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Technology Stocks : Lucent Technologies (LU) -- Ignore unavailable to you. Want to Upgrade?

To: Chuzzlewit who wrote (8935)	7/30/1999 11:52:00 AM
From: Devil's Advocate	Read Replies (1) \| Respond to of 21876

I would add two things to what you said. First, you don't need to have 100 stocks to be diversified. The risk associated with non-diversification, called non-systematic risk, cannot be reduced further when your portfolio has already 20 stocks. It is assumed that each stock has about the same weight, of course. Secondly, your portfolio is not diversified from my perspective since most of your stocks are in the high-tech sector. You have enjoyed tremendous returns because you have increased the risk substantially by targeting one sector. It would be wise in my opinion, to find growth stocks that offer equivalent growth perspectives in other sectors. You would then reduce risk while targeting about the same return.

To: Chuzzlewit who wrote (8935)	7/30/1999 1:58:00 PM
From: GVTucker	Respond to of 21876

Chuzzlewit, RE: Diversification is never a mistake! I think you confused maximizing returns retrospectively with creating an optimal portfolio. I am a growth investor and I maintain a portfolio of around 10 or so growth companies (plus certain core holdings like IBM, T, the baby Bells, and TYC). I expect that some of them will end up doing poorly, but diversification will buffer that problem. For example, my portfolio held ATI, ASND, BMCS, CSCO, CTXS, DELL, LU, NETA, PSFT, TLAB, VTSS, VISX. NETA was a horrible loser, and I made a small amount of money on PSFT (both of which were jettisoned from the portfolio). All of the rest were tremendous winners. Had I put all of my money in VISX I would be living in a villa in the south of France right now, but alas, diversification limited the gain. But it was the prudent thing to do. I believe the short version of that is, "Don't confuse brains with a bull market."

To: Chuzzlewit who wrote (8935)	7/30/1999 2:32:00 PM
From: Zoltan!	Read Replies (1) \| Respond to of 21876

>>MMW, according to Yahoo! CSCO has a PEG of 3.07 while LU has a PEG of 1.37. This has nothing to do with the relative merits of the two companies -- simply how much you are willing to pay for growth, and prospective 5 year growth is much cheaper with LU (24% estimated) than CSCO (30% estimated). Your figures are whacked. Standard and Poor's has Cisco's PEG (5 year) at 3.8 and LU's at 4.3 - making Cisco the better buy. That LU PEG you cite isn't even close - I checked Yahoo's figures and matched the S&P results. Cisco's growth according to S&P is estimated at 28.1 and LU's at 21.1 (5 yr). Standard and Poor's rates Cisco a buy and LU and accumulate at these levels. And the analysts agree.

To: Chuzzlewit who wrote (8935)	7/31/1999 1:16:00 AM
From: MMW	Read Replies (2) \| Respond to of 21876

Hi Chuzzlewit, I would understand your reason for sold CSCO. You are looking into numbers very deep, and so do I. But, I also look into CSCO growth opportunity. Here is what I figured: If you look at big picture, I think the internet is projected to grow 30% to 50% year over year for next 5 years. Who would be greatly benefit from such growth? CSCO is one coming to my mind. It sits in the sweet spot. It does not have products transition problem like LU does. Its product cover about just 80% internet business segments. It may not have best products in the world, but it presents in there. So it looks very good. What is the risk? CSCO is not as competitive as it was in the past. New product cycle is taking longer time. It current new development has to support legacy product just like MSFT "Windows" Compatibility is taking long time. I just don't see there is anyone can take over CSCO's position for next year or two except they totally screwed up. Given superior management team they have, the probability of total screw up is small. I think I can handle this risk. As far as stock price goes, I have time on my side. I am looking 5 years out. I estimate Cisco may grow into 40 bil company by 2005. By holding the stock instead of trading, I can defer my capital gain tax and stat income tax to the day I sell, I don't have to discover new company to invest which normally is very risky, and I don't have to spend time to active managing my account. Over the years, I have seen so many people get rich so quickly by doing nothing to their holdings. Best Regards,