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

To: Thomas Mercer-Hursh who wrote (47957)	10/16/2001 1:08:53 AM
From: slacker711	Read Replies (1) \| Respond to of 54805

My hope in this discussion is not to degrade valuation techniques, but to find something in which I can have confidence. Empirically, I bought some things higher than I should have, buoyed by the successes from prior years. I would like to avoid a repeat. I think it is going to be hard to find a valuation method for growth stocks that works consistently well. The problem doesnt arise from the various formulas that we could use but rather the difficulty in assigning a growth rate to any company that we follow. Message 16507533 By "rule" I meant something like using FCF as the basis for the value and a particular way of relating it to share price. By "breakpoint" or "values" I meant values or multiples that would trigger a buy or sell decision. Just to give an example....last year at this time, Chambers was still saying that Cicso was going to grow earnings at a rate of 30%-50%. In reality earnings are likely to slide from 18 cents to 2 cent during the October quarter (revenues are down about 18%). Qualcomm was supposed to grow earning by around 25% for the last two years....reality is that they were flat for two years. These are earning/revenue projections....FCF would probably have an even larger delta. Regardless of what types of multiples we assign for buy and sell points, they are only going to be as good as our projected growth rates. It seems to me that the delta in our growth rates could be larger than the delta in our buy/sell points. Garbage in garbage out..... This does not mean that I dont find valuation a good tool to work with. It just means that I tend to find it more valuable to concentrate on evaluating the earnings prospects of a company than worrying about precise rules for my buy/sell points. Just my two cents.... Slacker