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Strategies & Market Trends : Roger's 1998 Short Picks
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To: BelowTheCrowd who wrote (17808)3/20/1999 11:17:00 AM
From: Zeev Hed   of 18691
 
Michael, the change in the economic environment from a heavily industrial state to a high content of information and service economy should not affect the book value by too much. The manufacturing infrastructure is depreciated over its life (and is so reflected in book values), and furthermore, you'll find that many information related activities require even more capital investments per employee than the old "industrial" companies. I would venture that the semiconductor industry's capital investment per employee is greater than the old steel industry. Finally, even if you assumed that the old measure (buy at or below book value) were acceptable for heavily capitalized industrial activities, you will find that even in these, the part of their "book value" which is "capital equipment" is no more than 1/3 of total book value, thus at best we should have "fair values" of three times book, not 10 or more.

Zeev
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