In the most recent conference call it was mentioned that some of the larger sales were right on the borderline of being included last quarter versus this one. I suspect that they will be shown this quarter as a strong catalyst for the stock to return to its former levels.

Do your own research, I’ve done mine, and this looks promising

In terms of value investing, I always liked this one:

“It is better to be approximately right than precisely wrong”. That coupled with a margin of safety is the trick. I think you made a good investment.

Maybe the uncertainty meant that you needed to buy at a 50% margin of safety (MoS) and sell at a 25% MoS, where a JNJ you would only require a 25% MoS, but you would probably hold till it was 25% overvalued by your approximately right IV.

You do have me thinking Joe. I might go thumb through the Value Line Small and Mid cap edition at the library this weekend.

Ever look at RRGB? Red Robin Gourment Burgers. The name says what they do. Kinda like a Chilis that specializes in hamburgers. Like Chilis in terms of size and the fact that they have waiters. Pricing is maybe 10-20% over what you would pay at McDonalds.

http://finance.google.com...;q=NASDAQ:RRGB

It has a $560M market cap, but it has two problems. I think the food is not that great (for the price) and last time I looked (maybe a year ago) it was overvalued. Alot of people think the food is great though. My experience left me with a big, jaw breaking yawn. It might be of interest hough. They have about 60 restaurants last time I looked. If you look at a Chilis, you can easily see that room for expansion is there for many years to come.

I should add that at a glance, I saw an overvalued stock and I personally did not like the restaurant. So, I never looked at quality of managment, the annual reports, etc. Maybe a mistake on my part, but I must have been right, the stock has gone no where for atleast a year.

I know I bought at a substantial discount, but I wasn’t sure how substantial. I was able to comfortably buy with confidence, but as the price rose, I wasn’t sure exactly when it would be fairly priced.

If it took a few years for the stock to run up, I would have had a better idea of the value because I would have had better insight into the “new” company’s operations. Without that track record, I was stuck selling at what I believed would be a fair value if the “new” company didn’t grow much more.

I may have left a lot of upside on the table. Then again, it may really be a $55 company if things don’t play out exactly how I predicted. (Hence the margin of safety.)

It’s the Buffett “fat guy” quote: You don’t have to know a guys exact weight to know that he’s fat. I wasn’t sure of GHM’s actual weight, so I got out when I no longer knew whether or not it was fat.

Make sense?

With this company, it looks like you bought at a 50% margin of safety but were not comfortable holding with a 25% margin of safety. While you admit that quality is questionable, isn’t it true that the rule “never lose money” she not be abandoned? If the company is sound, why not hold till it is overvalued? Or simply look elsewhere?

I’m no small cap expert but I still think the idea of moat is a requirement.

Thanks for posting on your buy/sell of Graham Corp. It shows just how in-depth you are willing (and able) to analyze a company. This is a different style of investing than looking for stable multi-year cash-flow growth. You must have read a great deal of the 10-K information in order to feel comfortable that Graham was beginning to grow at a higher rate than it had done in prior years.

Anyway, thanks for the great post. Keep’em coming!

David

Nice to hear that you’re back and everything alright with your borther. I’m a fan of this blog from Thailand. Reading your blog is very enjoy and useful. Hope that you keep teaching us to be a good invester.

Excellent post, though I agree, the mystery is why the heck you are looking at Graham in the second half of 2007.

All the best.

Warren Buffett mentions the Four Filters this way: “Charlie and I look for companies that have a) a business we understand; b) favorable long-term economics; c) able and trustworthy management; and d) a sensible price tag.” These Four Filters can enhance the probability of our investment success.

My book is available at http://www.frips.com and, it includes a valuation case example of Kraft, KFT.

Here is a 10 min. audio book summary:

http://www.frips.com/4fsu...

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