>>How do you justify Yahoo's current $105 billion market cap?
I'm too tired for all the handwaving which justifying YHOO's market cap (or MSFT's, or GE's, for that matter) would require. They are getting a premium for some good reasons (superb management which has underpromised and overdelivered, model which has delivered, and should continue to deliver monster return on invested capital) and some not-so-good ones (they are a big cap, they are a "blue chip"). I have a feeling we have had this conversation before, but I think all determinations of valuation need to be made in the context of an individual's time horizon and investment goals. Mine have kept me out of YHOO for several months.
>>But you can't deny the fact that there are many
profitable growing companies that have had flat stock prices this year - mainly due to the fact that the
companies have not found favor with momentum investors.
I'm having trouble finding stocks like that. There are certainly plenty of good stocks which have underperformed flaky stocks. As someone who spent much of the past two years heavily overweight QCOM (up less than 2% last year, this year, well, you know...) I can only say that momentum, like chance, favors the prepared mind. (I should mention that I wasn't as well prepared as I thought I was; I sold QCOM about 150 points ago...)
>>But when stock prices rise so far above where even the most optimistic fundamental
analysis would place them, I can think of no other reason than momentum.
No disagreement there. This might be a good time to pull up AG's excellent speech from a few months back on risk premiums. Much of the recent run-up in my favorite stocks, let alone the JWEBs of the world, can, imo, be attributed to excess optimism and a concomitant willingness to pay more for a nicely articulated strategy than investors in more fearful times would pay for results. I'm pretty heavily overweight in ITWO and INSP, which are trading more than triple their 200 dmas. At some point they will have to correct hard, move sideways for a few months, or both.
Take care,
Ganesh |
