Bob: "Valuation based on
historical parameters works great when the environment
is stable, but when the game changes, this can get you in
@ mid point of a long slide. The game, IMO, has
changed."
I couldn't agree with you more. porx rubric for this is "the 3rd Era of Value Investing". Anyone who doesn't think "this time is different" has to explain why productivity is rising, rather than falling (see: Message 9460745 ), after 8 years of an economic expansion, even though low productivity labor is being dragooned off the welfare roles to take the jobs that illegal immigrants no longer want.
"The general theme here is that when looking at ANY
investment, one must ask: What is the net doing to this
business model?
and, What will the net do to it in 5 years when virtually
everybody with money to spend has access at
bandwidths that will allow far more content-rich
products to be delivered at lower cost than today?"
To the continued wonderment of his colleagues, porx "Model Dow Value Portfolio" is, for the third year in a row: T, BA, GM, and IBM.
To begin with, porc gets dizzy contemplating all of the quarters this quartet of modified laundromats generates (see: Message 9463099 )
As to how they relate to the Internet:
For starters, the Internet is a network of computers linked (mainly, so far) by telephone lines. It doesn't take Nostradamus to foresee that T and IBM will increasingly benefit from the growth of the Internet.
And, BA is also being revolutionized by the 'Net. Besides its stake in the Ellipsos satellite network, the entire airline industry has been incredibly rationalized by the 'Net, as well as operations software, that means that every flight is virtually booked solid, and every passenger pays whatever Mr. Market charges at the margin. Unfortunately for the airlines, the fact that anyone can start an airline means that their margins still get squeezed. Nevertheless, their increased operational efficiency means that they won't all go bankrupt when the next recession rolls around.
This means that BA has a much more stable customer base, and therefore will be much less cyclical itself. And, not everyone can build a jumbo jet (they contain over 4 million parts). As much as China and Japan would like to, they both have far more economically pressing matters to attend to. This leaves BA and Airbus to divide up the world. And, BA has a half century of corporate corpulence to shed. As productivity climbs, so will BA's margins.
But, the most radical change from the 'Net will come to GM. I'm not even talking about GM's 80% stake in GM Hughes (i.e., DirectTV), which now appears to be AOL's way around T's way around the Baby Bells.
Henry Ford revolutionized the auto industry through standardization ("You can have any color Model T you want -- as long as it's black.") However, if you want to know what GM's business model will look like in 10 or 20 years, look at DELL's today. That's right. 100's of millions of third world labor market entrants will be looking to buy their first car. They'll be buying them right off the 'Net, made-to-order. And, GM will be stamping them out in a few days, at around 8 or 9 thousand dollars per, with a profit margin of 10% (anyway, that's the plan). (Not good news for the local auto dealer.)
To top it off, GM is -- yes! -- a stealth online broker. GMAC is already one of the nation's larger pools of low cost capital. Plans are already underway to market GMAC mutual funds to the public. (I know, it sounds like the final stages of Tulipmania). Could e.GM be far behind --???> |
