Paul,
>It seems to me - being a big believer in diversification -
> that this subset of stocks (G&Ks) is too limiting.
Nobody forces you or anyone else to put 100% of your
portfolio in GG. One rather reasonable approach would
be to buy X0% of total market index (not S&P which
is already skewed towards G&Ks) and put the rest in G&Ks.
One could even rebalance periodically if they wanted to.
Now for you and for techreports, my opinion
on EMC and INTC.
EMC - the negatives first: 50% drop in sales last Q,
25% drop in sales last year, possible competitive
and margin pressure, possible non-recovery in sales
generated by bubble, management claims no recovery
of margins above 4X% (vs. bubble 5X%), etc.
The sales drop may be cyclical or maybe permanent
"drop back to the mean" after bubble.
Now assuming forward going ROE of ~17% (which is
about 75% of their average ROE of 23% ;-)))
we have expected annual return of ~7%. Not much...
I will continue to hold it to see if this analysis
is flawed, but I will sell it if I don't see a
higher growth possibility.
INTC - similar revenue drop by 25% YoY, gross margins
however are still around 50%. Assuming 22% ROE
going forward (80% of average 27% 10-year ROE),
we have expected annual return of ~9%. Not much again,
but a definite hold.
I don't do P/E and P/S analysis, but would be interested
if someone calculated possible P/E and P/S for
these guys assuming a recovery and margins as indicated.
Jurgis - have fun |
