RE: "you and Paul are positive about Red Hat's upcoming stock offering. My 21 year old son just mentioned he is hoping to invest in Red Hat as well, so I appreciate hearing what you all think."
Hi DMF,
That's great your son is investing already. The earlier the better:
The retirement growth multiplier for a 21-year old is about $7.25 in today's dollar assuming loosely (1+growth-inflation)**NoYrsSaving = (1+11.35-4.35)**(55-21) = $7.25, i.e. Every dollar he invests today, becomes about seven dollars at age 55, after loosely correcting for inflation (i.e. expressed in today's dollar.)
At age 21 it's $7.25. Age 25 it's $5.74. Age 30 $4.20. Age 35 $3.21. Age 40 $2.40. Age 45 $1.79.
Translated, every dollar your son saves at age 21 for retirement, is equivalent to a 45-year old saving $4.00. Amazing, the power of starting early. In fact, consider this: $15,000 placed into the stock market on the day a child is born would become $1M at age 65, assuming 11.35 % growth & 4.35% inflation.
Regarding an investment in Red Hat, off the top of my head, the items an investor might review:
+ what is the offering price? has it moved? will it be bloated on day 1?
+ top customers, driving applications
+ # of ISVs/applications
+ financials: growth rate, margins, cogs, liabilities, etc.
+ distribution channel
+ management team; stock distribution to employees
+ barrier to entry (free Linux); competitive landscape (other Linux-wannabees, NT)
+ Linux did well against NT 4.0 because it was a) free, b) NT 40 had some issues
+ product comparison with NT's current beta?
+ what % of Linux users are pulled to Linux because it's free
Best of luck to your son! I hope it is profitable for him and educational too.
Regards,
Amy J |
