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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (57735)	2/20/2002 2:12:48 PM
From: Stock Farmer	Read Replies (2) \| Respond to of 77400

Interesting perspective. Tech being 2x overvalued is "fair"... It's often fun to go back in time and review such similar posts from the past. History is indeed a harsh tutor. Some of us have been pegging CSCO's DCF in the single digits since it was an arguably "better short than a long at $70", if you know what I mean. Indeed, it was not that long ago I responded in indignation to reasoning that it should soon be worth 14 x (that's 100/7, if you get the reference) based on history. At that time the refrain for why $70 was fair against a $7 DCF was that we just didn't understand technology, or Cisco's business. Despite some of our roles as masters of tech empires and/or practiced in the less technical aspects of business. Then when it was time to back up the truck at the $50 Maginot line, the fairness of a 7x premium was due to our lack of having comprehended the Great Sage Moore. And we were advised to read the Gorilla Game. Despite the fact that some of us morons who did read it caught the subtle flaw in its basic premise. We also failed to appreciate 5x premium deserved because of the second half recovery, just around the corner. Oops... sorry about the ambiguity. I should have said the second half of 2001. Despite a few of us watching Cisco laying off thousands of employees didn't think that smelled like planning for growth. By 4x in your "low" call of 2.5 x you also gave us a high of 5x round about about now (Jan/Feb [02]). [EDIT: same reason as 5x]. Despite a few of us suggesting you were... um, optimistic. By 3x we failed to appreciate the importance of market share. Despite an understanding that a leader capturing 67% of the share in a market that has shrunk by 35% is not really growth after all. And now we're at 2x and change and this is fair 'cause history should be our guide. Despite the fact that RCA and DEC and many others stand as a testament to over valuation of prior Tech Giants. The story evolves as the multiplier shrinks. Meanwhile, some of us are relentless in our view that 1x is the proper measure of "fair". Why would I pay twice as much as something is worth? It's not like investment is a trophy-hunting exercise. Now, if you're saying that tech is often factor two overvalued, I say yes. It's also sometimes factor two undervalued too. Me, I'd rather keep my money on the side so I can buy some factor-two undervalued tech and then hold on until it gets overvalued and dump it. Better that than buy some factor two overvalued tech in hopes that it becomes factor more than two overvalued. Particularly while assets are going on sale for pennies on the dollar.