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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Lazlo Pierce who wrote (5897)	4/2/1998 1:22:00 AM
From: Gerald Walls	Read Replies (2) \| Respond to of 18691

What is wrong with this picture? KO is WAY more expensive than dell or msft, and is showing decreasing to flat earnings growth for the next 2 years. Which of the following three stocks does the most successful investor in the world, Warren Buffet, own: KO, DELL, MSFT? You have a choice. You can say, "I'm smarter than the most successful investor in the world, Warren Buffet, so I'm going to short Coke" or you can say "Maybe the most successful investor in the world, Warren Buffet, knows something and I should look for easier pickings."

To: Lazlo Pierce who wrote (5897)	4/2/1998 7:53:00 AM
From: Roger A. Babb	Read Replies (1) \| Respond to of 18691

David, you need a course in the new math. Based on the earnings you quoted for KO versus MSFT and DELL, KO should be priced much higher. The fact that KO has decreasing earnings gives it a lower starting point for the "growth equations" and thus a higher PE. By the new math it is bullish to miss earnings, just look at the long list of stocks that have leaped up over the past month after issuing warnings. For example, ETEC missed earnings big time and leaped from $37 to $60. Are expected to miss again this quarter and will likely leap to over $100. Of course it is even more bullish to never have significant earnings in the first place, just look at the Internet stocks. Or if you do screw up and have earnings, wipe them out with a big writeoff like MANU and you can leap 40% in a single day while announcing a 90 cent loss.