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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: Berney who wrote (460)	7/3/1998 6:45:00 PM
From: Freedom Fighter	Respond to of 1722

>I thought it was interesting that it was Gates who suggested that >tech companies should have valuations less than Coke and Gillette. <hmmm. It shouldn't really have been too suprising. It's a well established and widely known fact that technology companies are riskier businesses than the average company. Companies like Coke and Gillette are less risky than average. Almost all valuation literature that I have read uses a much higher discount rate to value techs than the average business. To me this is absolutely appropriate. History is littered with fallen techs. (some are falling as we speak) Coke and Gillette will outlast us. Therefore all else being equal techs should sell for much less. That sometimes techs have high PE ratios is a result of higher than average growth, but the discount rate used is always higher. WC