Hi Gaurdian; I guess I'll have to defend the "traditional
valuation paradigm".
If I think of myself in a stock market of the past
where electricity and telephone were being introduced,
I would possibly think back to the 20s. Traditional
valuation was thrown out for stocks like RCA, the
inventor of the new advertising medium, radio. (Smells
a lot like YHOO, doesn't it?) RCA was a successful,
and profitable company and survived and prospered.
People in the 20s were all buying radios (smells like
computers don't it?) and they all wanted stock in the
premier company (like YHOO is the premier search
engine company) that made them, RCA.
They managed to get RCA up to $200 per share in '29,
which was a ridiculous multiple of sales, and multiple
of earnings. (Does anybody have the numbers?)
During the crash that followed, RCA went to the low
single digits, no splits needed.
So this is why traditional valuation paradigms have
survived for the many, many, many generations that
humans have traded stocks.
The premier investor for the long term is Warren
Buffet, and it is pretty clear that he own no YHOO.
He's been right for something like 45 years, and he
uses the traditional valuation paradigm. After this
market wrecks and a lot of people who retired at
39 are back in the work force, Warren will still be
an investment guru. (Though he is getting kind
of old.)
-- Carl |
