Just a comment on stratospherically high P/Es. How about the converse of this phenomenon; the "in-the-dirt" P/E. Companies that have taken a beating, even with good earnings. I know, these are typically the value plays, but, you could also be trying to catch a falling knife. Example: Applied Magnetics (APM). The knife hurts, I caught that one hard. When I bought in, the P/E was about 8. Geez, there was a good reason the business was hurting.
The point is that P/E should be viewed relative to a lot of other factors. Is 164 high for a P/E - you betcha. Is the market for broadband technology exploding - you betcha!
The 'nut stocks will likely come down to reality, but, who knows when. The likes of Yahoo!, Amazon and AOL are keeping Wall Street happy with pipe-dreams for profits. That is the way a lot of analysts are most comfortable; they can never be wrong when the companies they track are in such a state of chaos that no one can figure them out. Keeps their credibility alive even in tumultuous markets like this one.
Broadcom has strong profits, hence, when analysts get wind of a downturn the high P/E hurts. Seems like the bottom line on this stock is to just take the volatility in stride, play the options on the stock to make a little income, and get in as long as you can afford to go. Just my opinion.
Regards, Keith |
