re: professional rigor, etc.
I wasn't trying to imply that professional rigor prevails. Professional rigor to me would be a) knowing securities analysis, b) knowing the industry, and c) spending a week analyzing a stock as an investment. I don't know how to rank my securities analysis knowledge. I know I know no industries, really. And I don't have time or inclination for 40 hours of analysis on a prospective investment when I have a 100+ stock portfolio. (I will spend that much time as I make further commitments.)
There is no question in my mind that the present value of current resources and future cash flows is how to price stocks and how the market prices stocks. The questions are knowability/confidence in future estimates, what discount rate do you use, how do you factor in capital structure, what are the unlikely but foreseeable future risks and how do you price them in, etc. In other words, the differences of opinion are in the methods and judgments for analyzing/"knowing"/guessing the present value of what's there and what will be there. ... but ... I think this is hopeless for me to do this rigorously. Plus, that strikes me close to being real work. Instead, I think the individual needs to use heuristics that mimic the DCF analysis.
I'm bailing on Enron. I can't believe the original merger will go through with this discount. I will wait for a new deal (and try to avoid the "BK") before getting back in. There's too much debt and EV is pretty high for no deal and deteriorating fundamentals. |
