The following is excerpted from an interview with James O'Shaughnessy, published in LA Times in December 1996. Ascend then was at 70 or so. Makes interesting reading...
Dipy.
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Q: And yet it outperformed the S&P 500.
A: By a lot. The Cornerstone Value strategy between 1952 and
1995 compounded at 15.3%, turning $10,000 into $5.2 million.
The S&P compounded at 11.91%, turning $10,000 into $1.4
million.
Q: So this is almost a no-brainer, even for people who have
trouble sleeping at night. Any names from this list?
A: British Telecom , Philip Morris, US West, J.C. Penney,
Reader's Digest, Atlantic Richfield.
Q: OK, let's move on to the losers: high price-to-sales
ratio, I presume?
A: You can buy shares in Cyber Cash Inc. and have the joy of
paying 3,970 times sales. Oh, boy, have we got some stocks
for you! How about, also Alpha Beta Technology you pay 2,442
times sales for that. Here is one we all know--Yahoo! at 45
times sales. The yahoos are buying Yahoo!.
When you put it in stark terms like this, only an idiot
would pay that much for a stock like that. But people aren't
thinking about it that way. They are thinking about the
story behind Yahoo! They are thinking about the fact that
this is a brand new technology and it is going to the moon.
Q: Any big names that we all know and love?
A: Yeah, I've got some names that will really surprise you.
Microsoft, Coca-Cola, Ascend Communications--they have a
price-to-sales ratio of 17x. Cascade Communications, a
price-to-sales ratio of 23. Loral Space & Communications,
McAfee Associates, they do the Internet software. Netscape
Communications, almost 14 times.
Q: Just to sum up, you have identified certain investment
strategies that have survived the test of time, but they
work only if you apply them consistently and stick to your
guns. Don't get carried away by emotions, don't follow the
crowd, just follow the discipline.
A: Exactly, that in a nutshell is the way to do well on Wall
Street.
[...]
Jim O'Shaughnessy's Pans
HIGH PRICE-TO-SALES RATIO, LARGE STOCKS
Stock Ticker Recent Price to
Price Sales
[...]
Cascade Communications CSCC 61 7/8 22x
Ascend Communications ASND 71 _ 19x
[...]
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