Folks,
Well after an year of successful timing (primarily on buy side)
and recording 200% profits on a MSFT only portfolio, I was feeling
I would be able to predict the Post January price pattern. I thought
microsoft would temper the exuberance and rich valuations buy guiding
the stock down as they did in April98 and in June98. But what do I
know. Well I do know that no human can predict short term stock
behavior, including myself.
I played with short term positions in Jan and basically came out
flat on $$s and -ve with a lot of stress.
So, last week, despite feeling the stock is not really that cheap,
and realizing the split, strong earnings and the strong volume even
at these levels on upticks, I decided to come back as long term bull.
When it hits 200 (which could be as early as end of March99, after
split), I would have doubled my networth in 4 months.
I still have this queasy feeling in my stomach about the valuations.
That is why I took longer term positions. I hope even if I am wrong
in the short term, the increasing EPS will catch with valuations with
time.
At this point I expect MSFT to report 38c this quarter or about 50%+
growth in EPS. I think the guidance of 25% growth is too conservative.
I just looked at European, Japan PC growth rate and it just looks
too strong.
For the year we could see .28, .36, .38, .4 => 1.42 in EPS. So by
July99, I expect a 55 - 75x PE or a 78 to 106 stock price after the
split. Considering the current environement, I feel the 100 post
split is, while historically very very rich in multiple, is still
doable. If it were to trade below 90 post split, I could loose
principal but the risk may be worth it.
Johnd, back in the game, big time. |
