The ROI is not just the earnings.
It is also the expectation of appreciation of the total investment value. IF CSCO is going to double in 2 years, then your $28B annual interest cost would be offset by the $403 billion in incremental revenues when you sell CSCO to somebody else in two years.
I sold my CSCO this week out of fear that the day of reckoning, the day in which manic valuations will no longer be applied to internet-related companies, is near. I have seen the valuations of too many companies that I owned, AMZN, ICGE, ATHM, HLTH, DSCM, for example, come crashing back from exuberant valuations. Fortunately overall I came out ahead on these, although calling tops is very difficult, and I missed some of them by a lot, but overall got very lucky. The weaker companies got their valuations trimmed first, but it seems to be spreading to the stronger companies lately, such as AMZN. I did not want to take the risk that it would happen to CSCO. So I will move the money to mutual funds.
Tom |
