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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Gameboy who wrote (28492)	8/27/1998 8:23:00 PM
From: Crimson Ghost	Read Replies (2) \| Respond to of 95453

I am not willing to say we have bottomed but does look like we will bounce tomorrow. Heavily battered cyclical stock indexes (gold, oil service, small caps) held up quite well when the Dow did its late swan dive from -200 to -357. Most down just slightly during this period. I have good vibes on all these groups for the next few days, OSX could easily bounce 5-10% in very short order. Huge volume today also suggests total capitulation by the few remaining bulls.

To: Gameboy who wrote (28492)	8/31/1998 12:57:00 AM
From: pt	Read Replies (1) \| Respond to of 95453

Steve, what you say re: PER sounds fine as far as it goes, but fails to adjust for risk. Equity returns are greater than debt returns because the investment is riskier. And investment in companies in heavily cyclical industries is riskier than investment in companies in non-cyclical industries. No way, no how should energy service company stocks be capitalized with the same factor as government bonds. If they are, short the daylights out of them! Perhaps one of the best ways to make money is to look for cases where momentum (or whatever) has carried multiples in a cyclical industry to excessive levels. Last summer that was disk drives. Last fall, energy services. Disk drive manufacturers and energy service companies should not be priced like pure growth companies. P/Es in the 7-10 range are probably appropriate. Those of us, myself included, who don't figure that out until they have the benefit of hindsight feel the pain big time. If you take the worst case earnings estimate of your oil service sector stock for the next 12 months and multiply it times 18.73 you would have the equivalent 'value' of your stock compared to an investment in a bond. If you get a number about 2 or 3 or 4 times greater than the current value of your stock, you've got a heck of a deal. Sorry, I have to say if you only get a number 2x the current stock price, you are barely being compensated for the high risk of your investment in a heavily cyclical company. Sell and look for something better. <OT> I've been thinking I should start a thread on the topic...try to figure out which sector will be next to wake up to this brutal reality. Chip equipment companies might be a strong candidate. Paul