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Technology Stocks : Dell Technologies Inc.

DELL 133.74

-0.1%

3:59 PM EST

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To: Tony Viola who wrote (149618)	12/21/1999 12:04:00 PM
From: Chuzzlewit	Read Replies (2) of 176387

Tony, How about running Qualcomm's valuation numbers next? Been there and done that <VBG>. The issue is not the prospects of these companies. I believe that both are great. I simply cannot swallow the valuations attached to them. One way to look at it is if you were a multibillionaire and had the opportunity to take either one of these companies private, would you do it at their current valuations? I believe that the valuations attached to these companies bear no relationship to their prospective cash flows even assuming the rosiest of forecasts. That's not to say that these companies will not prosper. I believe they will. I simply argue that 10 years from now the yield to buy and hold investors will be flat to negative. I think that companies like these are the new nifty fifty, and will perform accordingly. Malkiel quotes a Forbes magazine article as follows: [The Nifty Fifty] appeared to rise up] from the ocean; it was as though all of the U.S. but Nebraska had sunk into the sea. The two tier market really consisted of one tier and a lot of rubble down below. What held the Nifty Fifty up? The same thing that held up tulip-bulb prices in long-ago Holland - popular delusions and the madness of crowds. The delusion was that these companies were so good that it didn't matter what you paid for them; their inexorable growth would bail you out. Look at the aftermath. Sony had a P/E of 92 in 1972. In 1980 it had fallen to 17. Polaroid's went from 90 to 16. McDonald's dropped from 83 to 9. TTFN, CTC

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