An example of a fund manager not properly valuing AMD's future. If all fund managers think like this guy, the forward PE will never reach 20, much less exceed that level. He knows that AMD is cheap, but can't recognize that it is insanely cheap.
=DJ TIP SHEET: Dreyfus' Higgins Builds Fund From Bottom Up
By John Shipman
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Not one to focus on a sector group or market conditions,
Peter Higgins pursues value stocks which meet his price-to-earnings,
price-to-book value, and price-to-sales criteria.
As a "bottom-up stock picker," the portfolio manager of the Dreyfus Midcap
Value Fund has built the fund by buying stocks that stand on their own merits,
rather than starting with a sector or trend and working his way down.
"We're not owning the latest, greatest craze," Higgins said. His fund is up
over 28.5% year-to-date, according to Morningstar.
The fund is currently largely weighted in technology stocks, where Higgins
said there's still a lot of value.
"It's popular to equate technology with expensive, but there's a lot of stocks
that have been sold way too hard," he said.
One example Higgins cites is Advanced Micro Devices Inc. (AMD).
"This is the third time we've owned it this year," he said, having first
picked up the stock around $35 or $36 a share, and having sold it each time it
reached his desired valuation.
[Evidently his "desired valuation" wasn't even remotely comparable to the semi industry mean.]
He said he thinks that Wall Street consensus earnings estimates for the
company are "way too low," and that its flash memory business is undervalued.
[Now he has figured out that his prior earning estimates that caused him to sell were too low, so he has jumped back in. This shows that he didn't really have a handle on AMD's prospects earlier in the year. AMD's management may have been sandbagging their guidance too much, but who can blame them after all the lawsuits]
With 2000 earnings expected at $2.60 a share, "it was not expensive when we
first bought it and it's not expensive now," he said.
After a 2-for-1 stock split earlier this month, Advanced Micro recently traded
at $34.13.
Another technology holding that's done well, Higgins said, is Tech Data Corp.
.
.
.
"At some point valuation levels become unreasonable," he said. "There has to
be a point when you say, 'This is too expensive.' "
(END) DOW JONES NEWS 08-30-00
03:00 PM
