ValueSearch Capital Management, L.L.C. Comments on Quarter

ValueSearch Capital Management, L.L.C. comments on quarter.

Swampscott, MA (PRWEB) May 4, 2006 -– ValueSearch Capital Management, L.L.C. (VCM), based here, has issued the following comments regarding the latest quarter and the financial markets and outlook, from Michael I Schwartzman, President:
   
“Our short-term performance for the quarter ended March 30, 2006 was at variance with the market -- the market did better than we did. These are and will continue to be the travails of a concentrated portfolio -- movements of a few, large positions (concentrated, in our case) will overpower the general movement of the market. This also benefits us when these movements are in our favor. What will matter and has mattered so far, is the long-term performance, and it has been good.
   
“Meanwhile, what was it that caused the underperformance? Prices of three or four large positions (eBay, Intel, and XM Radio) have declined while the market was gaining. We maintain our long-term positions in these companies.
   
“During this quarter, eBay stock price was affected by the patent case it is involved in. The patent case of eBay should be of interest to eBay shareholders, like ValueSearch Capital Management, only because of its public policy implications such as the power of “patent trolls,” the breadth of patents issued by the US Patent Office, and the remedies allowed and required by the law in the case of infringements. All very important and long overdue issues to consider.
   
“As to the narrow interests of the shareholders regarding the future value of eBay, ignoring oracles would always be a good policy for the long term eBay shareholders. Some oracles sounded very ominous, such as “...a permanent injunction against eBay fixed price business would be extremely detrimental bec ause it represents about 30% eBay revenue.” It would, may be, if such an injunction is issued, if it is not overturned on appeal (the Supreme Court case is, strictly speaking, about the power of lower courts to issue such an injunction, it is not about the merits of eBay’s position), if the settlement is not reached with MercExchange, if eBay’s redesigned interface is not practical, and on, and on. Studying the history of similar dust-ups in the past helps and allows a shareholder to make a reasonable assumption of the probability of a disaster.
   
“eBay is undervalued under these educated assumptions and is a good buy for long term investors wanting to own a well-run company.
   
“Our large position, Wm. Wrigley, ‘declined’ only in a very short-term accounting sense. Before the end of the quarter, Wm. Wrigley shares dropped significantly in anticipation of a reorganization of its stock structure as announced by Wm. Wrigley. The actual reorganization is about to occur, and the total value of Wm. Wrigley holdings, with the new shares sent to shareholders, will become equal to the pre-reorganization value. This fluctuation in value, also caused by a misunderstanding between Wm. Wrigley and the New York Stock Exchange, should be an event of no concern to long-term shareholders.
   
“Of course, the eBay, Intel, and XM Radio drop in values was real, and if we are wrong in our assessment of these companies, we lost some money long-term. I do not think we are wrong.”

Overall Investment Climate:

“Investing is never easy, except for a year here and there during the last segments of bubbles and euphorias, when stock prices become largely disconnected from the underlying fundamentals.
   
“In all other years, the fundamentals, to a good degree, influence the prices. They, along, of course, with mini-euphorias, mini-panics, and the all-determining "indicator to watch” of the day, determine the stock prices. One year -- the money supply, another year -- inflation, the budget deficit, oil prices, and Iran's progress in making the bomb -- all vie to be the one, universal, easy-to-rely-on indicator, predicting the future. Of course, such indicator does not exist, but that never stopped the market participants from reacting to the currently anointed indicator.
   
“We will not predict 2006; we do not do short-term predictions. We will continue our diligent sifting through companies' fundamentals and their executives’ profiles to find the best-run companies, to remove from our watch list those which are no longer well-run, and to sell those which are significantly overvalued.
   
“In the long-term, we will do well with this approach, as long as the US remains a good place to do business. While there are signs of this not always being true short-term, and the Far East is taking greater and greater long-term significance, we will stick to this approach.
   
“At the same time, we will look closer and closer at other economies, including the Far East, which provide economic, political, and social frameworks conducive to growing a business, enforcing and promoting the rights of shareholders, and which have long-term sustainability perspectives for the underlying societies.
   
“We have already begun this process with a very successful investment in a Korean company, and will continue the process, but ever so cautiously -- understanding of another culture is not attained overnight.”
   
VCM manages its partnerships with a long-term perspective on investing. The investments are made in common stock of publicly traded companies with the expectation of holding them for several years or longer. VCM's goal is to achieve a return superior to that of the market while paying utmost attention to the preservation of capital.    
VCM manages two partnerships: ValueSearch Equity Partners (VEP) and ValueSearch Equity Partners II (VEP II). The principal difference between the two is in the use of leverage: VEP is leveraged and VEP II is not.

For more information, see www.ValueSearchFunds.com or call 781-599-8839.

Contact: Bill Bongiorno, President, Blue Chip Public Relations, 914-533-7065;
Michael I. Schwartzman, President, ValueSearch Capital Management, L.L.C., 781-599-8839.

###