[BC69]

I think there is a lot of great stuff in here, but a lot of it makes me cringe a bit too. There is alot of technical analysis, discussion of financial growth, and stock charts, ect. I can tell Greg knows his stuff, I just caution running with some of the simplicity of it. Also, maybe in the 89 pages of comments I missed something like what I am about to say, so I apologize.

But what concerns me is a) lack of using a comparison method and b) focus on technicals

I am one of the young guys here, but have been doing investment banking for 5 years now, 4 at one of those big Wall Street banks in downtown manhattan we all gang up on. On the private side of the world, we help companies buy and sell other companies, do any sort of financing, and of course IPO's. I am not on the private side anymore, so no worries about calling SEC.

When you see X company buying Y company, or X company IPOing at Y there is, at the foundation of it all, a discounted cash flow model behind it. You model out historic and projected periods (as far as you can reasonably be certain). Income is reduced down to cash flow, and that is taken back in time to the present period based on the companies cost of capital. The biggest part of it all is the Terminal Value - this is the value you assume the company grows in perpetuity. This makes up 90% of the total value. You can use a growth rate of 1% or so, but most likely you use a multiple of EBITDA. Think of it as operating income.

That multiple is determined based 99.9% of the time on comparison analysis. What are the public comparibles trading at. The median value of that. You tweek it if you think your company is better or worse at something. Sometimes analysts will use a multiple of earnings (P/E) which you see in research reports, its simpler, but also based on comparison!

My point is - you may see a company. A simple one, a fast food restaurant, that you understand the business model, you understand that in a downturn people go to QSR over sit down. You see sales up 5% yoy, EBITDA margins improving, CF reinvested in Europe, ect ect. So you think...great! BUY.

But what about the TRILLIONS of dollars in smart money out there, hedge funds, mutual funds, asset managers. Don't they see this? Wouldn't they be buying this? So what if all that smart money is already in the stock, and right now the stock is trading at 15x 2013E EBITDA vs. the industry trading at 8x 2013E? That means if they performed at industry average instead of projection you would be down big! If ebitda was 10mm, 1mm shares, at 15x its $150 a share, at 8x times its $80 bucks a share!

You need to make smart comparisons here. NFLX was mentioned earlier, and the chart looked great, but there was no real comp, no real way to measure that growth, and it was retail money coming in late. But industries that have established players and comparisons, you need to use that.

Its not just about stock x, it is stock x compared to the index and its peers.

On the technical analysis. Thats day trader glory, that can change in an instant! Thats not long term investing, thats day trading. And its us vs. smart big money that operates faster. Also, the options market is where the day trading really operates.

Focus on the fundamentals of the business, hold, average down during bear markets, and set limits on losses, and gains.