Hi Mike, actually, if you think about it, the valuation of stocks like YHOO are the logical result of present day practices. Back in "the old days," a shareholder thought of a share as a piece of a company, which paid a dividend. We lose sight of the fact that the piece also represented a slice, no matter how miniscule, of the company "pie," so that if the company went bankrupt, the shareholder would actually own a share of the assets, and be paid something, if there were anything left. So, such ratios as "book value per share" mattered - - it is the dollar value of the asset you buy when you buy a share. People like Benjamin Graham and Warren Buffet talk of the wisdom of paying one dollar for two dollars worth of assets, for example. Even paying one dollar for one or more dollar's worth of assets makes sense if you are going to be paid a dividend, an income stream.
But, these days, you don't get a share of real assets when you buy shares in YHOO, if it goes bankrupt, you will not get a nickle, likely. And, you will never get a dividend. Nobody cool pays dividends anymore. What you are supposed to get in return is a share of the growth in equity, and since that is not meaningful, you are actually not getting anything when you buy a share, except an ownership interest in something cool. Well, what is worth to be able to say you have a hundred shares of YHOO? There is no way to value it, so it is priceless. |
