Thanks, Dien. Some thought-provoking stuff you've shared! I'm particularly intrigued by this takeover strategy, as it would seem on the surface to be more of a niche technique and not something that millions of others are doing or attempting.

Of course one can't go wrong imitating just about ANYTHING that Buffett has done, as he is a certifiable financial genius :). Of course the million dollar question is how do you develop a reliable methodology for spotting those undervalued companies.

And last, but certainly not least, I'm interested in your OWN technique which has been very profitable for you! I'm frankly impressed that you even HAVE a very profitable technique with the state of the market these days. Then again, I've heard that the best investors make money regardless of how the market is doing.

If you'd rather keep your strategy proprietary, I certainly respect that right. But if you're willing to share, I'd be fascinated to get an insight :)

All the best,

-Jesse

> Hi Jesse, Mel, and everyone interested in
> stocks!

> First, sorry this took me a bit longer to
> post than I anticipated. I had a bout of
> indigestion, and so it took me a bit longer
> to get to writing this than I had planned!
> But let's get started....

> I believe that often there's a trade-off
> between security and speed. I think that
> more secure investments usually take longer
> than the less secure, but possibly faster,
> investments. If this is true, it means that
> you have to decide which of these criteria
> you want to use to invest. (Or what
> combination of the two.)

> I'll give a couple of ways to invest here,
> though one is probably very difficult to
> implement. The other way is the method I use
> myself.

> Rene Rivkin's Approach One Australian
> investor to look at is a guy named Rene
> Rivkin. You can look at his web site at
> http://www.rivkin.com.au/ .... He currently
> sells a subscription to a weekly newsletter,
> where he gives his views every week on what
> to buy and what to sell.

> His background is that he is one of the
> founders of an Australian stockbroking
> company, Rivkin Croll Smith, which he later
> sold. Apart from that, he makes all his
> money from his own investing and from his
> newsletter. His fleet of cars -- he
> personally owns something like 80 cars --
> shows that he seems to be successful.

> From articles and interviews I've seen with
> him, what I can gather is that Rene Rivkin's
> technique is this....

> He tries to find out as early as possible
> what companies are likely to be takeover
> targets. He then buys shares in the
> companies which are likely to be taken over.

> If his informed guess is right, the
> companies will at some point make a public
> announcement regarding this.

> When that happens, usually the share price
> of the company to be taken over will rise
> dramatically, and that's when he sells his
> shares for a profit.

> Of course, sometimes he can be wrong, but I
> have the impression that he's a very
> cautious investor.

> Can an ordinary person use this technique?

> I think Rene Rivkin is in a unique position
> to use this style of investing. He spends a
> lot of his time soaking up information,
> probably much of it from various contacts
> which he has in the finance industry
> (especially since he's the founder of a
> stock broking firm). So, he may often hear
> about upcoming developments before the
> general public does.

> His stock market experience also probably
> helps him to interpret the information, when
> he's looking for possible takeover targets.
> I think it could be difficult for an
> ordinary person to try to apply this
> technique effectively.

> However, Rivkin does have a way for people
> to "share" in this technique from
> his newsletter. I DON'T subscribe to his
> newsletter, BUT (not having seen it) I think
> his newsletter would probably pay for itself
> if you had a few thousand bucks to invest
> following his advice. I think his technique
> is plausible for someone in his position and
> with his experience.

> (The reason I haven't subscribed is that I
> prefer to use my own style of investing,
> which has been very profitable for me.)

> One limitation is that his newsletter is
> only for investing in companies listed on
> the Australian stock exchange. There could
> be something similar for companies on US
> exchanges, but I'm not sure.

> I personally believe the best approach is
> still the one used by Warren Buffett. But
> more about that later. First, let me briefly
> talk about stock brokers.

> Stock Brokers Many people listen to
> their stock broker when deciding what to
> invest in. However, the truth is, many stock
> brokers are essentially salespeople. They
> make a commission on everything you buy and
> sell. It is in their interest for you to buy
> and sell a LOT -- the more you trade, the
> more money they make.

> Think about it -- if they really knew what
> stocks would go up, would they still be
> working as stock brokers? In many cases, the
> probable answer is NO.

> The problem with stock brokers is that their
> self-interest and your self-interest are not
> the same. They make money if you trade a lot
> -- whether you make money doing it or not.
> So, I'd take any advice from stock brokers
> with a grain of salt.

> Following The Crowd When it comes to
> stocks, what most people tend to do is
> "follow the crowd." In many
> activities, this is a way to play it safe.
> However, in the stock market, this approach
> can be a disaster.

> The problem with this is that it means many
> people have a tendency to buy too high
> (AFTER everyone ELSE has bought), and sell
> too low (AFTER everyone ELSE has sold). When
> you "follow the crowd" there's a
> tendency for you to "buy high, sell
> low" -- which is why a lot of people
> lose money.

> A better approach is the one followed by
> Warren Buffett -- the world's most
> successful investor. Here's the theory
> behind his approach....

> Warren Buffett's Approach Every business
> has an intrinsic value. Since buying stocks
> is buying part of a business, that means
> that every stock also has an intrinsic value
> too. This approach says that, over a long
> enough period of time, the price of a stock
> will gravitate towards its intrinsic value.

> This means that "overvalued"
> stocks (whose price is higher than their
> intrinsic worth) will tend to go down in
> price, towards their intrinsic value.

> At the same time, "undervalued"
> stocks (whose price is LOWER than their
> intrinsic worth) will tend to go up in
> price, towards their intrinsic value.

> So, if you buy undervalued stocks and wait,
> as long as your calculations are right,
> you'll ALMOST ALWAYS make money.

> Which companies are good ones to look at?
> Some essential criteria which Warren Buffett
> uses to select companies to invest in are
> these....

> They must have a monopoly or a strong
> brand name (so they dominate their market)
> They must have a good record of profit
> growth which will likely continue for
> several years to come (they must have a
> degree of predictability here)
> They must be undervalued (as explained
> above) I'll explain more about these
> criteria later....

> Dien Rice