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Technology Stocks : Creative Labs (CREAF) -- Ignore unavailable to you. Want to Upgrade?

To: Douglas V. Fant who wrote (8361)	1/16/1998 7:14:00 PM
From: Vanni Resta	Read Replies (1) \| Respond to of 13925

Douglas Fant wrote: "Even if you knocked 15-20% off of the earnings estimates of every tech/telecommunication/medtech stock discussed here on the SI Threads in order to account for the "Asian Flu", check out the growth rates/revised earnings powers of these stocks- they are still excellent...." Just a word of caution for anyone considering this advice. Stocks are usually priced on expected earnings growth. It is by no means a mathematical relationship, but it stands to reason that if you knock 15% off the growth rate, you will also take the stock down at least 15%, even if the remaining growth is still "excellent." I say the stock price will come down "at least" 15%, or the same amount as the decline in growth, because usually the stock price suffers much more. Why? Because when the markets see earnings growth suddenly take a hit, they usually conclude that more bad news will come, and rightly so, because it usually does. If anyone has any doubts, just follow the course of the disk drive threads, where hopes rallied with the leveling off after each $5 or $10 drop in the stock prices, only to be dashed again with the next $5 or $10 decline when even more bad news came out. This occured in $5 or $10 increments during the course of the fall and early winter, bringing $50 to $60 stocks down to the $20 range. I am by no means predicting this will happen with Creaf. Nor am I saying it won't. I am only pointing out a possible weakness in the line of reasoning that Douglas presents. Happy Investing! Vanni

To: Douglas V. Fant who wrote (8361)	1/16/1998 9:09:00 PM
From: JessiDani	Read Replies (3) \| Respond to of 13925

Doug: The scary thing is that either the price will go up to maintain a higher PE or the E will go down to match the currently "low" stock price. Your own assumption at the end of your post indicates a forward growth rate of earnings of only 5%. Perhaps some so called smart money is assuming the same and that is why the price of CREAF is waiting to catch up to the a lower earnings growth rate. CREAF's margins do appear to be shrinking. Also, regarding the IBD mutual fund top ten lists: the top holding and additions are always dated. The small print in those boxes of IBD usually indicate that the data is at least three months old. I currently have no position in CREAF and have not decided whether to buy again. JD