Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Thomas Mercer-Hursh who wrote (51880)	7/5/2002 2:34:24 PM
From: Seeker of Truth	Read Replies (1) \| Respond to of 54805

Thomas, you are absolutely right. How does one estimate the growth rate of a company the profits and sales of which are level or decreasing? We simply can't do it with any accuracy. Impossible! And when a business has been proved by events to be cyclic, the estimation of the future growth rate gets even more difficult. I'm inclined, following Buffett, to wait for the sure thing, the "fat pitch" that's easy to hit a home run with. BUT, looking over the last 40+ years, I've only come across a sure thing four times. I think buying SEBL at 10 to 12 times present earnings would be a sure thing. It would have to be priced at a single digit for that. Of course people may make lots of money buying SEBL or any of our other favorites at higher than "sure thing" prices. Unless you are content to buy only once in eight years, we have to get involved with "almost sure' (??) things. This thread explores the potentials of the gorillas. I think the case for the gorilla characteristics of the set {INTC,CSCO,SEBL,MSFT} has been well made here.

To: Thomas Mercer-Hursh who wrote (51880)	7/6/2002 3:27:55 AM
From: Jurgis Bekepuris	Read Replies (1) \| Respond to of 54805

>what can one expect of valuation metrics in times like these? I think I answered this question before, when I described my valuation approach. I have not changed it. I use my own conservative estimate of forward going ROE, which is closely related to earnings growth, as a yardstick. By being conservative, I mean, that for example, I currently use only 15% ROE for INTC - it's average ROE for last ten years is ~25%. I think 15% is achievable for the next 5-10 years. However, with such yardstick, INTC is still fairly valued and not undervalued. I get expected annual return of ~7% from the current 19.5 price. Not a sell, not a buy. If one raised expected ROE to 20%, expected annual return would rise to ~13%. Which is close to my buy criteria, but I doubt that INTC will be able to continue 20% ROE times. I do not use short term negative PEs, negative growth, etc. for my valuations. However, I take into account equity drop associated with losses and I look at whether company is really losing it. As mentioned before, I do not look at the companies that did not show at least 15% ROE consistently for at least 5 years. So I won't comment on certain G&Ks that fail this measure. Jurgis - and, yes, I remember that Thomas was not satisfied with my measures the last time... :-)))