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

To: Uncle Frank who wrote (40368)	3/13/2001 11:32:37 AM
From: Bruce Brown	Respond to of 54805

The sum of proforma earnings for the trailing 4 quarters was $1.07, which is a p/e of 44.9 based on yesterday's disgusting closing price of 48 1/16. uf Yeah, I know the PE as well as the trading range yesterday and the chart for the mighty Q. On a side note: Man, oh man, oh man.....wake me up next year when all this attention being paid to bottoms, bears, sucker rallies, FED will, FED won't, recession is all finished, over and out. I'll avoid heavy machinery until then and focus on 'love' for the year. ;-) I was just making the case again - which Mike has been so generous to share with this thread - that we can't rely on quote services for providing the real P/E ratio picture for a company like Coke or Qualcomm. One has to dig under the hood to see what's really there. Unfortunately, not too many are interested in doing that and a quote service PE gets passed around as 'fact' and people are actually making 'decisions' based on that. Since Coke was fresh in my mind after I was studying it pretty intensely at the end of January and early February, I made a post on the MDD board here at SI because a couple of posts were made about Qualcomm having a P/E of 400 and Coke having a P/E of 58, so a poster said they were ripe for shorting because of those PE ratios. I figured I should stick my two cents in and explain to him that those were incorrect assumptions. When I saw Judith's post, I simply wanted to echo the issue once again. Actually, it was I that was posting some comparisons of S&P PE's here in regards to Silverbacks not too long ago and I did - most likely - incorrectly state Coke's PE at the time. It should have been around 40, but I listed it without the non-recurring charges backed out from fiscal year 2000. So now I'm coming around to correct that because maybe Judith remembered that post. When we hear statements like the 'average PE' for the S&P 500 or Nasdaq 100 = XX or XXX, they often ignore some of the issues above and everyone takes it as gospel and says 'they all gotta come down to 15' or whatever. In that light, I think it is important for all our success going forward to spend much more time at nailing down more conventional EPS growth estimates, price targets, valuation issues and when the companies we follow breach some of these levels either on the downside or the upside - address those issues. We saw the influence of the authors (and portions of the analyst community) go from the PSR to Price to Vision insanity. Unless we are dealing with an emerging hypergrowth company or a gorilla candidate such as BEA Systems that doesn't yet have a PE ratio where using PSR can be a guide - I suggest we move away from any of the POS ratios. ;-) BB