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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Stock Farmer who wrote (55588)	9/24/2001 5:38:30 PM
From: RetiredNow	Read Replies (1) \| Respond to of 77400

Hey John, again, it looks like we're back to arguing about numbers again. I can cook up any numbers you'd like me to. It's all about the assumptions. I assume that if Cisco maintains net margins going forward of 15%, and grows their revenues 0% in FY02, 15% in FY03, 25% in FY04, 25% in FY05, 15% in FY06, 10% in FY07, and 5% every year thereafter until FY30, when they cease to exist abruptly, and manages to keep their o/s shares growing only 1% per year due to buying back shares with all that positive cash flows, then the present value of their EPS at a discount rate of 8% equals $12.10. So at current stock price, they are fairly valued. However, I've been hearing from you and other folks that we may be entering a period of 20 years where the S&P500 will only return 6-7% average annually. If that's the case, then we can use that as our discount rate, and the present value of their future EPS each year will equal $15.64, which is a 30% return from these levels. So again, John, what I'm saying is that in the end playing with numbers too much is bullshit and will get you nowhere. You need to do the due diligence, yes. But you, in particular, take it to the extreme of saying, "My spreadsheet says this, and my assumptions are infallible, therefore I must be right and Cisco must be a bad investment." What I'm telling you is that your assumptions are as fallible as the next guy's. And one wrong assumption can throw your brute force spreadsheet all out of whack, so that an investment you thought was bad, turns out to have been a great buy opportunity instead. The way I overcome these forecasting fallacies is I look at the soft factors, like company's management, tornado markets, market position and share, technology leads, HR policies geared towards recruiting and retaining the best, cash flow management, no debt, etc. Cisco scores high in most of those categories. So for me they are a good investment (I just picked up some again recently and will pick up more over the next few weeks). I think Cisco is good for at least a 30% return this fiscal year. Wanna bet on it for bragging rights?