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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 73.99+0.2%Jan 12 3:59 PM EST
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To: larry who wrote (56642)1/14/2002 12:14:01 PM
From: RetiredNow  Read Replies (1) of 77400
 
yeah, you'd think so. I've been investing 20 years and I've always wondered why the premium companies didn't trade based on their discounted cash flows like the commodity companies. After a few years of betting against the premium companies, thinking that a price to free cash flow contraction was imminent, I learned the hard way that premium companies get premium valuations. End of story. So I price Cisco out at $8 based on my own free cash flow analysis. However, I doubt it will ever trade that low this decade. I could be wrong, but I haven't see a premium company trade at par with discounted cash flow valuation, sales valuation, income valuation, or book valuation methodologies in all my years of investing. That's why VC folks came up with the idea of market comparables valuation models. It lends some logic to the animal spirits that provide premiums to premium companies.
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