'You don't short God' ........I hear that is changing
pathfinder.com
Despite setback, Microsoft stock should weather Justice Department's attack intact
In the words of one investor: 'You don't short God'
by Michael Brush
Thursday, December 18, 1997
8:30 p.m. EST
Like many analysts, however, Cowan analyst Drew Brosseau thinks Microsoft is still a good investment. And he sticks to this view, despite the often noted pricey valuations that Microsoft stock carries. It trades at a price-earnings ratio of around 33 times forward earnings, and a price to sales ratio of around 13. Compare that to a price-earnings ratio of 18 and a price to sales ratio of 1.6 for Sun Microsystems. (NASDAQ:SUNW).
Not even short-sellers are betting against Microsoft in any significant way in the wake of Microsoft's tangle with the Justice Department. "The antitrust problem is something to be nervous about," says William Fleckenstein, of Fleckenstein Capital in Seattle. "The government has unlimited resources, and they can be as irrational and as nasty as they want to be."
Throw in Micorsoft's high valuations, and that risk is compounded. But not enough to make Fleckenstein want to short the stock. "If it was anybody but Microsoft, people would be really concerned. But Microsoft has demonstrated an extraordinary ability to maximize profits and manage around problems."
Another well-known stock shorter, Marc Perkins, of Perkins Capital Advisers in Delray Beach, Fla. also refuses to take the bait. In fact, his interest is less in Microsoft's battle with the Justice Department, and more in a recent decision by Federal Express to invest in network computers -- which use Java programming and do not need Microsoft's operating system.
"If that really catches on, Microsoft has a problem on its hands," says Perkins. "I think the network computer is going to be a bigger force than most people think. I think it will eat into Microsoft's growth rate." So far, though, Perkins is not convinced enough to short Microsoft. "The company is not a stock.
It is a diety. And you never short God."
Some words bear repeating
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