let's move the thread back to its roots.
And Paul Phillip said:
The valuation threads on this board in the past six months have become so pendantic as to be of no practical use to me
Guessing that I am considered one of the "guilty" parties in these remarks, I would like to offer a thought or two.
I think the recent volume of discussion on valuation in which I was a part was as extensive and non-conclusive as it was in part because I, a newcomer, was looking for empirical validation for proposed techniques while most of those using one valuation method or another appear to be content for their metric to provide input to a buy or sell decision at the time they are considering the transaction. To the extent that they are content with the theoretical background of the technique they have selected and with the decisions which they have made using it, they don't feel the need for the kind of validation which I would like to see, coming as I do from a background of science.
I am inclined to agree that the discussion of whether to validate, how to validate, and what constitutes adequate valuation is not within the purpose of this thread and should thus go elsewhere or get dropped. I also suspect that it is largely pointless since those that are satisfied with what they have today are likely to remain so while those of us (assuming I am not alone!) who are not satisfied will only get resolution by someone undertaking the analysis which, should it occur, would then give us something concrete to discuss.
However, a subplot in this discussion was the question of how any valuation method might apply differently or require adjustment when used with a gorilla. E.g., the current case in point, if valuation method X tells me that SEBL is overpriced today using the criteria I would use with "ordinary" companies, should I believe this, given that I consider SEBL to be a gorilla. If not, then how should I adjust the method or criteria to reflect SEBL's gorillaness.
Those whose valuation method includes 5 year growth projections might well say that gorillaness is included because the sustained growth projected over that period is the kind of growth that only a gorilla can expect to attain. This seems to have a certain empirical validity, but is it enough? I must say that it certainly has the attraction of allowing us to model a slower near-term growth and more gorilla-like growth in the future, e.g., SEBL because of the economy or QCOM because that is when we expect its position to really kick in.
Myself, I'm not going to be satisfied until I have done some more satisfactory testing (or someone does it for me, which unfortunately doesn't seem particularly likely), but I do think the question of how we should apply what we know or expect of a company because of its gorilla status to the problem of valuation is well within the charter of this forum. |
