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Strategies & Market Trends : MDA - Market Direction Analysis

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To: KyrosL who wrote (40750)	2/19/2000 2:39:00 PM
From: Jacob Snyder	Read Replies (2) of 99985

re: "say company A that grows at 20% is awarded a p/e of 30, and company B that grows at 30% is awarded a p/e of 60. A slowdown that cuts B's growth rate from 30% to 20%, should result in its valuation being cut by half." Exactly right, except that the PE premium for growth stocks has become much more extreme than your example, and often the "growth" is entirely theoretical, involving sales rather than profits, or some very hopeful/optomistic assumptions/extrapolations about the future. Actually, "investors" who are buying the internet/biotech/fuel cell/semi/fiberoptic stocks, long ago stopped doing these B. Graham/W. Buffet-type calculations. On the threads of those stocks, it isn't possible to start a serious debate about valuation. The attitude is, if you bring up the subject, you're an idiot.

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