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

To: techreports who wrote (37325)	1/1/2001 6:23:53 PM
From: Mike Buckley	Read Replies (2) \| Respond to of 54805

techreports, I understand your concern about not wanting to invest in established Gorillas, thinking that you're too late to the game. You might want to try an approach Bruce uses in his portfolio -- owning stocks (or baskets of stocks) in various phases of the technology adoption cycle. For example, it seems like everyone already knows about NTAP or SEBL. They both have pretty high PEG ratios. I don't know enough to write about NTAP but I feel comfortable discussing SEBL. Using a PEG ratio that compares the PE to the estimated growth through FY01, the PEG is a lofty 3.85. But in the last several months, analysts have already raised estimates by 10%. And I'll be surprised if Q4 estimates aren't beaten by two to three cents. Most important, FY01 estimates reflect roughly 40% growth. I don't believe a company can grow in excess of 100% in 2000 and slow to less than 50% the very next year, notwithstanding a recession of course. That's why I assume at least 75% annual growth. In a nutshell, I changed the data for the PEG to reflect $.90 EPS in 2001 instead of the currently projected $.66. Doing that, the PEG (as described above) is dramatically reduced to 1.95. I wouldn't call that a screaming buy but a PEG in the area of 2.0 has to be taken in context to fully appreciate. This is the PEG of a really strong Gorilla operating in a really rapidly growing business sector while enjoying the benefits of two tornados at the same time. In that context, I don't think the investor with a long-term horizon should feel that it's too late to get into the game, especially if you feel as I do that this $1.5 billion company (sales) will become a $15 billion company in seven or eight years. Not too bad even if it takes ten years. when a stock has a market cap of 29 billion (SEBL) and has P/E of 363.58 SEBL's trailing EPS is $.43. Using a stock price of $68, the PE is 158. You probably think a PE of 158 is still high, but if you're concerned about being too late in the game consider the following back-of-the-envelope analysis. Assume the company does $15 billion in sales in 8 years. Assume the PSR is 10 (half what it is today). Also asssume there will be 500 million outstanding shares, about 20% more than today. Using those assumptions, the stock price will be $300. Using today's price of $68, that's 20% average annual, tax-deferred growth. Tweak those assumptions as you see fit and also use other metrics. You might find that you really aren't too late in the game. --Mike Buckley

To: techreports who wrote (37325)	1/1/2001 6:46:32 PM
From: Bruce Brown	Read Replies (3) \| Respond to of 54805

I understand i have to pay more for the best companies, but when a stock has a market cap of 29 billion (SEBL) and has P/E of 363.58 how much future growth is already priced into the stock? Mike already addressed Siebel. I was curious where you got the P/E ratio of 363.58? Let me send you off to one of the recent Red Herring articles which profiles ten pretty exciting young companies on the Nasdaq where they make the case of new bellwhethers emerging: redherring.com As Mike made the case for not being 'too late' to an investment like Siebel, we could walk through the other nine in that Red Herring article (i2, Brocade, Juniper, BEA Systems, Checkpoint, Veritas, Versign, JDS Uniphase and Ciena) and make similar cases. No, the IPO prices and early days are past. Yet, the business models and market acceptance of their technologies position each of them as interesting places to look and consider going forward. I believe every one of those companies has been discussed on all of the gorilla game message boards over the past year or two. Moving into younger games using the basket strategy, you do take on the component of the gorilla game of catching the early gains. Yet, I think it is important to mix that strategy with proven winners (at attractive valuations of course) to balance risk/reward. BB

To: techreports who wrote (37325)	1/1/2001 7:19:12 PM
From: Ibexx	Respond to of 54805

techreports and thread, Re. Relative merit of SEBL vs BEAS I have pulled off the following fundamental analysis from a private source that I subscribe to (tradetrek.com). Please read this with a grain a salt, as I have not checked all their parameters for accuracy. But the macro-economical assumptions and numbers certainly look reasonable, except that the 30 yr treasury rate is expected to decline further by spring. (Which would then result in higher target price) ************************************************ SIEBEL SYSTEMS (SEBL) — 6-Month Target (Fundamental Analysis) Parameters 30-Year Treasury Yield (%): 5.65 Short-term Inflation Rate (%): 3.09 Sales Per Share $ 1.841310 Price/Earning: 205.3 DJIA Outlook (1 year): 13000 Market Price $67.75 6 Month Target $134.7 Implied Earning Growth Rate (%):89.11 Vs. S&P 500 --3-Month Beta: 2.77 --Risk: Higher --Exp. Return: Higher Good Value? yes ******************************************* BEA Systems (BEAS) — 6-Month Target (Fundamental Analysis) Parameters 30-Year Treasury Yield (%): 5.65 Short-term Inflation Rate (%): 3.09 Sales Per Share $ 1.221984 Price/Earning: -1346.25 DJIA Outlook (1 year): 13000 Market Price $67.3125 6 Month Target $115.82 Implied Earning Growth Rate (%)77.81 Vs. S&P 500 --3-Month Beta: 2.6 --Risk: Higher --Exp. Return: Higher Good Value? yes ******************** HAPPY NEW YEAR TO ALL! Ibexx