Utmost importance of TALC? Pardon me, but that seems to be somewhat synchronous with bubble thinking.
On the contrary. Perhaps it is synchronous with bubble thinking on your part, but not on mine. Microsoft and Intel remain stellar examples of the importance of dominating a mass market TALC which is both broad and long. Not all technology companies have such a "luxury", so identifying exactly the breadth as well as always considering and reviewing the prospects in regards to the longevity of a technology remains of utmost importance in my way of thinking. No bubble thoughts at all, simply contemplation, thought and discussion of what market a technology targets and what that layer of technology represents. Perhaps you don't see the technology adoption life cycle as being the essential part of the criteria for review of an investment in technology, but I do. It is the basis on which everything else is formed.
If at this instant I were to offer you $200 for a share of SEBL, or if the best deal going was $2, the independently assessed TALC would not change. But your expected future return on investment over the next ten years would likely be quite different. If instead a disruptive innovation were to appear and flush the basis of SEBL's current TALC down the toilet, expected future profit over the next ten years from this moment's share price would also change wildly.
I'm not sure you bothered to type that for my benefit as both points you make are obvious. I'm one of the longer term holders of Siebel on this board (along with --Mike Buckley) and not even our cost basis for shares purchased in 1998 could hold a candle to the $2 "best deal going" example you offer. (The range back in 1998 is around $4 and change to $7 and change.)
Moving on, your use of comparative terms like "low" and "better" without objective reference appears to be merely verbal sleight of hand.
Would that be akin to vocal masturbation? Sorry, it's an old singer's joke... . I apologize for any "verbal sleight of hand" I may have overlooked in my post.
First by analogy: yes, it's much lower to jump from 20,000 feet AGL than it is from 30,000 feet. However, sans parachute, the results are unlikely to be distinguishable to any meaningful extent. N'est pas?
I don't know. I have not seen the results from either height. At least you were kind enough not to use the analogy of leaping from a particular floor in comparison to another from the WTC. Moore's comments were directed at some previous comments he made during the bear market in regards to waiting for a "better environment" - or some such wording - if one was contemplating adding new money to the market. There was a thread on that particular digest discussing the benefits of waiting to add additional monies to buy shares which was posted here in bits and pieces as that thread unfolding over the months. Evidently Moore was sharing some comments he had exchanged with some professionals in the investment world in some of his previous posts under the category of "for what it's worth". Perhaps I should not have "inserted" them into my previous post in regards to your comments that tech was being driven through the roof, but frankly I was too lazy to construct another post with Geoff's comments.
In regards to both the fundamental analysis as well as the technical analysis of many of the individual equities as they sank from their bubble heights all the way to the pre-attack levels, there were not many that had entered the type of set up which provided a solid base building to consider adding shares with little concern. The post attack selling, although not providing specific technical base building set ups, did provide some attractive fundamentally based valuation set up points for entry into some stocks. Although the low prices I had listed in a previous post did not all occur at the same time, on a valuation basis at those prices reached, I could make the justification of adding additional monies into some of them for particular time frames.
Although you have disagreed with that premise in a previous post by stating that those lows will be surpassed at some point in the future, it appears that many market participants found enough attraction in the valuations at the time to accumulate some shares. Of course, depending on the time frame of holding those accumulated shares (ST, IT or LT), the valuations stand at a different level today than those late September, early October price points. Hence, the valuation model of Yardeni as he contemplates the overvaluation of the S&P by 11% or so using the forward 12 month EPS figure of $52.3 and the 10 year treasury bond of 5.0X% is indeed a well picked cherry. This sets us up at a precarious position that even if the "E" does extremely well in 2002, there is no room for P/E expansion at this point. Of that I am not in disagreement. The obvious would be to take the range to include the lower of the EPS estimates such as Prunential's Cliggot at $39 and change - or whatever he is rotating around at the moment - to realize that an awful lot has been priced into the market going forward.
You had wanted a jousting opponent who would take the time to "cherry pick" some "objective facts" to support our speculative and opposing hypotheses. I'm afraid you already rejected my premise that some various attractive valuation points were already reached. Feel free to run the calculations of forward estimates for the companies I listed and the lows they had hit to see if any of them presented an attractive entry from a valuation stand point. I believe these are some of the equities I had mentioned:
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!
The most attractive to me at those times were Juniper, Brocade, Intel, Microsoft, Checkpoint and Nvidia for my personal tastes and preferences of either trading or investing - although I am currently playing a trade (not an investment) in eBay purely on technical analysis. As an example, Checkpoint had reached a forward P/E of 15 using the consensus estimates and 17 using the low estimate. Since I have followed the company and invested in it, such a low forward multiple had never been reached before. I chose to add shares based on the valuation alone. I believe Intel has the chance to surpass the current forward consensus estimates by quite a bit as we move through the next generation processor ramp up and the server market upgrade cycle making their multiple reached at the $19 - $21 level as having met my criteria for adding shares. I worked my way through each equity to create a risk/reward scenario of purchasing at or near some of those prices reached as they occurred. I did the same outside of technology when I was attracted to some of my favorite companies (Wal-mart, Home Depot, Callaway, Harley, Beazer, Ryland, etc.. and the valuations they reached in the post attack blues). Maybe a Wal-Mart at a forward multiple of 24 is no screaming bargain, but it seemed more so to me at the time than paying a multiple over 30. With the rise of the equity prices from those levels, I have been left with evaluating the risk/reward scenario of each equity to determine the time frame for holding. I don't hold all shares purchased from some of those low points, but came in the "range" well enough to justify having entered with additional shares.
Obviously, buying additional shares of Intel at $19 recently would fit with your sans parachute analogy of buying shares of Intel at $70 if you are under the impression that the ground is a long way off even though the view may be astounding. Time will tell if your thought process is correct or not and the eventual 'splat' will have Wal-Mart sticking shares of Intel and their own shares in each shoppers bag with a purchase of $50 or more at aisle #7.
In short, yes I agree: prices are "low". But only if you choose the peak of the bubble as your objective point of reference.
On the other hand, compared to original cost basis for many things I own - prices are awfully damn high. It all depends on the point of reference. Feel free to remove the 1998 to mid summer 2001 move in the Nasdaq and look at points of reference for the sake of "fun". It's just all one big channel that we've been going through for two decades now - outside of that blip the bubble created. I'm not expecting any great bull market run at the moment, but like you, I am comfortable with my portfolio make up with those I have chosen.
Would it surprise you if earnings for some of the gorillas come in lower?
By how much? By a penny? By enough to justify a fourfold decrease in price per dollar? ;-)
Bottom line: I agree TALC is the most important business criteria for evaluating the prospective dominance of a Gorilla within its habitat.
Good thinking. Be careful not to move over to the dark side. ;-)
But getting even the slimmest TALC for free delivers infinite return on investment, and we've seen what happens when one purchases top-of-the-walk TALC at outrageous prices.
TALC is more important than price? In an investment decision?
Halt! Verbal sleight of hand, John.
I did not say those words. You constructed that wording. The entire basis of gorilla gaming revolves around the TALC which is what I was addressing. Without discussing the technology and the prospects for that technology adoption life cycle - there is no investment decision to be made. If the prospects are for a 6 year TALC, then I would prefer to go with an investment that has prospects for a decade or more TALC. Hard to calculate, but studying the barriers to entry to examine the degree of complexity may have one favoring those that are more complex - or it might not.
If you remember my original response to your comments, I said:
"I am not in total disagreement except for the utmost importance of TALC. That is what the entire game is all about....."
Then you made the claim:
There is a growing appreciation that TALC alone, independent of share price (and more importantly, future valuation considerations), is a dangerous basis for an investment decision. And as was opined recently on this thread, it is the macro environment that dominates valuation considerations.
We are barking up two Bonsai trees at once. The TALC is the basis and without it, there is no way to try and wrap a valuation around anything. I am indeed in agreement that price matters once we have identified a legit candidate that meets the criteria of either being in a game or having already emerged as dominating a game and we have discussed the TALC until we are blue in the face. It's a given that once we have established the complexity of the TALC and the prospects for the longevity, we can start to work around the valuation issues to discover if a particular share price represents an investment vehicle that meets one's criteria or not.
We cannot always get it right, but in my way of thinking and my particular time frame for certain investments - valuation levels were reached that appeared to meet enough of my personal criteria to add additional monies into them. Only I have to live with those decisions now. You have made the decision not to invest in gorillas based on their valuations and that is fine. You have also hinted that perhaps if certain valuation levels were reached that bordered on a 'value' play, you might take the bait. That is also fine. I have respect for that.
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