You guys are funny to calculate the what so called fair value based on certain
self made equations by the analysts. The market is made of people, if people think MSFT is worth the current price , even $200 a share is under valued ,otherwise even
$20 a share is well over valued. It is also a game of supply and demand, the more money chasing less stocks with quality and continous growth, then those stocks are under valued. If you ask me whether the following stocks are over or under value, I will give you an answer, of course not based on those stupid equations from the analysists:
INTC : over value, more competitions down the road, profit margin thinner.
If AMD file bankrupcy in the next 2 years, then INTC will be under
value again.
LU : New black horse, the market for its products and service is huge , a lot of room to grow in the future.
the stock will continue to be under valued as revenus and profit continues
to grow.
CSCO : continue to be a black horse, the company is in a business and offer the service of the future and every company needs, the potential of growth is unlimited.
As growth and profit continues, the stock price will be under value from quarter to quarter.
IBM : Over valued, the margin of the products is thinner, and competition is
fierce and profit margin will be cut. Too many competitions from companies like CPQ, HWP, DELL .....etc, the price pressure will continue to hurt the company.
KO : Fair value , the company will continue to grow with the growth of population, growth is a sure thing for this company, but in a slower pace.
GE : Fair value, growth will be kept at the current pace, the diversification is the
value of this stock.
DELL : Over valued. With the price war, and thinner margin, the previous growth is hard to maintain, so the stock price is over valued. The current price is built based on the previous growth, but how about the future ?
...
If you use the equation to calculate the fiar values of the stocks of above, I bet
all of them are over value by at least 100%. Then , why those fund managers are still
in those stocks ? especially CSCO and MSFT ?
The growth of PC shipment will be increased by at least 10% to 15% per year in
the next five years, this is the value for MSFT , which means 20% to 30% of growth rate for MSFT in the next five years. However, this does not mean companies like
CPQ, IBM, DELL will benefit, the competition in hardware is so fierce, someday ,
they will find the more they sell the more they lose. However, for MSFT, the more PCs shipped, the more MSFT will make, and that is a sure thing and it is the value of MSFT. Of course, 20 years down the road, MSFT maybe well over valued when the market of its products and service is saturated, however that is not what we are talking about here . No company can grow in a fast rate forwever, however, in the forseeable future, there are still a lot of rooms for MSFT to grow . E-Commerce, WEB TV, OS, Application Softwares ...etc. All those will carry MSFT well into the
next century and maintain its high speed of growth !!!! That is something for sure
from an investor's point of view, as well as the market !!! |
