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

To: Mike Buckley who wrote (6706)	9/21/1999 10:29:00 AM
From: FLSTF97	Read Replies (3) \| Respond to of 54805

Mike,I understand your comments and that in the past no gorilla was ever undervalued, but does that mean it can never happen? For the record I think that RMBS has more potential for achieving gorilladom than anything else I have seen mentioned here. The problem is it takes(for me) a huge leap of faith to understand that their stock will perform analogous to other gorillas. Let me assume the extreme for yr 2003: DRAM market= $50Billion RMBS captures 100% market share Royalties average=2% Net profit ratio before tax= 75% (does anybody know of such a beast anywhere?) Tax rate=40% If I crunched the numbers correctly that means profit of $440 million in 2003. So what PE should be assigned (remember they can't grow market share, royalties are already negotiated so they are constrained to the total DRAM Revenue growth)? I propose at most 10x because even the most aggressive projections are showing barely 10-11% CAGR growth.The manufacturers are in a commodity business where they earn money 3 out of 10 years and when demand spurts are cash constrained to build those $5 billion new fabs. So my market cap is $4.4 billion compared to today's $2.2 billion. Not bad, I'll take a 2x in 3 years. I just have to believe that absolutely everything goes right! I guess I need to reread the manual for another dose of faith.