well, one hardly has to go back to the 17th or 18th century to find genius paupers, and it wasn't just because of differences in economic arrangements; rather, the reason to look at the past is to see geniuses could have been overlooked in their own time only to be recognized posthumously...just look at Van Gogh....i don't recall him filling eny shoes at the royal court, unless his brother was king. in any case, this subject is now in full digression mode (a concatenation of miscommunications resulting in a cataclysmic verbal event, fortunately less harmful than whatever downed the latest airliner), so i suggest we move on.
getting back to the topic of investing, my barb about GG not paying attention to value seems to have triggered a few alarums...in a way, it is not surprising that the "always undervalued gorilla" theme would emerge when writing a book with CSCO and MSFT as the leitmotif; indeed, if one had had foreknowledge of their tremendous growth, how should they have been priced? (CSCO, after all, makes a whopping 4 cents a quarter, although probably just a penny if you back out interest income...let's forget CSCO and focus on MSFT)
so in msft, you have a co clocking 1bil a month in CF; what would have been a reasonable price to pay for that in 1986? easy enough to figure, but of course this is hypothetical since no such foreknowledge existed. MSFT was surely undervalued as long as one kept some measure of uncertainty in the valuation equation, but that trend seems to have changed. even going back to the beginning of our ongoing bubble in internet-related IT stocks--the Netscape ipo in 1995 i believe--bill gates commented at the time that Netscape had a 3-billion-dollar market cap right out of the gate, but MSFT didn't get that big of a market cap for X years. perhaps andreesen thot this was sour grapes, but in retrospect, it seems that the market was placing a much smaller margin of uncertainty (i.e., a higher price) on Netscape than it did 9 years earlier on msft, which paucity of uncertainty proved insufficient to achieve a long-term handsome return (altho AOL was a night in shining amour for them). and that was just at the beginning of the historically unprecedented bubble in IT stocks. i submit that uncertainty discounts for G&K candidates, verifiable or otherwise, are nothing like what they used to be; this is not yer father's microsoft. to my mind, it is axiomatic, then, that forward returns from such issues will be nothing like those of past stars. one could make a legitimate argument, as GG does, that a stock such as msft was "way too cheap". indeed, this regret of missing the msft (or qcom, or csco) boat seems to have informed the enthusiasm behind today's greater premiums. to an extent i think this is legitimate, but the legitimate extent i believe is a much shorter ledge than that extended by today's generous and forgiving investors. |
