Eric,
The point of my post, is that based upon what are TODAY's estimates, US Robotics does indeed appear to be undervalued. However, "estimates" are by no means guaranteed to be accurate. Obviously, the market isn't giving those analyst predictions very much weight.
To go back to my extreme examples--At one time, Rick Whittington was "estimating" that Micron Tech would make $10 per share in 1996--that's when MU was at its 94 3/4 peak. And even at those prices, it's P/E was only ~10---given a P/E of 15, MU would be $150....making the stock appear to be undervalued.
However, it wasn't until MU lost 1/3 of its value, that Whittington reduced his earnings estimates. And he didn't make any major cuts until it had lost 2/3 of its value.
RE: Fear.... I agree that fear is not a fundamental. Regardless, it has a large part in the way a stock is valued. For USRX, the fear that all isn't as well as it seems, is depressing the stock price. With that, you need to take fear into account when making investment decisions in "value plays." For the reason that a stock is undervalued, or a value play, is because of fear. It's your job to figure out whether the fear is justifyed or not.
Me, I'm not a value player, so I don't look at fundamentals to find intrinsic value, and I don't even want to guess what USRX might actually be worth. My style of investing is different--no right or wrong, but different.
But for a value player--those guys tend to avoid high tech stocks. There is far to much uncertainty in the high-tech industry....Will the company still be in business 3 years from now? Is some young startup going to outdo them? Are they going to miss a paradigm shift? Is stiff competition going to canibalize their profit margins (which one of the biggest fears in USRX's stock price)? For most value players, there are too many variables in technology stocks.
For my personal style of investing, I'm not anxious to buy USRX at this point. Ditto for most other stocks.
Sal Habash |
