I know we are straying a bit off topic to discuss homebuilders & golf clubs, but yes - they looked attractive at least in the short term. Same with many other sectors that I do not understand. Such is the case with the breadth of the market.
Yes, I know it was off topic, but since I follow homebuilders as well as some consumer related companies such as Callaway, Harley, etc... - I was just mentioning some things that seemed to fit criteria you had mentioned, yet you only listed in your current porftolio the invididual equities being made up of blue chips. Be thankful I didn't launch into the rail transportation. Homebuilders and Callaway are a long way from being blue chips, but maybe you prefer to find blue chips that meet your criteria. Hence the circular discussion is tossed back in your lap as to why you even bother to follow gorillas if they don't meet your risk and earnings ratio critieria.
Parsing the logic, no I don't think there will be a sustained opportunity to purchase these at a PE of 17 in the current environment. But for example, with Cisco price to earnings in three digits (pro-forma, no less), there's indication of considerable room to wiggle.
I agree with you that the E is missing on the Cisco side in terms of current and trailing which has left the door open for enough wiggle room to please both camps and provide fodder for endless banging of the head. So the premium is pretty hefty to pay without "knowing" what the next 8 - 12 quarters are going to bring. Whether we zero in on the cash flow, lack of debt, category dominance or flip the coin and focus on all the negative issues - one still has to decide if the shares are a vehicle or not a vehicle for capital appreciation going forward to meet certain goals. After all, it is only one "vehicle" out of many. Yet, I would be curious if you think your P/E criteria will be met by any of today's "healthy gorillas"?
I don't need a sustained opportunity. Just one brief enough on which to capitalize.
Although Mucho will be down my throat for 'ex ante' data mining, it will be interesting to note over the next few years what the last 52 week lows will look like in comparison to the future prices when we think of those lows reached to date like Microsoft at $40, Intel at $18.96, Oracle at $10, Cisco at $11, Siebel at $12, Brocade at $12, Qualcomm at $38, i2 at $2.98, Checkpoint at $19, Dell at $16, Juniper at $9, BEA Systems at $9, Arm Holdings at $8, Sonus at $2.26, IBM at $80, eBay at $26, etc... - and don't forget Nvidia at $13.75!
P.S. I'm not "anti Gorilla" so much as "anti getting fleeced". These are great companies. The price of which has been driven up to even greater levels IMHO. I gather you don't share this opinion.
I own shares from a variety of cost basis issues dating back to before I had children and even before the previous recession in some cases. Likewise, since my wife and I are employed and ear mark a percentage of monthly savings for investment, I own shares at other price points along the path - including some of the recent price points. In terms of some of the recent price levels that were achieved of the 'great companies' you refer to, I do own more shares of them now.
P.P.S What kind of multiple do you think is proper for a cyclical company at its peak? At its trough? When do you think MSFT, ORCL, CSCO and SEBL will put in their next cyclical peaks?
Depends on the duration of the business cycle, the dividend yield, the interest rate, the inflation rate, energy prices, tax rates, debt and the maturity of the company in terms of the TALC their main revenue driving products are targeted. Of the companies you mention, Microsoft, Oracle, Cisco and Siebel - I could pick each of the companies apart in terms of their products, margins and niche targets to come up with different ages, TALCs and margins that don't signal to me they are created equal and deserve the same multiples throughout the business cycle. Cisco was barely even around as a public company during the last recession and Siebel's targeted architecture didn't even exist as Cisco was going public. Each of those companies has been facing the reality of a major architecture transition in computing which is underway, yet far from complete. Probably more important than the mutliples is the transition and ability to meld and survive such an event. Hence, my desire to keep portions of my capital in younger, niche targeted companies that have been created due to the next generation architecture of infrastructure.
In terms of predicting when they will reach their next cyclical peaks - there is no need to predict as it will unfold as it unfolds. Even if we remove the excess of the previous bubble, the market did a good job of forecasting the peaks had been hit well before the turn down in the "E" was evident and the contraction was well underway. Is the market doing a good job at the moment of forecasting any sort of expansion, or should we simply ignore the market and wait for the evidence to be presented?
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