glen: book value doesn't mean so much for a software company, where the "book value" is the value of the engineers, everywhere else it's really an idea of what the company is worth if it had to be split up and sold to pay off creditors. Dow is at 5.55X book. If you buy a great smallcap you might expect it to grow a lot so it's reasonable to pay a lot higher than book for a company with a screaming growth rate and profitability, but I can't see any justification for these prices in large companies.
eps growth of 80% a year is unsustainable for any length of time, so if you're buying on momentum then don't bother to look at the balance sheet. I'm chicken right now, otherwise would be buying back some stocks I sold too soon: DLJ, BARZ, ITGI (and its parent JEF). The stock market could churn sideways for years and these guys will all profit from it. I like smallcap REITS they are quite cheap for what you get. There aren't many tech stocks I like at these prices, I think they'll get a lot cheaper next year.
For unique things, TI really does have a corner on speech technology and related patents but its use is a few years away. Rockwell has it on GPS, MTSI on touch screens, SDTI on encryption, WIND on RT OS, if I saw stuff like this get really cheap I will buy. |
