Forum Archive Index - February 2002

[Phaedrus <Phaedrus@techemail.com>]

Snoopy,
       TWR listed in September 1999 following an issue at $5.65, a price 
determined by a book build process. Since that time, holders have seen their 
capital investment eroded by about 10%. In my book, this constitutes a dud. 
What would it take for you to agree? A 20% loss? 50% loss? 10% loss in 20 
years? Or, would the fundamentals always be such that it would never, could 
never, be a dud? At what point would reality outway theory, at what point would 
you accept that the value, as set by the market, was in fact what TWR was worth?
 It is unfair of you to accuse John of having "ridiculous expectations". The 
guy merely expressed mild disappointment that a stock he had bought had not 
moved in over a year. At no point did he even hint at a desire to "get rich 
quick". He simply sought others opinions. Maybe he would have held on to this 
stock, had you persuaded him that, as a fundamentalist, he should. (at least 
for the arbitrary period of 2 years, thus avoiding being labelled a speculator)
 This stock, with its performance over the last two and a half years, is an 
excellent illustration of the fact that good fundamentals do not necessarily 
translate into capital gains. 
 Re your later post :- TWR is in a short-term downtrend, a medium-term uptrend, 
and longterm, as you rightly note, it is trendless. Going absolutely nowhere. 
Contrary to what you say, you can tell a lot from a trendless chart. It tells 
you that nothing is happening - why buy? If it continues as it has done for 
years, the price will be much the same next day, next week, next year. John 
classes himself as a longterm investor. Therefore he wants stocks that are in a 
long-term uptrend. So, this stock is no good to him, or any other longterm 
investor. 
 What we are observing here with John and Nick the Kiwi is the beginning of 
disillusionment with fundamental analysis. ("Can someone please explain this 
dichotomy, good fundamentals, poor performance?") They thought it worked every 
time. Maybe they will go on to TA, only to find that it, too, does not work 
every time. They may then devise a system that uses both. Even then they will 
find that success is not guaranteed, and that an essential part of any system 
is a mechanism to deal with the times that it is wrong. 
 They will find that success lies in holding on to their winners and selling 
their losers. They will define the point at which they will consider a buy 
decision to have been "wrong" before they make any purchase - while they are 
still emotionally detached from the stock. Before ego comes into play. 
 Snoopy, let me conclude by asking you again - assuming TWR fundamentals 
continue to stay much the same, how much would the price have to decline for 
you to consider it to have been a poor investment?
      Regards,
               Phaedrus.

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