Ausdauer and Thread:
Regarding investment criteria such as PSR, it is difficult to go by any single rule of thumb. What Fisher likes may apply more to larger companies that aren't growing as fast, and that are in a sector which is more mature than something as new as flash memories. One useful measurement that I find is to compare the PSR of one company with another that has a similar technology or growth rate. A second indicator that is very important, especially with new companies, is cash flow. If the cash flow generated by the company is insufficient to finance expansion of research, development, production, marketing, etc., then either the company must slow its growth, borrow, or issue new shares, thereby diluting earnings. In markets like this, new shares are often the preferred strategy, but they don't help existing shareholders much.
Two companies I follow, and for parallel reasons, are SanDisk and QUALCOMM, both of which have succeeded in generating very good cash flow early in their careers. QUALCOMM used the cash from its very profitable 2-way satellite communication systems for truck fleets to finance its development of CDMA for wireless phones. SanDisk had such a good cash position that last October, when the shares were at 7, there was $5 cash on hand, making the cost of the company (i.e., its people, products, and patents) just $2 per share. Now THAT'S what I call a deal, a real buy, no matter what the rest of the market is doing. |
