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

To: Mike Buckley who wrote (18149)	2/17/2000 1:05:00 AM
From: Uncle Frank	Respond to of 54805

>> Valuation Metrics for Unprofitable Companies - I used that headline just to get Frank's blood boiling Well, it got my attention <gg>. Let's go back to the fm for an explanation of my prejudice against unprofitable companies: A share of stock is a share of a company's future returns. The price of that stock is based on the market's expectations of the net present value of the future returns... In this context, the market capitalization of any company - its price per share times the total number of shares outstanding - is the stock market's best estimate of the net present value of all of its future after-tax operating profits. The above appeared in chapter 4, Understanding the Stock Market, which I found to be the most difficult to understand but most enlightening section of the Gorilla Game. The Gorilla investor's advantage is that a Gorilla is always undervalued since its profit generation potential differs so greatly from traditional models on which the market bases its expectations. Given the above and the proven inability of the market to project next quarter's earnings for a company much less its cumulative net profits over the lifetime of the enterprise, I choose to minimize risk by limiting my investments to companies with proven earnings capabilities. Kind of stodgy, huh <gg>? uf