Current Shareware 1994 January/SHAR194.ISO/finance/happy815.zip/HAPPY815.CAP

Text File | 1993-08-19 | 4KB | 75 lines

Leona_Troese: Solid Value #815 -- Irving Wolfe's Commentary of early August:19
Copyright 1993 Happy Man Corp., Vashon, WA 98070-7399, 1 206 463 9399
One hard copy may be made for individual, personal use only.

What follows is Irving Wolfe's column, Commentary, from the most
recent issue of _Solid Value._

Permission to distribute it via Usenet is hereby granted.

Because Solid Value's heart is its tables of Best Buys and
former-Buy followups, this free distribution of Irving Wolfe's
Commentary should be interesting to some Usenet readers without
making subscriptions less valuable to those who actually invest in
stocks for profit.

=====

If Solid Value/tm/ and my own investing for I. S. Wolfe & Partners
share one weakness -- despite the overall strength that allowed
Solid Value's Best Buys to rise 31% on average while the Dow was
rising 23% and the Value Line, just 13% -- that shortcoming has
been our willingness to invest in electronic-technology companies.

In a field where entire product lines become obsolete in five
years, even the largest companies, like IBM and Digital Equipment,
have found it all too easy to lose their footing and fall.

Smaller, single-market firms are still riskier.  Even leadership in
a particular technology does not make a company immune to inroads
by related technology.  For example, Telebit's former dominance in
high-speed, high-reliability modems for computer-to-computer
communication did not protect it from incursions by other
manufacturers, once the industry had agreed on a standard that was
reasonably competitive with Telebit's proprietary offering.

Perhaps we are past the time when two kids working in a garage can
bring revolutionary change to this industry, but perhaps not.  In
either case, small but well financed new companies, often run by
men who know more about their chosen field than anyone else on
earth and who possess ambitions as high as their IQs, are regularly
formed to capture markets from the existing leaders with
cost-saving and attractive innovations.

Since owning shares is owning a company and, hence, being in a
business, we must ask ourselves whether it really makes sense to
choose a business with such capable competition and such a fast
pace.  Would we not be better off investing in grocery stores,
telephone companies, shoe manufacturers, or even automobile makers,
where the competition is just ordinary people and we can count on
continuing demand for the products that already exist, well into
the future?

A number of extremely capable, value-oriented investors have
concluded that the answer to that question is, "Yes!"  They avoid
high-technology (and especially electronics) like the plague, no
matter how good the values look.  They may be right, and Solid
Value's policy of reducing the valuation of these companies to
compensate for the uncertainties, but to go ahead and buy them when
they appear cheap enough, may be less than ideal.  For if these
companies' futures are so nearly chimerical, perhaps they defy and
invalidate most forms of analysis, particularly ours, with its firm
base in past results.

For the present, I am making no change in our investment policies.
I do want to caution readers that most of our few, bad investments
have been in technological companies.  Looking at the histories of
Wang, Xebec, Next, WordStar, Osborne, Rodime, and even Xerox (among
many others), I will risk offending you by reciting without
attribution, "The road to Hell is paved with good inventions!"
--
 Leona [e-mail]   206/463-9399 x109   fax [phone]
 Happy Man Corp.  4410 SW Pt. Robinson Rd., Vashon, WA  98070-7399
 We publish SOLID VALUE for the intelligent investor.  NextMail OK
Info. packet free.  Send POSTAL address: [e-mail]