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Technology Stocks : AUTOHOME, Inc -- Ignore unavailable to you. Want to Upgrade?

To: Hiram Walker who wrote (2524)	7/17/1998 9:22:00 PM
From: ahhaha	Read Replies (3) \| Respond to of 29970

Emotion is noise, stochastic noise. Stock prices fluctuate in the manner of a Gaussian distributed random variable in first order approximation. All the emotional inputs cause the price to move up and down asymptotically approaching an average value. The value is the instantaneous estimate of expectations. The next exogenous shock can move the price out of the instantaneous nearby equilibrium, but if expectations haven't changed, the fluctuation will randomly undo its exogenous shock translation. Stock prices closely follow earnings. Because averaging introduces lags, the following is coincident though the cumulative price changes reflect expectations for future earnings changes. The random nature of stochastic processes necessitates that a stock is never fairly valued because it is never known exactly what that value is. It is an uncertain quantity because it doesn't exist now, but only potentially in the future. As new knowledge become available, prices are adjusted by the fear and greed of individuals. There has never been a growing company whose stock sells for a P/E of 1. If there were, it wouldn't be growing and there would be perfect certainty that it couldn't grow. Bonds are such a vehicle. There is perfect certainty that the face value won't grow. Bonds are priced to represent the future discounted stream of interest. Companies either grow or shrink. If they grow, there is a probability that their future worth will be higher than the raw per share stream of earnings. So people bid them up or down according to the strength of their convictions about future earnings. The expectations for ATHM earnings growth is exceedingly strong so you can expect that the share price is high. To make some judgement about what is too high based on historical precedent either is wrong because the precedent is inapplicable or wrong because a similar case in history isn't well-known. To say ATHM is overvalued in this way is at least wrong because it and the other internet plays are much like the railroads at the turn of the century. They had enormous multiples. They went on to be one of the most dynamic stocks ever held, so the multiples were justified. It didn't take long for the railroads to deliver the earnings either. You're saying the internet is a sham. I totally disagree. You claim HLIT will do well but ATHM won't. That's a contradiction that you wouldn't have made six months ago. You've gone off the deep end. You need to get away from all of this. Take a vacation. You aren't your old self. Proof: read some of your commentary of six months ago. It's good stuff. This bull market is starting to make a lot of people angry. When that happens, it's advance notice that the mene, mene, tekel upharsin is on the wall.