Formerly About Applied Materials Message Board

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Politics : Formerly About Applied Materials

AMAT 254.72

+0.9%

Dec 1 3:59 PM EST

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To: Proud_Infidel who wrote (30592)	5/25/1999 9:08:00 PM
From: Sun Tzu	Read Replies (1) of 70976

The key to understanding what he is saying is the investment time horizon. Indeed if a company can be assured any rate of growth which is significantly above the bond yields for a very long period of time, no price is too great. The problem is that you cannot be assured of the growth rate for more than 2~5 years. This is because as soon as it becomes clear that there is money to be made in that business, competitors will come en masse. Not to mention that the company may fail on itsown for reasons beyond its control. Here is another way to look at it. You can consider stocks as "bonds" with variable interest payments (i.e. earnings). So calculate the present value of a "bond" that will pay you increasing amount of interest at a rate of 8% for the next 100 years and you will see what Old Ben is telling you here. regards, Sun Tzu P.S. As I've been saying for a long time, it is the investment horizon that matters the most.

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