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

To: Pirah Naman who wrote (39497)	2/19/2001 7:13:10 PM
From: Pirah Naman	Read Replies (2) \| Respond to of 54805

HELP? For part VI, I need to include a couple of charts, but every way I try to include them, I just get a mess. Can somebody explain to me how to make charts show up? - Pirah

To: Pirah Naman who wrote (39497)	2/19/2001 7:34:03 PM
From: Thomas Mercer-Hursh	Read Replies (1) \| Respond to of 54805

H3 [=(f3/g3)^(1/3)] I believe you mean G3/F3

To: Pirah Naman who wrote (39497)	2/19/2001 11:04:19 PM
From: Pirah Naman	Read Replies (1) \| Respond to of 54805

Free Cash Flow Part VI Expanding the Spreadsheet If you made up the spreadsheet in Part V, hopefully you found that it is easier to do than all those instructions suggest. You can now expand it to handle more companies. I'm going to give you the numbers from Value Line for a few more G&Ks, and tell you how to expand the spreadsheet. Then we can move on to discussing the results. What follows is a table (oh please oh please let this work) with the cash flow and capital expenditure projections for 2001 and 2004 for six companies, along with some of the answers you will get later. One of these companies you already have on your spreadsheet. What you can do now is input the values I give you in the first five columns of the chart below inot your spreadsheet in rows 4-8, spanning from columns A through E. Once you have that, you are ready to have the spreadsheet do work for you. Symbol 01 CF 01CF 04CF 04CE Sum(1-5) ResVal IntrinVal Price RelVal INTC 1.75 0.65 3.20 1.00 6.86 56.35 63.22 34.40 0.54 CSCO 0.88 0.15 2.00 0.20 5.37 49.44 54.81 28.30 0.52 EMC 1.35 0.35 3.00 0.40 7.68 72.68 80.36 54.10 0.67 SUNW 1.00 0.30 1.65 0.50 3.78 27.59 31.36 23.20 0.74 QCOM 1.55 0.15 3.15 0.15 9.21 78.63 87.84 80.60 0.92 NTAP 0.90 0.15 2.65 0.45 6.36 64.03 70.39 40.40 0.57 Click on cell F3. That cell should now be highlighted or outlined. Look at the bottom right corner of that cell, and you will see a block or something there. If you move your mouse to that lower right hand corner, you will notice that the arrow changes into a cross or plus sign. When you have that cross, press your left mouse button. Now drag the mouse down and watch as the rectangle expands down to row 8. When you have gone that far, release the mouse button. You should now have numbers in those cells; the program has repeated the calculation you did in row 1 for the other companies. Repeat this process for the other columns, all the way out to U, with a few exceptions: I4 [=i3} then click on i4 and drag down. P4 [=p3} then click on p4 and drag down. Column T = stock prices - take from chart for now. And when you look in the chart, you will see I provide the answers I think you should get in columns O, R, S, and U. Updating the spreadsheet. You can easily update prices in column T as often as you like. You can change the discount rate in column I as the long bond changes, as often as you like. You can replace the Value Line projections with projections from some other source if you prefer, or you can update them periodically with reference to Value Line reports. You now know how to add more companies. You can easily change any assumptions built into your spreadsheet. Discussion of the Results There are lots of points for nitpicking, so I will leave those points to be brought up by those who were actually able to read through all of this. What I would like to point out, however, is that given the set of assumptions used, several G&Ks represent attractive values at present. This is largely a function of the current combination of low interest rates and depressed prices. Also given the set of assumptions used, it should be obvious that some of them were rather unattractively priced a few months ago. Are some of them better deals than others? Here you have to apply some qualitative judgement first. And don't get hung up in small differences in numbers, because you are guessing at the future. Guessing isn't useless if you recognize its limitations. All you should really expect to get from this is when companies are obviously over- or under- priced. Trying to decide between two companies with comparable relative values should be done on the basis of qualitative factors or portfolio needs, not on slight differences in estimated relative value. What if the projections are too optimistic (maybe a recession is coming on)? Just for fun, I cut tried cutting the growth rates in half. The results are shown in the chart below. Symbol Growth IntrinVal Price RelVal INTC 1.13 41.87 34.40 0.82 CSCO 1.18 32.24 28.30 0.88 EMC 1.19 45.90 54.10 1.18 SUNW 1.09 23.29 23.20 1.00 QCOM 1.14 55.94 80.60 1.44 NTAP 1.22 37.63 40.40 1.07 There -plenty of material to nitpick! - Pirah PS. Thanks to all who tried to help me get the tables right. They still don't look quite right, but I hope they are useable.