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To: Mike Buckley who wrote (48533)	11/3/2001 3:28:16 PM
From: Seeker of Truth	Read Replies (1) \| Respond to of 54805

Your point, Mike, I think, is that If the market price implies a long term growth rate that looks ridiculously high then we don't have to think further. If the stock price does, in our opinion, pass the laugh test, then we have to think hard, only then.

To: Mike Buckley who wrote (48533)	11/3/2001 6:32:30 PM
From: Wyätt Gwyön	Respond to of 54805

hi Mike, Especially in the case of high-tech companies, so much can happen in a five- or ten-year period that the more we rely on such long-term estimates the greater chance we have of being wrong. yes, there have been many studies showing the poor record of analysts in forecasting company results for the long term. they are not even very good six months out, so asking for 10-year forecasts is pretty ridiculous. David Dreman summarizes some of these findings in his books on contrarian investing. I believe a more useful approach is to identify the growth required over a five- or ten-year period to justify the current price of a stock unfortunately, i think what tends to happen is analysts will identify some growth rate, and then fudge the numbers to make the current price justified. but typically, a growth company might have several years of outperformance before its results trend to market. so it is not realistic to forecast outperformance beyond several years for a sizable company. be that as it may, i believe John Chambers was proclaiming confidence in CSCO continuing to grow at a 50%....right before their sales fell off a cliff.

To: Mike Buckley who wrote (48533)	11/3/2001 6:37:45 PM
From: Pirah Naman	Read Replies (1) \| Respond to of 54805

Mike: a more useful approach is to identify the growth required over a five- or ten-year period to justify the current price of a stock. Doing so helps us at least understand the parameter the current stock market is using. While this is bound to become more popular in certain circles now (vbg) this is really not doing anything different. When working out a price or a value, it is a simple matter to test a range and see what is implicit in the rest of market participant's expectations. Or those who enjoy algebra or computers can work it backwards. I agree that this is useful for conducting a reality check; my point is that the two approaches should most definitely not be seen as separate. Indeed, they are the same approach, rearranged, and require the same understanding. some times it might be better to assess the market's expected growth implied by the stock price than to come up with our own long-term estimates which are difficult if not impossible to reliably predict. Again, they are the same, merely the arrangement is different. And one can (and should) easily do a reality check using either arrangement. - Pirah