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Technology Stocks : Lucent Technologies (LU) -- Ignore unavailable to you. Want to Upgrade?

To: Wigglesworth who wrote (4780)	10/22/1998 7:24:00 PM
From: Warren Gates	Respond to of 21876

LUCENT IS UNDERVALUED !!!!! That's right ... Lucent is undervalued. Maybe the best kept secret but not to those money managers who really know their stuff. As always, everybody is too concerned about PE, PEG, etc. But think of it this way, if you have $1000 in a money market account, you get a return of $50, then your price to cash flow is 20 (1000/50=20). Now, you have to pay taxes, so your $50 becomes only $34.50. Then you price to earnings is 29 (1000/34.50). You roll this over to your principal so you now have a principal growth of 3.45%. Now, suppose you make $300 on your $1000, pay taxes, spend some on books for to enhance your carreer, and at the end have some $120 left to roll over you principal. Now, that's definitely better than the other scenario. So good, that you say, gee, instead of $1000 that should be valued at $6000 to get that $300 earnings at 5% as in the money market. Doesn't this sound like a 6X market cap to revenues. Lucent by the way is only at 3-4 X Once investors realize that cash flow is king, things become a lot simpler.