RE: Nepeague evalations of Four Horsemen of the NASDAQ
I prefer "four horsemen" to "pillars" because it is a more dynamic metaphor, and pillars are subject to being toppling, while horsemen tend to move on.
Very interesting reports, well worth reading by everyone. The debate over evaluation of these companies will never end until they are ground to dust. It is easy to see in the decay of EPS growth of all of them a secular decline -- but it is also easy to sea a pause or hiccup arising from the problems of the world economy. Intel, for instance, earns perhaps 60% of its profits from outside the U.S. and MSFT and CSCO are also very international. I think world recovery over the next few year will push them all forward rapidly, because I do not see anyone else moving in on their profits. Your method, as I understand it, systematically ignores the possibility of EPS growth greater than 25% which pretty much cripples the intrinsic vale of CSCO, MSFT, and DELL. You also ignore the dominant position of these companies in market value added in their own industries. If you compete against any of them, you lose. If conditions in the market itself prevent rapid growth of profits, then the dominant firm's potential is limited, but ultimately it means the competition must cut back, can't expand, and leave the field to the dominant firm. Anyone who thinks that PC's and Servers. x86 mpu's, PC software, and backbone networking are going to grow slowly are simply wrong. To demonstrate that these four firms will fall behind in EPS on an absolute basis, will have to explain who is going to take over the markets.
Thanks for the good work (keep up the work on the EVA and MVA). |
