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Strategies & Market Trends : Value Investing
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To: Mark Marcellus who wrote (18200)12/18/2003 8:59:54 AM
From: Bob Rudd  Read Replies (1) of 78471
 
Mark: <<MSFT 15% seems like a modest goal>>If the market continues as it has, you're certainly right. A shift in preference to large cap, high quality companies could carry quite aways if the runs low-quality stuff have had are any indication. My targets on a lot of stuff have been way too modest...several have gone up 50+% after I sold for 50+% profit. Nevertheless, I'll likely stick with the target since Microsoft's size, a generally longer PC upgrade cycle and competitive threats from open source [Linux] will likely constrain secular growth to high-single, low double digit levels if that [YAHOO shows 5yr growth @10% and that's usually optimistic]. With MCD, we saw what happens when the market comes to grips with the shift from high-growth to low-growth. A similar thing is going on with MSFT but the transition is much smoother [so far] which is why MSFT hasn't really participated in the rally. There's already a 'quality premium' built into the shares. My 15% upside target would be 25X 05Est and ~34 times S&P core earnings which have been running about 25% below the analyst version. While the market has shown the capacity to take 'em a lot higher, I see nearterm gains above that as stretching it from a value perspective.
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