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

To: pt who wrote (28614)	9/1/1998 8:48:00 AM
From: Gameboy	Read Replies (1) \| Respond to of 95453

No way, no how should energy service company stocks be capitalized with the same factor as government bonds. Historically, the interest rate has been a very accurate predictor of the prevailing PER of stocks. My opinion would be that stocks would be undervalued when compared to bonds, though, because as a whole stocks have grown in value over the years at a rate of 13-15%. Also, the oil service sector stocks I've studied are very solid with high book value (often higher than our current prices). The valuation multiplier (18.73 based on an interest rate return of 5.34%; 18.73 x earnings = stock value) presumed the worst case earnings estimate - the best case earnings estimate would return a much higher number. If anything, using the worst case earnings estimate would understate the value of stocks. Warren Buffett revealed on Monday, August 10th, that he had recently sold more than $5 billion in bonds. I have a suspicion that current prices may be just the kind of market he likes to shop. Best of luck, Steve