Bob,
Thank you for the response. If the price of WDC is low because seagate lost some money recently, isn't that an indicator to buy?
I understand that the whole DD sector has been influenced negatively by seagate recently, but looking at it from another perspective, I would say that WDC as a company is not worse because Seagate has lost money! My question is this:
- Has WDC been profitable during times of DD dumping? Or more spcecifically, what are the numbers for WDC's eps during these times?
If these numbers are good, we don't need to worry.
You stated:
" As long as overcapacity exists, the threat of a price war will, too, and the PEG will remain substantially <1.0."
Here's a positive spin on that:
Even if the P/E stays relatively low, let's say around 8 or so, this is fine for a company that is growing at 12%-20% a year. Because, the earnings are undoubtly being pumped back into the business or into stock buy backs, which seems to be a policy of this company. Ultimately, even if the P/E stays at 8, the growth rate of the price of the stock will increase substantially, and I might add, to all our satisfaction.
Example.
If you invest $100 in WDC @ P/E of 10, that means they made $10 this year on your investment. That $10 is going back into WDC to expand.
If you invest $100 in INTC @ P/E of approximately 25, that means they made $4 this year on your investment. $4 goes back into the business.
In general, it is easier to make more money next year with an extra $10 than it is with an extra $4. All other factors being equal of course(and I realize they are not!).
My point is that, I'm not worried about the low P/E as long as the business is sound and profitable and most importantly, is growing, which I believe is true for now. This is the reason I own WDC, and as long as this does not change, I will remain an owner of the stock.
However Bob, your points are well taken and your perspective is welcomed. I encourage you and others to share their ideas on this stock, as I believe we can all benifit from different viewpoints.
Your explanation of what's happening to this stock seems to be accurate, and if it is, then I think that this stock will bring us profit.
Good Luck,
Kevin |
