"Wild things happen in the markets. And the markets have not gotten more rational over the years. They've become more followed. But when people panic, when fear takes over, or when greed takes over, people react just as irrationally as they have in the past."
                                -- Warren Buffett

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INVESTMENT CAREER EVENTS
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FRIDAY APRIL 18TH: CAREER EXPO at NEW YORK SOCIETY OF SECURITY ANALYSTS
2-3:30 PM Brian Zen will talk about what we can learn from Warren Buffett’s career path.
http://www.nyssa.org/AM/Template.cfm?Section=calendar&template=/CM/ContentDisplay.cfm&ContentID=6827

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PROFESSIONAL NETWORKING LUNCH PARTY
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Date: Saturday, May 17
Time: 1:30 PM - 5 PM
Cost: FREE
RSVP required. Please email your name and phone number to: RSVPzw@...
1. Share big investment ideas and best business practices.
2. Swap great jokes and meet wonderful friends.
3. Learn a hilarious Taichi Hiphop move from our stand-up comedian. At Zenway, we take fun and health seriously.
4. Discuss investment career and partnership opportunities at: http://zenway.com

1:30-4 PM LUNCH PARTY: EVERYONE BRINGS A DISH
Place: 211 North End Ave (at Murray St, near WFC) New York, NY 10282
Tel: 646.388.0887

4-5 PM THEATER PERFORMANCE AT WINTER GARDEN, WORLD FINANCIAL CENTER
“CORPORATE CARNIVAL”
Performed by Women’s Project http://womensproject.org
Returning to the World Financial Center with Corporate Carnival, Women’s Project presents feats of balance, strength and magic, while juggling hedge funds,

unleashing the retail giantess, eating the glass ceiling, challenging the strongman to wrestle with Sarbanes-Oxley, and many more daredevil acts. Catch a glimpse of

the carnies as they roam the corridors of the World Financial Center, interacting with the public in surprising ways. Don’t miss the show’s culmination on the Winter

Garden’s grand staircase where performers will spin extraordinary tales of corporate life.

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JOHN NEFF'S LOW P/E STRATEGY
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A special excerpt from http://superinvestor.net

John B. Neff, CFA, manager of the Windsor and Gemini II Funds at Vanguard for 31 years, averaged 13.9% versus 10.7% for the market. He averaged 20% over the last 10 years on his own equities. The following digest is based on his presentation at a financial analyst seminar in July 2006.

The Opportunities Today Are as Good as They Have Ever Been.
•    With so many newly minted value investors crowding the market, John Neff thinks the opportunities today are just as good as they have ever been. He continues to play the low-P/E game, his forte.
•    Neff believes that low-P/E is obviously the primary, enduring principle of investing. Analysts also need to continuously hone their analytical prowess.

Concentrate on 8 to 10 Stocks.
•    Compared to his days at the Windsor Fund, he now managed his own money in a much more concentrated form. He typically own 8 to 10 stocks. He buttresses that allocation with about 30 percent in fixed income.
•    He averaged 20% over the last 10 years.

How John Neff Screens Ideas.
•    Low P/E. Seek out companies on the “squash”, that is, ones that are making new lows. Neff would sweep the list of stocks making new lows each day and review Value Line each week, not for their opinions but for the 10 to 12 statistical yardsticks in provides.
•    Strong and Improving Fundamentals: Look for solid companies with strong fundamentals in strong, growing industries. Look for companies that were moving up the quality ladder based on statistics provided by Value Line. So the new low list gives you one entry for consideration and Value Line statistics, another.

Other Screening Considerations.
•    Growth: A company’s prospects should include fundamental growth of 7 percent or more.
•    Consistency: Companies with cyclical exposure should only be considered at a compensating lower P/E.
•    Look for miscategorized companies and hidden assets. Example: Lyondell Chemical Company (LYO) is the forth-largest chemical company in the U.S., but it happens to own the eighth-largest oil refinery in the country. When LYO was hitting new lows at around $20-21 in July 2006, it was selling at 5.6 times earnings and has a 4.1% dividend yield. The hidden asset unappreciated by the market was its oil refinery in Houston.
•    Look for “free plus” surprises, such as an unexpected oil discovery, an old line electronics retailer got into personal computer sales, or a buyout.
•    Play to your strengths and knowledge.
•    Develop a curbstone opinion. Shop around the neighborhood, and ask family and friends about companies to get their perspectives. With a curbstone opinion on top of basic fundamental analysis, you will be much more comfortable moving when you get the price opportunity.
•    Match your opinion against what caused the stock’s price to drop, and you can easily determine if the timing is propitious for investment.

The Tax Disadvantages of Shorting.
•    If you short a stock and you are right, regardless of your holding period, you realize a short-term gain on which you pay ordinary income tax of 35 percent.
•    If you short a future, regardless of your holding period, 60 percent of the gain is long term and 40 percent is short term.
•    Neff shorts infrequently because of the tax problems.

When Low P/E Investing Went Out of Fashion.
•    The first bad spell was the Nifty Fifty period in the early 1960’s. During this time, the Nifty Fifty stocks were selling at P/Es in the low 40s.  Their P/Es eventually fell to the low 20s, the to the low teens, and eventually to single-digit multiples in some cases. When those growth stocks became out-of-favor stocks, John Neff loaded up with the likes of Tandy, Hospital Corp., and Browning-Ferris, among others.
•    Low P/E investing again got absolutely killed in the 1971-73 period. Ultimately, Neff just waited out the bad spells and recouped.
•    Other bad spells:  Neff did not own hot stocks like oil and electronics in1980. He could not find value in early 1987. He got crushed in financial stocks in early 1990’s. But he eventually blazed out of each underperformance. Lesson: You have to stick to your gun.
•    Neff also bought some genuine growth stocks after they were beat up badly enough by the market to meet his low P/E hurdles. He owned Dell twice at single-digit multiples, and he also bought Home Depot, IBM, Xerox, Seagate Technology, Digital Equipment, and McDonald’s whey they reached single-digit multiples.

The S&P 500 Has not Been Particularly Difficult to Beat.
•    The S&P 500 is not really an index fund but, rather, a managed fund, run by a committee which decides which equity securities are included. They added a load of technology stocks during the late 1990’s. “Frankly, the S&P 500 Index Committee gives investors a lot of opportunities”, said John Neff.
•    Neff believes that tracking error, style adherence and closet indexing are not healthy. It’s hard to beat the averages if you cling to the index. So managers should have some freedom to manage money intelligently.
•    Neff looks for opportunities in both large-cap and small-cap areas and exercises them accordingly. (Brian Zen, CFA)

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WHAT WARREN THINKS
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http://money.cnn.com/2008/04/11/news/newsmakers/varchaver_buffett.fortune/index.htm

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This is a special free excerpt from:
http://www.superinvestordigest.com

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