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

To: Uncle Frank who wrote (35396)	11/27/2000 3:16:03 PM
From: slacker711	Read Replies (1) \| Respond to of 54805

Do you actually think there's a way to reliably spot peaks? Just one person's opinion....but I try not to think of it in term's of spotting the peaks. Rather, it helps me to think of it as a risk/reward ratio. When Qualcomm was at 175, I think most reasonable people would agree that this ratio had tilted noticably towards the risk portion of the spectrum compared to November. If you used agressive numbers you could probably create a DCF which would would get you a 25% YoY return for the next ten years (which is how the analyst got the $250 price target). However, how much risk are you taking in order to get that 25% YoY return? As a general rule, I try and use a PEG of 1.0 as a baseline and then compare the current shareprice. This doesnt mean that the shareprice wont fall below this price, but it is a pretty good indicator. If you had done this at the end of last year, you would have gotten a price somewhere between $50-$100 (obviously, it depends almost entirely on the numbers you use). However, the risks had almost certainly become larger than at previous times of the year.... None of this means that Qualcomm couldnt have continued to go up this year. If China had rolled-out a CDMA network and Korea hadnt instituted a subsidy ban, we might be approaching $300 (WAG) right now. There is no fool-proof method...but for those who might not wish to ride the roller-coaster again, I think that using valuations to determine a risk/reward could help. Some caveats.... 1) I tend to scale both in and out of stocks. This is different than MB's method of buying and selling entire positions at one time. There are merits to both....but it depends on the individual. 2) I am completely ignoring tax issues. Slacker