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Bruce Sherman: We have chosen not to participate in the energy sector

November 13, 2005

You may not know Bruce Sherman, but his Private Capital Management manages more than $31 billion in separate accounts, returned more than 20% annually (in average) during the last 10 years. Once a CPA, Bruce Sherman is good at calculating the intrinsic value of stocks. But he is not investing in the best performing sector energy. He said that any valid cash flow analysis of a commodity-based business requires strong conviction regarding the long term price of the underlying commodity. He believes that oil prices have reached a threshold that is beginning to modify consumer behavior both at the pumps and at the automobile dealership, as evidenced by the recent sharp decline in sport utility vehicle sales.

http://www.private-cap.com/pdf/PCM_3rd_Quarter_2005_Report.pdf

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