Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : SAP A.G. -- Ignore unavailable to you. Want to Upgrade?

To: Glen McGlaughlin who wrote (1910)	7/31/1998 9:03:00 PM
From: Warren Gates	Read Replies (1) \| Respond to of 3424

I use RELATIVE fundamental analysis to choose companies to invest in. The keyword here is relative because determining intrinsic values is not an exact science, and what is overpriced when taken alone may not be when compared against the industry and the general market. Then you factor in the premiums that you have to pay. If you have to pay a 25% premium for a company, and at the end of 5 years, that premium is still at least 25%, wouldn't you do it. Now, tell me if after the correction in Wall Street if there is any big cap company right now that is at it's 52 week high. This makes a lot of a difference come Monday because both traders, speculators and investors know that there is no upper resistance established yet for SAP. Come Monday, momentum will rule. To know when an intermediate top is near, watch the volume. There are now really 2 ways to profit from SAP. Learn the application or invest in it. I'm doing both, but my bet is the investing part will bring more $$$ within the next 10 years

To: Glen McGlaughlin who wrote (1910)	7/31/1998 11:48:00 PM
From: Mark Marcellus	Read Replies (2) \| Respond to of 3424

<< Glad to see your long-what are you and others basing your investment decisions on? No one has answered my earlier post re: Earnings growth projections and P/E ratios.Lets remember share price must ultimately be based on profit growth. Lets see the fundamentals folks!!>> Glen, I know where you're coming from, but I think you need to go back and look through some of the old posts a little more carefully to understand the reasoning of most of the people here who are investing in SAP. It would also be useful to read _The Gorilla Game_ by Moore, Johnson, and Kippola. In brief, the theory is that a company which meets certain criteria has the potential to become a "gorilla" in its sector. Examples of companies which have achieved gorilla status in the past include Microsoft, Intel, and Cisco. I couldn't possibly do justice to the theory here (if you're interested you should read the book). In any event, if you accept the premise of _The Gorilla Game_, the inevitable conclusion is that it is virtually impossible to overpay for a company which is early in the gorilla cycle. The hypergrowth of a young gorilla demolishes any traditional valuation model you could come up with. So while it's relevant to argue the merits of the theory, or to argue that SAP does not fit the profile of a gorilla, asking why we're investing in a company whose projected earnings growth is less than its PE ratio is completely irrelevant to the discussion. Moving off topic a bit, I don't understand why you place such weight on the PEG ratio to begin with. It's a nice handy rule of thumb for screening stocks but it's certainly not the ultimate valuation tool, especially given the notorious unreliability of analyst's estimates. If you're going to be dogmatic about things, it seems to me that you're better off sticking to methods which have some solid statistical research behind them such as O'Neill's CANSLIM (for which I suspect SAP would be a viable candidate), O'Higgins' Beating the Dow, or O'Shaughnessy's focus on low PE and low PSR stocks. FWIW, Mark