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Technology Stocks : Softbank Group Corp -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (2713)	12/14/1999 9:26:00 PM
From: Anchan	Read Replies (1) \| Respond to of 6020

In the online Nikkei news today: "Merrill Lynch has included 16 recommended Japanese stocks in its soon-to-be-released report on the outlook for the year 2000. The issues cover a broad industry spectrum, and it is noteworthy that many are members of the Mitsubishi group. The firm is recommending Kirin Brewery Co. (2503), World Co. (3596), Yamanouchi Pharmaceutical Co. (4503), Sanix Inc. (4651), Minebea Co. (6479), Matsushita Communication Industrial Co. (6781), Kyocera Corp. (6971), Suzuki Motor Corp. (7269), Nikon Corp. (7731), Mitsubishi Corp. (8058), Jusco Co. (8267), Bank of Tokyo-Mitsubishi (8315), Mitsubishi Estate Co. (8802), Fukuyama Transporting Co. (9075), Nippon Telegraph and Telephone Corp. (9432) and Softbank Corp. (9984)." All the same, Softbank is down a bit again, probably on mere profit-taking. Strangely enough, similarly far-and-wide investing Trans-Cosmos with its big U.S. holdings remains at BID ONLY for the sixth day in a row, despite the Nasdaq's tech sell-off. Like Softbank, Trans-Cosmos rose tenfold during 1999 but has risen another 80% in the last ten days.

To: TobagoJack who wrote (2713)	12/15/1999 3:20:00 AM
From: manohar kanuri	Read Replies (2) \| Respond to of 6020

Hi Jay, My main interest in Grant's article was his reference to "cycles" in investment ideas and Porter's succint encapsulation of the process over the last 4-5 years, culminating in the valuation of "conceptual possibilities". That said, I'm not quite sure if Yahoo is under- or over-valued. I tend to think that a snapshot of value today is necessarily different from a snapshot of value tomorrow. There are enough variables in the company itself and in the macro-economy to justify any random number. Not least of which is if in a market of 10 people 8 wake up tomorrow with a different yardstick in mind then the 2 marginal participants are looking at something that is either severely under- or over-valued. Barton Biggs, Grant et al fit somewhere in there. That they may eventually be proved right about the whole sector is not of interest to me if the time-frame is 80 years as in the cited example of the automobile industry. I'll be enjoying my rigor mortis with a side of worms by then. More to the point, and echoing something you said here a couple of days ago, I tend to look at what I call 'immense potential' that cannot be rationally be valued and whose traded value under- and overshoots its still invisible mean. Once the potential is partially realised you have a meaningful upper and lower bound within which to locate the mean. To take the example of an AOL with broadband, the first thing that comes to mind is music and movies. We know how many subscribers they have, what they pay, what they can afford to pay and that's about as far as it goes. There is no reason to suppose that an average of one movie and one song at $2 per person per year is any more or less reasonable than two per or three or more per year at $2.50. They did that kind of number-crunching with subscription fees but after AOL had an established base from which to extrapolate. Ex ante the carping was always that it was over-valued. And each time the business model gets extended we go through the same motions again. And really, apart from monthly subscriptions and the detail of geographic reach, I don't see much of a difference between AOL and Yahoo (whose potential you enumerated) as far as valuation methodology goes. And Softbank (or CMGI) is a meta example of that. An AOL or a Yahoo have enduring businesses, use their 'expensive' currency to extend their business model and their reach, and have a demonstrated capacity to execute which, unfortunately, cannot be said of many of the other techs that are trading on similar multiples. The "concept" play gets extended, on syllogistic reasoning, to one-trick tech ponies that can and will go belly up in short order. The problem with people like Grant is that they are probably right when they bemoan the fate of a Tenneco but lose some credibility (with me at any rate) when they pick the wrong example to show valuation excesses. They understand buggies and cars but are quite at sea when they come to making a distinction between, say, a Yahoo on the one hand and an Akamai or a Digital Island (to pick at random) on the other, and making a case for under- or over-valuation. There are dozens of techs that should properly be valued on the metrics of a Tenneco simply because they make one widget (albeit digital or vapor) and are subject to the normal laws of supply and demand. Yahoo on the other hand has many widgets and widgets for making still other widgets. A company that has been mentioned frequently on this thread, Satyam Infoway, is going ballistic on the assumption that it is another AOL in the making. What I fail to understand is what assumptions go into valuing a company that operates in a country where the most hyped figure puts the "middle class" at 300 million. And what is the disposable income of that middle class in dollar terms?More pertinently what fraction of that 300 million can afford a PC and still have money left over to pay for a jar of pickle purchased online with credit cards that practically don't exist? I would think the number of cards outstanding, the average credit limit and average spending per card would be a good guide to estimating something, if not the value of SIFY per se, but I have yet to see a single number that is even remotely connected to valuation of any kind. The mantra is simply - they said that about AOL too and this is the AOL of India. Sure it could be. From acorns to mighty oaks is fine and dandy but it's going to be a long, long time before the per capita income of those 300 million (not to speak of the 700 million others) crosses $10k per annum. If Satyam goes from it's present 100k subscribers, past the national total of 1 million and on to 20 million subscribers in the next three years (it can happen, warbles the blue bird of happiness) would it then merit an AOL yardstick? They just spent $115 million on acquiring a portal. In cash. To put things in perspective, they raised 75 million on their Nasdaq listing a couple of months ago. How many unique subscribers did they add? I haven't seen any estimates. But I digress too much... At any rate, I think the disservice that smart people like Grant, who understand economic systems and market psychology, do to themselves and their readers is that they don't put in the effort to distinguish between the plausibly justifiable valuation models (if not the values themselves) of companies like Softbank or Yahoo and the garden variety irrational exuberance that emanates and spreads from those initial spectacles that dazzle and mesmerize. I'm not sure what your target is but I don't think you have to wait much more than a month for Yahoo at atleast a quarter to a third less than today. And, apologies to Grant, I don't mean nickles and dimes either. Best, always a pleasure reading your posts. manohar