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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Bruce Brown who wrote (39443)2/18/2001 5:20:48 PM
From: harmonaronson  Read Replies (1) of 54805
 
Are we throwing out the baby with the bath water?

Many of the more visible tech stocks have been reporting reduced earnings growth. But all of the tech stocks have been taken down indiscriminately. I decided to compare the forward PE vs. growth rate and calculate the PEG (PE to growth rate ratio) for some of the computer makers (CPQ, HP, DELL, IBM) and compare it to SUNW, which is part of the G+K list. I used Barron's 2/19/01 issue for the trailing PE and the expected earnings for '01 and '02 to calculate the forward PE and the average expected growth rate for the next two years. SUNW has the highest expected growth rate and the lowest PEG. Compaq is a close second with a low PEG.

Stock           Forward PE        Avg. Growth rate      PEG

CPQ            19.9                   19.7%                     1.01
DELL           26.8                   18.5%                     1.45
HP              21                        5.3%                     3.96
IBM             23.2                    13.2%                    1.75
SUNW         28.2                    29.1%                    0.97

Any time that you can buy a stock growing at close to 30% for a PEG of 1, that is truly
a bargain. If I didn't have so much SUNW in my portfolio, I would buy more. It would be interesting
to see if any of the other G+K stocks are likewise at bargain prices compared to lesser companies
in the same field.

Harmon
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