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

To: Stock Farmer who wrote (48567)	11/5/2001 10:56:41 AM
From: Thomas Mercer-Hursh	Respond to of 54805

I know the thread doesn't want theory. This part does ... and I think much of the rest would be appeased by carrying through to an example. I also suspect that a certain amount of dry math takes the fun out Especially if it is incorrect!

To: Stock Farmer who wrote (48567)	11/5/2001 11:00:43 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 54805

hi John, interesting analysis of SEBL. i suspect one could find similar results for many of the US large cap tech cos. sooner or later greater-fool investing has got to go IMHO. one comment--you assume a 6% T-bill rate, but that's what the rate was like a year ago. now bills have a 2-handle. but probably the risk-free rate one would want to compare to is the 10-yr T, which has a low 4-handle now that is goosing some longs into calling an S&P PE of 25 fair value (never mind that this only equates to a T return if one assumes the la la land pro forma numbers are "take-home money", and that it provides no risk premium). in any case, given the high volatility of large cap tech growth, a discount on the order of 11-12% is not unreasonable imho. what the 10-yr T return really tells us, in my opinion, is not that the S&P deserves a really high PE, but that earnings growth will likely be very low over the medium term. so what i would say is, even an assumption of 30%+ growth in your more conservative case may be wildly optimistic. if SEBL can grow adjusted free cash at, say, 12% compounding over the next decade (from your generous 100 million base), i reckon that will be quite an accomplishment. so what does that work back to in NPV, assuming an 11% discount?