I disagree on the over(bought/sold). I am sure there are synonyms out there but clearly Dell at $98 was over'bought'. Supply and demand. Everybody wanted to buy Dell and nobody wanted to sell, ergo the price went to that point where enough longs were willing to take their profits. One can call it anything they want, personally I, and others, use overbought or oversold. Similarly, when more people want to dump than are willing to buy it goes to oversold. I think the issue of value is different but related. The market values Dell, right or wrong, as a hightech company. This reward comes in the form of an aggressive growth multiple. I think generally this multiple stays relatively constant with value. uSoft is a good example, with lowering P/E's they are commanding even higher valuation, by way of earnings multiple. Maybe in this sense on could view valuation, over/under as strategic and overbought/oversold as tactical. I guess the point I am trying to make is say Dell enjoys a forward earnings multiple of around 40, that would place their stock at around mid to high $80's, $98 then is a short term aberation, as is $81. With Microsoft seeing lower and flattening earnings q to q and the market granting higher and higher multiples that is overvalued, not overbought. On the other hand, it could all be quantum mechanics.
Walt |
