it yet. Company B has been shrinking at 5% per year and is going to grow 2% in 2007, but people don't know it yet.

You must short one and buy the other...what do you choose?

I assume you have taken calculus, but first derivative is rate of change and second derivative is rate of change of rate of change (i hope..its been 20 years for me). The growth rates of 50% are first derivative...the change in the growth rate is second dervative. 50%->30% = negative second derivative. -5%->+2% = positive second derivative.

On revenues...that was where we spent most of our time...figuring out if the street expectations for revenues and earnings were correct or not. That is where the rubber meets the road.