Many of these companies (and entire industries) are so new, that this is the first time they've been through a serious contraction in demand. You could argue, for instance, that NTAP's entire existance as a public company, has taken place during a stock (and credit) bubble. So, the last 12 months is the only data we have, the one example available (and only partly available, since the bear market isn't over yet), on how reliable Gorilla earnings really are. So, I'll accept the criticism that I am extrapolating based on inadequate data. But that's what stock-picking is all about, right?
Coke hasn't done what Cisco has, and written off a year's worth of inventory. Ford hasn't done what JDSU has, and written off the last decade's worth of acquisitions (a slight exageration). Based on the last 12 months, Procter and Gamble has better pricing power than any of the Gorillas. The S&P 500 has seen 12M forward earnings expectations come down in the last year, but to a much, much smaller degree than NTAP (and now EMC also) has experienced.
Probably NTAP will grow earnings, over the next 5 years, faster than Ford. But NTAP's earnings will also be more volatile, and less predictable, than Ford's. Which presents an opportunity to buy the stock when expectations are low (NTAP, not Ford!). And the risk of buying when expectations are (too) high.
Re: not buying stocks: There is an (unintentionally) hilarious article in tomorrow's WSJ, about a new ad campaign by Merrill Lynch, promoting bonds and diversification away from stocks. |
