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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Mike Buckley who wrote (21360)3/26/2000 2:00:00 AM
From: Curbstone  Read Replies (2) of 54805
 
Mike and Chaz,

Thank you for your in-depth responses to my questions about Moore's discussion of Discounted Cash Flow Analysis.

Both of you picked up on the 15% thing and my question about whether it was simply an example or an actual formula. Your answers led me to believe that I must not have made myself clear.

What was particularly bothersome about Moore's example was his use of the 15% discount rate to be repeated annually over the term of a 10 year investment.

Something like a bond, loan, or mortgage (regardless of interest rate) is a static investment and easily lends itself to a simple discount rate analysis and chart as used in the book. But we are not dealing with static investments when investing in high-technology, far from it. In fact, the ebb and flow of ideas, products, markets, politics and the laws affecting all of the above are changing at a rate that sometimes reminds me of navigating the "rapids" associated with Alaska's 30-foot tides.

Is Moore really suggesting that we try to apply a standard valuation metric such as Discounted Cash Flow Analysis to companies that (especially of late) have mocked almost every conventional metric except public perception of value? By maintaining this specific shred of conventional wisdom is Moore trying to offer his readers a key to separating wheat from chaff in a stock market gone mad?

Sincerely, AM
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