Let me remind you...
I am an owner of biotech, chip, telecommunications, and dot-com. I was CLEARLY referring to real earnings occurring RIGHT NOW and ESTIMATED FY2001 earnings. A cyclical chip stock will discount the end of the cycle far in advance; this discount is based on the premise that investors can accurately foresee the cycle peak i.e. peak earnings. No one, repeat NO ONE, accurately forecasts these peaks. Thus your statement, 'A cyclical stock selling at 7.5 times peak earnings is not cheap' is based on this crystal ball premise which you may feel comfortable with. To each his own; I submit the peak is over two years away - if this is the case the semis are very, VERY cheap right now.
To coin a phrase, a semi stock that is making money hand over fist can easily have an undervalued stock price. Conversely, a biotech stock that has not made money since its inception relies solely on investor perception to determine its valuation.
I would also suggest that your sentence, '..a biotech stock that is losing money hand over fist can easily have an undervalued stock price.' be presented to 100 randomly chosen investors for their opinion of the logic. Perhaps I'm extremely dense, but I would bet most would have a problem with the prefix 'under'... |
