Good point, Pamina. As I was warned when I first bought BRCM: expect a lot of volatility. High flyers have farther to fall.
But, reward tends to be commensurate to risk undertaken, and this has been breathtakingly true of my wild ride with BRCM over the last 14 months or so.
That having been said, I'm convinced that talk of valuation applies best to companies who are growing linearly. With companies in a curvilinear or even exponential phase of their growth, valuation becomes less relevant as growth deviates from linearity, because valuation depends upon a forward view from a static point of assessment, and tends to assume a constant market----this, in a market and company which is anything but static. Kind of like trying to judge the speed of a car as you stand by the freeway and it whizzes past----a much easier task if you are also on the freeway driving the same way at a similar speed.
So, analysts estimates and price targets must be frequently revised in these situations, strong testimony to the inadequacy of such estimates in the first place. And if this has been true before, why would it not be true now? The best assumption is that analysts estimates and price targets will continue to be inaccurate. And of course, to some extent or another these estimates will involve "valuation" measures, and to this extent, I submit, will they be inherently misleading.
Instead, a much better way IMHO is to try to determine the growth characteristics of the markets in which BRCM operates or hopes to operate, and the rate at which market penetration is occurring, and how that rate is accelerating/decelerating, and add to that an estimate of how BRCM intends to expand into those markets and new as yet uncreated markets, and the probability that it will succeed at that, and how quickly. But of course, this is no small task, and fraught with the potential for error at numerous points. And in the end, it all hinges on the market agreeing with your assessment, since the market sets the price of a stock by whatever rational or irrational means at its command. Me, I operate on the hope and assumption that sooner or later the market will see things more or less the way that I do, but realize that might require patience on my part.
Still, point well taken, and particularly noteworthy for those recently investing in BRCM. Expect a wild ride, and ask yourself if you're prepared. If not, better set stops.
Regards,
Walkingshadow |
