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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: jeffbas who wrote (3858)	4/16/1998 2:48:00 PM
From: kolo55	Read Replies (1) \| Respond to of 78478

I'll post a reply on the ECM thread. I think we've discussed this several times over there, so lets keep the discussion there. I am very interested in the comments on whether the overall market is overpriced at this point, and simply wanted to comment on one of the market leaders over the last 8-10 years. I believe that a stock like Intel, that is about to enter a cyclical downturn and loss of its monopoly position, shouldn't trade for 23 times current year earnings. When I bought Intel several years ago, it traded at 12 times forward earnings versus 16 forward earnings for the S&P with interest rates in the 7.5% range. It was going into a cyclical upturn and a stronger monopoly position in MPUs. As events unfolded, the earnings came in even stronger than anticipated due to increased margins. Now essentially all of that has changed. There is much more capital being invested in the MPU sector which along with technical advances is driving capacity up and will push margins down. The stock is trading at about the S&P forward multiple of about 24 to 25 IMO, if not higher if margins really go punk. And the S&P seems to be trading very close to overpriced territory, with interest rates at 5.9%. I did an analysis early last year on the valuation of the S&P500, and at that time at 20-21 times trailing and 17-18 times forward earnings, I couldn't see the market as overvalued considering the low interest rate environment. Now the market has appreciated to the point where I believe any appreciation beyond here cannot be justified on a discounted future earnings stream basis using the current interest rate. We are entering LaLa Land. The question is how far up will we fly, before the dream breaks, and how should we position ourselves? Like many of you, I'm still finding fundamantal values, and growth opportunites out there at a good price. Also, although its not the purview of this thread, I have found several stocks that should rise or fall almost entirely based on their ability to execute their business plan, and so do not contain much "market risk". I have found the stocks I like the best on the NASDAQ, are foreign stocks, and now own five foreign stocks that together comprise 60% of my portfolio (mostly in the sector I know best) up from maybe 30% last summer. These stocks are heavily weighted toward China and Mexico. I really am finding the best values in the "f" symbol stocks. In addition to these five stocks, I own shares in Tweedy Browne Global Value fund. These are my strategies to deal with a possible problem with the market. Position into stocks with limited market risk, go overseas to beat up markets, and invest in an international value fund. Paul