I copied this from SI yhoo, is this guy a Amzn bull or what?
Why don't the bulls post here on the Amzn thread?
To: PeterGx (10783 )
From: William Harmond Sunday, May 10 1998 1:16AM ET
Reply # of 10787
I didn't get through to the link, but from what you posted I think it's right on.
The most important thing about this market to me is that participants are willing to discount earnings out farther than ever before because the net flow of funds is so strong. I think it was the president of Prudential Securities who said recently that unlike previously (as in "it's different this time"), investors in the market have long time horizons. In the 60's and 70's people took profits to buy things. This time investors have a retirement time horizon, and are not cashing in their mutual funds.
When an opportunity like Yahoo comes along in an environment like this, the market can look farther over the valley. Tried and true valuation formulas don't seem to apply as well, because there is a reasonable comfort factor paying up for expensive "athletes"...companies addressing huge business opportunities that are growing off small bases at explosive rates and have big leads over their competitors. As long as the flow holds up, there is really no other choice but to buy these issues "now", because a cheaper price is less likely to come along. Throw in Americans' worship of all things technological and the startling operating efficiencies created through Internet commerce and you get the current platinum-plated relative valuations in the category-leadership companies like Yahoo, AOL, @Home, DoubleClick, VeriSign, and Amazon.
In the latest edition of the DLJ Internet Observer (I suggest everyone subscribe...it's entirely free) the staff compared the operating differences between Amazon and Barnes & Noble. It really opened even this bull's eyes.
While most consider B&N a more solid investment because of its "reasonable" valuation and leading chain of real bookstores, it became clear to me just how handicapped B&N is compared with Amazon. I didn't know that B&N takes its inventory on consignment (resulting in extra cost per book), or pays publishers extra for display book jackets and other promotional goodies. I didn't know that B&N's inventory turns are only 1/4 Amazon's turns.
Net net is that Amazon and B&N are really two completely different businesses...even without giving Amazon points for customer tracking and subject affinity promotion on the portals.
This is all long-winded, I know. But we live in a time of both important commercial change and sustained positive investment. Capitalizing on change has always been the best way to make money in stocks. I think we have to follow that rule even if the market is keeping general valuations at historically high levels. |
