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Technology Stocks : Micron Only Forum

MU 237.16

+4.6%

Dec 5 9:30 AM EST

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To: Don Additon who wrote (2425)	9/17/1996 5:42:00 PM
From: Adrian Wu	of 53903

Don: The valuation model for a cyclical company is different from a growth stock. You do not apply a fixed P/E ratio to the trailing earnings to arrive at a reasonable price. Look at the charts of companies such as Ford and Chrysler. In down cycles, the P/E ratio rises because the earnings take a hit, and the stock looks expensive. During upswings, the P/E ratio decreases and the stock looks cheap. Don't be fooled! The predictions of $5 to $7 a share is based on historic low P/Es, but these ratios happened during upswings and cannot be applied here. If you are a long term investor, you should be looking more at qualitative analysis and whether the company will thrive during the next upswing (which is almost as certain as the sun will rise). This downturn also weeded out some of the less initiated (e.g. Samsung), leaving the field open for the more determined. Micron is the low cost producer and hopefully will remain so until the next up cycle. Adrian

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