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 : Free Cash Flow as Value Criterion -- Ignore unavailable to you. Want to Upgrade?

To: Reginald Middleton who wrote (174)	11/7/1997 8:41:00 PM
From: Jules B. Garfunkel	Read Replies (1) \| Respond to of 253

Reggie, Thanks! So the way I read your analysis it shows that IBM has been in a steady decline since 1992. Am I reading it correct that both true value, and invested capital are decreasing every year since Lou Gerstner took over as CEO? While we may use different methods of fundamental analysis, we both come to the same conclusion. So again I ask. Why doesn't the rest of the world see IBM's value as decreasing, or is it they just don't care right now. I want to appoligize for not acknowledging your posting of your very fine post on the IBM thread. Although, I thought, it read a little bit like "Plato's Republic" it made some very compelling arguements. Unfortunately, I got tied up after I read it, and never remembered to get back to you. Regards, Jules I

To: Reginald Middleton who wrote (174)	11/9/1997 12:36:00 PM
From: jbe	Read Replies (1) \| Respond to of 253

Reginald -- how about a FREE CASH FLOW analysis of IBM? You have analysed IBM in line with your system of "rational analysis," which may be -- or rather probably is -- a superior method of analysing companies. As I have said before, there is more than one way to skin the cat (and hopefully, truly fine companies will make a good showing no matter how it is skinned). However, this thread is devoted to free cash flow analysis. You noted in the introductory post on your own thread (Professional Equity Analysis) that you hoped to develop a free cash flow analysis model. So how about it? Is there some way for you to translate the IBM data you have provided into free cash flow language? jbe P.S. On a completely different matter: value, rather than the accounting convention known as EPS, may indeed be the long-term determinant of price. But as my bitter experience tells me, the surest determinant of a short-term drop in price is the failure of a company to meet EPS quarterly projections. (I own Western Digital.) Then, of course, there are the unquantifiable determinants, such as investors' perceptions of the prospects of a particular industry (in this case, the disk drive industry). Are you so convinced that the market will ultimately recognize True Value? As an historian, I have always been struck by the determining role played in all our affairs by irrationality and outright stupidity.