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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: voop who wrote (6032)	9/6/1999 12:23:00 PM
From: Mike Buckley	Read Replies (1) \| Respond to of 54805

Voop, Do you know this Mike Buckley <gg> and what does he think about YPEG? I am familiar with both and don't think much of either one of them. First, I'll explain my frame of reference with the YPEG. About four years ago when I was deeply involved with the Motley Fool, I was posting the results of an investment thesis using YPEG as the basis. My work was mentioned very briefly by Tom Gardner in an article in Smart Money. After he made me famous :), as I gathered more and more empirical evidence I came to realize that my investment thesis was proving to be a complete failure. I think part of the reason for the failure is that my premise was not valid. But another part of the reason is because I think the YPEG might be the least valid of all the valuation tools I've seen. The YPEG typically uses five-year growth as the estimated growth component. I discussed that in my post you noticed in the other folder: "If I remember correctly, First Call's PEG uses estimated 5-year growth. I don't like to use that because it's so difficult to know what's going to happen five years out. Also, there are a lot of estimates that, when looked at closely, show glaring contradictions between the near-term estimates and the five-year estimates, so much so that they render the five-year estimates entirely beyond comprehension. I won't bore you with examples because I've already bored you with this diatribe." With regard to Qualcomm, I'm not comfortable using the year-forward nature of the YPEG. The idea of a year-forward PE is that the market feels more comfortable with the track record and stability of larger companies than with the lesser established smaller companies. Looking at the size of Qualcomm's market cap, I think it's easy to get lured into thinking that the market places Qualcomm in that group of stocks. I think it's still too early (maybe by a year or two) that the market is really thinking of Qualcomm that way. Based on everything I read, most of the market has never heard of Qualcomm, which inherently means that the market's perception couldn't possibly be that it is a stable giant with a proven track record. Just my opinion. --Mike Buckley