Dear Smart:
Seems to me that when we buy (or sell) a stock, we are doing so not on the basis of the fundamental worth of the company, but on how we think the market will value a company. This is not true of Warren Buffet when he buys or sells for Berkshire Hathaway, because he is in a position to own the whole company. Since we aren't if we buy we must intend to eventually sell the stock or collect its dividends until eternity. Even Warren B. is in this position when he takes a position in gold or treasury strips.
It seems inconceivable to me that Amazon will go bankrupt SOON, since Bezos is smart and can issue stock for cash or buy a money-making enterprise with Amazon stock. Same with Yahoo. So if we are bearish on AMZN or YHOO stock, it must be on the basis that the stock will go down in value some time soon. (Unless you think they will suddenly go bankrupt, which as I said seems unlikely).
How then are we different from the MOMO folks? Because we think that over time the values will approach some fundamental value related to returns, bond yields and risk, like other stocks (GE, IBM, etc.) I submit, though, that the fundamental value is nearly impossible to estimate so long as the company is growing at over about 70% per year, because the valuation explodes upward as the growth period expands outward. What I am trying to say is that a stock is worth more if 100% growth lasts for 20 years than for 2. Right now there is some difference of opinion how long the supergrowth will last with Amazon and Yahoo. Maybe Amazon is worth $5 and maybe $1000. Somewhere in there, I'm pretty sure. Yahoo is definitely worth more than Amazon, IMO, somewhere maybe between $20 and $2000. $2000 per share is roughly $200 billion, implying that, full-grown, Yahoo would be bigger than GE, IBM and MSFT together. All it would take is a couple extra years of 100%+ growth tacked on the end of the forecast. |
