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Technology Stocks : Disk Drive Sector Discussion Forum
WDC 157.75+1.5%Nov 26 3:59 PM EST
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To: Pierre-X who wrote (2628)3/1/1998 6:59:00 PM
From: LK2  Read Replies (1) of 9256
 
PX, even if there's continued growth in an industry, it doesn't necessarily translate into stock market profits. At least, that's what Ben Graham said in The Intelligent Investor in the early 1970's (and probably in the earlier versions of the same book written in the 1960's). It's been a number of years since I read his book, so my recollection could be far from precise, but he pointed out:

1. That the aluminum stocks had massive revenue growth, but the stocks went nowhere for a number of years. I think he was showing in this case that an industry could do well, but if the stocks' PE were too high, you might not benefit as a stockholder.

2. The airline stocks had massive revenue growth, but the stocks went nowhere. This was a different case from the aluminum industry, because even though the airlines had massive revenue growth, they didn't have massive earnings growth. In fact, the airlines had a real problem making any earnings at all.

Regards.
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