[CANSLIM] New Investors needs help... a short story

From: Yien T Lung <ylung@engin.umich.edu>
Subject: [CANSLIM] New Investors needs help... a short story
Date: Mon, 4 Aug 2003 12:47:39 -0400 (EDT)

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Hi all,

I am quite new to this forum and I was hoping that some of you, more
experienced canslim users, would kindly offer me some starting tips or
share your procedure in the search for new potential buys.

Let me continue by sharing my initial experience with you guys. I started
investing 2 years ago after my friend recommended me to read books about
Value Investing, more specifially, books about Warren Buffett. I read and
summarized almost every single book I could get my hands on about Warren
Buffett...and was almost too eager to start my road to be a millionaire.

So what is value investing? Basically, I intepret it as investing in
securities that are currently being traded at a value below its true
"intrinsic value". The idea is that the market has been too harsh and
pessimist about the prospects of a particular stock,..and you as a
investor believes that this company has the potential to get back on track
and that the current problems it is facing is only temporary.

Sounds easy, but I found the hard way that it is not.

In my impulsive and eagerness to make money? I plunged my hard earned cash
into securities like Qwest (Q), Tyco (TYC),...among others. I bought Q
when it was trading around 8.50. I thought to myself...this is a company
that has a book value of at least 20 dollars. If only half of that book
value is written off, I will still be safe. So I bought the stock, and saw
it plunge in value to less than 1 dollar. Again, I thought it was ok
because I am a "value investor"...and I need to hold my buys for the "long
run"... A new management comes in and the stocks starts doing better...
However, the new management finds out that there are a lot of improver
entries and must restate earnings. That restatement totally wipes out the
book value of the company!!! This taught me never to believe on BS alone.
Now, even after two full years, the stock has not yet recouped to my
entry level.

My other experience was TYC. I bought it when it was 26. I read a lot of
news from respected value managers that Tyco is a very sound company with
a lot of small businesses that generate lots of free cash flow. Good hein?
Well, I thought so too. I bought it and it went up all the way to 35. I
thought, I should "stay for the long run" and let it run its way up.. But
the next thing, the stock began to go south. That was the time when there
was a lot of talk about the ex CEO being a crook and stuff like that. I
held the stock for quite some time...and I will be very hopeful if the
stock trades at around the price I got in....

So here I am today. After losing a lot of hard earned cash, I decided to
give Mr. O'Neill's methodology a try. If you read some of this value
investing, a lot of these people dont believe that technical analysis
works..and my friend (a Buffett believer) doesnt think too highly of Mr
O'Neills methodology. But I am willing to give it a try. Please help me
get started.

Thanks

Yien








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