For me, it's the $64,000 question.
It's been noted here before, but one of the biggest traps that novice value investors can fall into is that of the "growth at a value price" when in fact the market already is just showing that it knows that the barriers to entry simply splinter in the face of fresh capital.
What really gets me about the internets is not so much the valuations, but that so much of it is indefensible. For instance, Exodus Communications is borrowing $1 billion at 10% to build data centers round the world. Intel could do the same thing, with greater brand name, and would hardly have to borrow to do it. And if it did, it could borrow at much less than 10%, and provide much of its own hardware.
Now, it's easy to pick on the Exoduses of the world, but the teasers with PE's of 15 and ROE of 60% should be no less suspicious.
Good investing,
Mike |
