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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: Milan Shah who wrote (56593)	3/12/2001 6:50:11 PM
From: David Howe	Read Replies (3) \| Respond to of 74651

<< What exactly does the table at the start show? >> I guess it shows that the S&P has grown at an average of 11.8% for the last 36 years, and the BKE has grown at an average of 23.6% over that same time period. Notice that the return of the BKE isn't relying on some large spike in recent history (ie. the bubble of 1998 - 1999). It's simply performed well throughout history. To me, this is proof that the buy and hold strategy works. If it works, it should certainly work if you are looking at your investments from today's Nasdaq levels. Some will suggest you shun tech stocks as a rule now. However, computers, networking and software are not flash in the pan products. They are an integral part of our economy and our everyday lives and they will continue to be so for the remainder of time, IMO, unless there is nuclear armageddon, in which case, I don't know what to invest in. Buying the leading tech companies and doing so at reasonable valuations is a decent strategy. So maybe MSFT only grows at 10% from now on. If that's the case, then your investment might only grow at 10%, that is until the next bull market peaks out driving MSFT's PE to 80 or something wacky like that. Far fetched? If we're talking about tomorrow or this year, yes. But, if we're talking about the year 2015, probably not. Long term prediction: MSFT grows EPS at an average of 8% per year for the next 14 years. This will put their EPS at 5.30 and about that time, a bull market will be in full fruition with companies like MSFT and GE seeing PEs of 70 or higher. A PE of 70 on EPS of 5.30 would put the stock price at $371. Investing in MSFT today at $51 and seeing the above prediction play out would return the investor an average annual increase of about 15%. Of course you'll need to remember to sell at that point. <g> IMO, Dave PS. This is contingent on the economy NOT sliding into a massive global great depression II like the Nasdaq now seems to be predicting.