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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: John Stichnoth who wrote (36269)12/8/2000 2:32:48 PM
From: Pirah Naman  Read Replies (1) of 54805
 
the trouble there is determining where to set the trigger point for action.

There is another problem (or maybe this is a restatement of the same problem) in using PEGs. Because it is a pricing method rather than a valuation method, users are making guesses about how other investors will behave, not just about how the company will do. Look at how fickle investors have been in pricing even the Gs and Ks over the past couple of years. Better yet, note how that pricing has changed from even five years ago. For all of the great returns we have enjoyed (and which many use as "validation"), had investors priced these companies as they had previously, the gains would not have been so noteworthy. Going forward, investors may have a change of attitude on pricing.

By contrast, if we determine a value of a business, we have reduced need to rely on "feel" and on the behavior of others.

- Pirah
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