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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Bruce Brown who wrote (40367)3/13/2001 11:56:01 AM
From: Judith Williams  Read Replies (2) of 54805
 
Bruce--

I'm aware that KO's PE is around 38 or so if one-time charges are taken into account and also that management predicts an improvement in the earnings growth. But the company's PE is widely perceived to be around 60. Similarly there is broad belief that Qcom's PE is in the stratospheric range over 300 and that JDSU has no PE because it has no earnings.

In a time of "shoot first, ask questions later," perceptions like these, however faulty or unfounded, matter.

My point was less about PE per se, than the apples and oranges issue of making cross-sector risk/volatility comparisons without taking into account differences in earnings and revenue growth rates.

Whether KO's PE is 38 or 58, a potential investor is paying a lot for presumed safety. That tradeoff is simply not one that is compelling to me. I would argue that a Qcom or a Sebl offers more safety over the long haul--even if you get heartburn multiple times along the way.

And then there is the entertainment factor. Does KO offer a virtual who-done-it? Sugar water doesn't give you an intricate plot, nasty and rich villains, a bunch of papparazzi out for blood, and a beleaquered hero fighting against all odds.

Perhaps Chan or Levy could figure out a way to get the EF into intangible assets.

--Judith
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