>>Q. Explain growth flow - your method for picking technology stocks.
A. Growth flow is similar to cash flow, a concept people are used to. Cash flow is earnings plus depreciation, and the reason you care about it is that both earnings and depreciation belong to the shareholders.
In an old-economy company, there is a lot of depreciation. But most technology companies don't have a lot. What they do have that would be an expense, but is really an investment for shareholders, is R&D.
So if you add earnings per share to R&D per share, you get growth flow. And the advantage of it is that the ratio of stock price to growth flow will tip you off that a stock is cheap before the price-earnings ratio will. And you'll have enough time to go in there, see if they're doing all that R&D on something of interest to you, if the management is able, and so on.
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Later, when the R&D results in new products and the new products result in an increase in earnings, Wall Street will pile on because, of course, they only look at earnings.<<
Regards, JB
Andy, you're killing me! Dump COMS once and for all, and stock up on as much SMTC as you can get; you'd be doing both of us a favor :o) |
