Comments on: If it flows, it ebbs … http://7million7years.com/2009/07/29/if-it-flows-it-ebbs/ How to make 7 million in 7 years ... Thu, 24 May 2012 09:20:05 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Steve http://7million7years.com/2009/07/29/if-it-flows-it-ebbs/comment-page-1/#comment-3311 Steve Thu, 30 Jul 2009 05:48:04 +0000 http://7million7years.com/?p=2984#comment-3311 Interesting. Never quite thought of it that way. But makes perfect sense :) Interesting. Never quite thought of it that way. But makes perfect sense :)

]]> By: Adrian http://7million7years.com/2009/07/29/if-it-flows-it-ebbs/comment-page-1/#comment-3310 Adrian Wed, 29 Jul 2009 14:32:23 +0000 http://7million7years.com/?p=2984#comment-3310 @ Trainee - I can't argue with your friends (I don't know them) ... but, you are correct: as you move down the 'market cap' range the P/E's go down (otherwise nobody would buy the stocks!) and the returns (generally) goes up as does the volatility (usually) ... in other words, in the long term as Warren Buffett (and/or Benjaim Graham) said "the market is a weighing machine". Thanks for another reason why people pay (in my mind a ridiculous) premium for a listed company: if you are not "in a position to keep a close eye on a business" ... ... of course, if you aren't keeping a close eye on the business, then you are really gambling 'ebb and flow' and/or that the P/E (and inflation) will hold true for the long-term (so your stocks go up). Not that this applies to you; just talking generally, here. @ Trainee – I can’t argue with your friends (I don’t know them) … but, you are correct: as you move down the ‘market cap’ range the P/E’s go down (otherwise nobody would buy the stocks!) and the returns (generally) goes up as does the volatility (usually) … in other words, in the long term as Warren Buffett (and/or Benjaim Graham) said “the market is a weighing machine”.

Thanks for another reason why people pay (in my mind a ridiculous) premium for a listed company: if you are not “in a position to keep a close eye on a business” …

… of course, if you aren’t keeping a close eye on the business, then you are really gambling ‘ebb and flow’ and/or that the P/E (and inflation) will hold true for the long-term (so your stocks go up). Not that this applies to you; just talking generally, here.

]]> By: traineeinvestor http://7million7years.com/2009/07/29/if-it-flows-it-ebbs/comment-page-1/#comment-3309 traineeinvestor Wed, 29 Jul 2009 13:27:12 +0000 http://7million7years.com/?p=2984#comment-3309 But the ebb and flow is also a source of opportunity. For those who for whatever reason do not want to invest in unlisted companies (regardless of whether the reasons are valid or not), listed companies are often the next best thing. As an example, as I am not in a position to keep a close eye on a business, I would rather hold shares in several listed companies than have a lot of money tied up in one or two small unlisted company with no assured exit arrangement. As an aside, I have had two venture capitalists (each working for major players in the industry) tell me that the expected returns on small cap listed stocks is about the same as for investments in unlisted companies - you pay more on an earnings basis for shares in the listed company but the failure rate among the small cap listed companies is significantly less than for unlisted companies. But the ebb and flow is also a source of opportunity. For those who for whatever reason do not want to invest in unlisted companies (regardless of whether the reasons are valid or not), listed companies are often the next best thing. As an example, as I am not in a position to keep a close eye on a business, I would rather hold shares in several listed companies than have a lot of money tied up in one or two small unlisted company with no assured exit arrangement.

As an aside, I have had two venture capitalists (each working for major players in the industry) tell me that the expected returns on small cap listed stocks is about the same as for investments in unlisted companies – you pay more on an earnings basis for shares in the listed company but the failure rate among the small cap listed companies is significantly less than for unlisted companies.

]]> By: Adrian http://7million7years.com/2009/07/29/if-it-flows-it-ebbs/comment-page-1/#comment-3308 Adrian Wed, 29 Jul 2009 12:08:04 +0000 http://7million7years.com/?p=2984#comment-3308 @ Mike - Sure ... it's how Warren Buffett got started (well, he made the cashflows of his little textile company - Berkshire Hathaway - larger by not issuing dividends) :) @ Mike – Sure … it’s how Warren Buffett got started (well, he made the cashflows of his little textile company – Berkshire Hathaway – larger by not issuing dividends) :)

]]> By: Mike Hunt http://7million7years.com/2009/07/29/if-it-flows-it-ebbs/comment-page-1/#comment-3307 Mike Hunt Wed, 29 Jul 2009 10:55:10 +0000 http://7million7years.com/?p=2984#comment-3307 Interesting, what about LBO's of companies with low valuations and strong cash flow...? Maybe not for the small investors but the big boys know how to play this game! -Mike Interesting, what about LBO’s of companies with low valuations and strong cash flow…? Maybe not for the small investors but the big boys know how to play this game!

-Mike

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