If you're going to be a true LTB&Her, it would seem, the first category is the one to watch and get certain about, because if it's in order, the second category will eventually take care of itself.
The proper valuation assigned to equities is an arbitrary matter, purely a matter of taste, arising spontaneously and unpredictably. Valuation fads (or to put it kindly, paradigms) come and go: PE = 25, PE = LTGR, PS<100, etc, etc; we have seen many.
If we are about to enter an environment where the proper valuation metric is something like Price/Book=1, or PE=10, cash is a far superior investment to NTAP stock looking forward from this point in time. This is even true if NetApp the company executes perfectly.
I think it's a major, and dangerous, fallacy propogated by Motley Fool, Peter Lynch, and others, that if the business is doing well, the stock must be a good investment. That is true in stable markets with stable valuation paradigms and slow, steady stock price appreciation. It is not true, and dangerously not true, when the times are a changin. (I hope I'm allowed that bit of cross-generational appropriation.)
I, for one, hope that the next valuation paradigm is one that rewards NTAP and companies of its kind. But I cannot be sure of that just yet. |
