Frank-- Re: Your two "rules"
Isn't it most accurate to judge a company based primarily on what it has accomplished in its most recent years? For example, a weighted function that generated a score for a company's merit and worthiness based primarily on the latest execution information, with decreasing emphasis on the past? Perhaps a simple formula where, for example, 1/2 the score came from the last two years of execution, 1/4 from the two years prior, 1/8 from the two years prior, etc? Why is it inappropriate to judge AMD primarily based on Athlon and flash, and Intel primarily on Merced, P3 binsplits, and Rambo?
There are a whole lot of people in 1998 who thought they were really smart for buying Dell. It only goes up; great supply chain model; market share to the moon; no r & d "waste," etc. Things change. And, when your stock is loved, "must own," and functioning in the context of a stock market that is obsessed with the notion of buy and hold forever as the sole path to wealth, selling a stock due to the underlying company stumbling becomes almost incomprehensible.
Sometimes the market doesn't discount reality; sometimes it discounts for a future reality that simply won't exist. The argument that your company must be doing well because the stock is up is very weak.
-Eric |
