Re: A Modest Proposal
Yes, and I'll wager CD investors were showing a similiar picture to naysayers earlier this year. I'm not saying MS investors will be victims of fraudulent accounting and massive earnings restatements, but you never know what might happen. Don't drive while looking in the rearview.
The herd likes MS. Ergo 75 times trailing. Go against the herd.
Do you believe that any of the negative factors I listed are incorrect or flawed? Can you bring to bear any significant factors that I've missed?
MS is in the same boat that IBM was in 30 years ago.
The Inevitable Slowing of IBM (excerpt from Investments, Gary Smith, 1990)
IBM is the premier growth stock of all time. In 1968, its revenues had been growing (in real terms) by about 16 percent a year; if this growth continued and the overall U.S. economy continued to grow at its long-run 3 percent rate, IBM would comprise 2.6 percent of the total gross national product in ten years and 8.5 in twenty-an impressive achievement but not beyond the realm of possibility. What it IBM's 16 percent growth rate were projected indefinitely? After 35 years, half of the GNP would be IBM products and, after 41 years, everything would be made by IBM! At this stage in our fanciful exercise, since IBM cannot be bigger than the economy, something would have to give-either IBM's growth rate would have to drop to 3 percent, or the economy's growth rate would have to rise to 16 percent. The latter scenario-sustained 16 percent growth for the entire economy-is plainly implausible, because aggregate output is constrained by the rates of growth of the labor force, capital stock, and productivity. |
