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Technology Stocks : IBM -- Ignore unavailable to you. Want to Upgrade?

To: saju chacko who wrote (2996)	4/28/1998 10:21:00 PM
From: The Vinman	Read Replies (3) \| Respond to of 8218

<<dividend increase, stock buy back>> That's about all IBM has to offer, this is a no to slow growth story, and eventually they will have to come up with REAL numbers and not all the smoke and mirrors they are offering investors right now...can't keep on beating lowered estimates based on less shares outstanding forever... Vinman

To: saju chacko who wrote (2996)	4/29/1998 2:27:00 PM
From: David Lee Smith	Read Replies (8) \| Respond to of 8218

I was being generous forcasting $90 per share; $49 per share is what I compute to be the fair value for the stock. Look, you have a stock paying an $0.80 dividend only growing it 10% per year. OK, so you have a modest 3.3% share repurchase program. If you believe that a stock is fundamentally worth the discounted present value of its future cash flows (dividends) plug the following into your HP calculator. First find the future value of a stream of payments (starting at $0.80) for say 30 years growing at 13.3% (that's the actual dividend growth rate including the share repurchases). That gives you a future value of that annuity of $281.83 in thirty years. Next, discount that value using the 30 year T-bond rate of 6%. That gives you a value of $49.07. Of course, it may be true that IBM is cheap relative to the market, but using the same analysis for the market I come up with a case for a 50% crash in the stock market. Therefore, if you're short the market and long IBM, I can understand. I just don't see the case for $140 or $200 as I've often seen. And about the options, I should double up!