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Strategies & Market Trends : Roger's 1997 Short Picks
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To: Bill Wexler who wrote (7897)12/6/1997 12:06:00 AM
From: Bill Wexler  Read Replies (1) of 9285
 
Investors are so much more value conscious nowadays...NOT!!!

I was ranting on the Yahoo thread about how the market cap was unsustainable - so I tried to give some examples of momentum stocks which keeled over; I was also pointing out great values which trade at a fraction of Yahoo's market cap yet have hundreds of millions (or billions!) in sales and solid earnings.

Of course - the standard response from the Yahoo longs is that Yahoo is "different". I'm sure the Citrix longs think it is "different" also.

I can understand why people would pay a premium for a fast grower - but I remember a time when a P/E of 30 was considered extreme. Nowadays it's a bargain.

I was looking over some old 10-Qs for Amgen. In early summer of 1994, Amgen was trading for about 20 (split adjusted). You could buy the whole company for about 5.8 billion and here's what you got.

$1.5 billion in sales
$320 million in profits
$700 million in cash (offset by $185 million in debt)
$1.2 billion in shareholder equity
...and an astounding growth rate.

Consider that today you have to pay about $10 billion to buy AOL and $3 billion to buy Yahoo...together about what you would pay for the 1997 Amgen. Difference being that Amgen generates nearly $3 billion in sales and $700 million in profits. While Amgen is using cash to buy back over $1 billion in its own stock, AOL borrows $350 million in a convertible. Geezz - what am I missing (slapping my forehead many times....)???

I keep hearing (even on this thread) how the current market is a "freight train".

Problem is that the tracks end at the edge of a cliff!!!
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