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Strategies & Market Trends : The Art of Investing

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To: Investor2 who wrote (743)	7/7/1999 7:20:00 AM
From: jttmab	Read Replies (1) of 10655

Re: Why would one want to short a company with a 5-year growth rate of 40%? Point well taken. The original screening was done looking at 3 criteria trying to identify "high" valuations [price to sales] with a weak balance sheet, high debt and operating expenses that exceed assets. In the case of a company with a high growth rate, the theory would go that the growth rate, if sustained, would lead them into bankruptcy, i.e., eventually the increasing debt (increasing since they would be unable to pay their operating expenses without incurring more debt) would overtake any operating income and/or they would not be able to sustain the growth rate because of increased capital needs and the valuation would have to decrease accordingly. Best Regards, Jim

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