To All, Another funny moment on CNBS today. An investment geek from J.P. Morgan was on, and most of what he said was very smart and well considered. Then he started talking about why he liked Worldcom. Even Ron InsaneOne had to ask him how he could like it at 103 times eps. His answer was that the co. would grow at more than 20% for the next 5 years, so it wasn't overpriced if you looked at it that way. I scratched my head. This All Day, All Bubble Channel has given me head lice. <G>
Anyway, use your calculators. That would give this co. a 24 multiple based upon 2003 earnings. No risk calculation for the fact that they may not hit 20% every year. After all, they are only fighting against some of the largest cos. in the world, many of which have their govts.' backing. The stock is so danged pricey, they cannot make even one mistake over 5 years. The odds against that have to be phenomenal.
The point is not really Worldcom, which is a conglomeration of former bankrupt cos or near bankrupt cos managed by a bunch of slick pr men. It will die of its own accord. The point is that this fellow, who had made sense until he used this faulty analysis, actually thought he was buying a value stock. And, folks, J.P. Morgan is a lot smarter than most investment firms. Pretty scary. MB |
