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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Fred Fahmy who wrote (73418)	1/13/2000 8:05:00 PM
From: Skeeter Bug	Read Replies (3) \| Respond to of 132070

fred, i did a little tbill analysis on qcom and found out that if analyst expectations of 250% growth this year followed by 50% growth for nine straight years are correct, an investor in qcom would under perform a tbill by over $65 billion in earnings. i'm going to do a similar analysis for intel to decide whether it is under or overvalued. after all, investing is about alternatives. intel's market cap is over $300 billion, but the math is quicker if we use $300b. let's assume 30% growth of eps a year for 10 years. i think this nothing short of a gift. why? intel's one year growth only looks good b/c it had such a crappy 1998. the two year single digit eps probably isn't a good measure either. true long term growth is somewhere in between and 30% is much higher than this in between range. but hey, i'm a generous guy ;-) at the end of 10 years, a tbill has generated $270b in cash. at the end af 10 years, intel has produced $103b in cash. again, i'm assuming 30% growth, no dilution and that intel is able to maintain growth rates a decade down the road. i also assume intel doesn't issue any more shares so they need to essentially burn earnings as a business expense to keep outstanding shares flat. you've stated intel is a good investment. either my math is way off or a loss of $167b over 10 years as compared to a guaranteed investment is now defined as a good investment. a 40% growth rate in earnings (no dilution - no buying back shares to issue more to execs) still underperforms a tbill to the tune of $47b over the next 10 years. i think this analysis illustrates why some could rationally view intel's current valuation as a bubble. btw, qcom is valued as though it will make as much money as intel does right now for the long term - they made $200 or so million over the last 12 months. when folks begin to view tbills as alternative investments to stocks en masse, intel and quite a few other companies are due to get whacked and whacked bad. underperforming a guaranteed tbill by 62% over the next 10 years won't be acceptable for ever. please verify the math. using this analysis really makes an intel purchase or hold at present a move representing the greater fool theory. appreciate your comments.