C-Cube Message Board - Msg: 10572629

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Technology Stocks : C-Cube

CUBE 37.00

-0.2%

1:51 PM EST

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To: Michael Olds who wrote (43215)	7/19/1999 9:23:00 PM
From: Don Dorsey	Read Replies (3) of 50808

OT....This is just something to think about for anyone who is interested. An area of investing I find intriguing is valuation models. A common opinion today is that traditional valuation models don't work any more. I contend that they never did work. The professionals put all their efforts into defining "fair value", but the problem is that they assume a bell shaped probability curve around that value. Clearly that's not the case. Extremes exist in the market in far too high numbers for a bell shaped curve. A better model would be something similar to the atom. There seems to be a series of valuation wells where a stock will settle in comfortably. If enough buying or selling energy comes along to knock it out of its current well, it will move on to the next one. This model allows for the common behavior of two stocks with similar outlooks, and in the same industry, one trading steady at 25 pe, the other trading steady at 75 pe. It also explains the proliferation of extremes.

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