[thehun69]

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Hun,

Buffett increased his net worth to $30m or so through fees from his partnership. I would guess his initial investment in Berkshire was most of that net worth. He's taken no fees over the 45 years or so he's been CEO and his pay has always been so small as to be nominal ( I think $100k a year last I heard). So Berkshire is a pretty good testament to the power of FA over long periods.

And value investments that require the whims of the market to recognize value are often called "Value Traps". I don't buy investments that require traders to trade up my stock to fair value, my picks always have catalysts. A catalyst could be as simple as increasing earnings over time, if the market assigns a too low PE for a stock and it doubles earnings, the stock would double even if the PE stays the same.

In the case of my example I am paying $14 for stock in a company that mgmt intends to sell for $50 per share. It all involves finding the right buyer who can monetize a very valuable asset without adverse tax consequences. They could find one tommorrow, or it may take a few years, they may grow in value during the wait and sell it for $70 per share. You can see how this example doesnt require the market at all to monetize my investment, aside from the unbelievable entry price it is giving me to create my position.

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Hi Dessert,

Nice to hear from you again as well. Yes, Berkshire has done well with a value investment philosophy, I don't want to go down that road. I brought it up because invariably someone will say, hey look at these billionaires that got that way through value investing. My point is, is that, yes they are successful investors and created a tremendous return, but their starting capital was significantly huge and to keep that in mind.

Trading catalysts - now if management is deciding to sell for $70 and you are in at $14, then yes, traders are not involved here as this is one of those things where you wake up Monday morning, turn on CNBC, with the newsflash across the screen and there is the big pop. I do take issues with increasing earnings as a catalyst, because again, some people have different presumptions about those things. I have seen time and time again companies that are growing, and then have huge blowout earnings, but get slammed. Sometimes the expectation of even greater earnings were not met.

At the end of the day, man, it works for you. You are a long term investor and this is a tool that you have found success with. I'm a trader. I buy and sell short term, and FA is uselss in that arena. FA will not give you any indication or predictive help as to why a $50 stock moved up $1.34 today and the company didn't announce a thing. TA will be a more useful guide in that arena.

THE HUN.