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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Ilaine who wrote (34698)	10/28/1998 5:22:00 PM
From: Knighty Tin	Read Replies (2) \| Respond to of 132070

Coby, I think you are confusing undervalued with low pe ratio. That is good old David Dreman's influence on the world. <G> A stock can have a high pe ratio if it has higher than average growth potential and higher than average financial stability and higher than average visibility of eps and better than average quality of eps and a dividend that is growing. For example, I think that Pfizer at 42 times eps is grotesquely overpriced. But I believe that Pfizer is a company that deserves a high pe ratio for its pipeline, management, relative honesty and financial condition. Along with Pfizer bulls, I consider Pfizer a great co. That isn't an argument. I just don't think it is a 42 times eps great co. I bought it with both hands when it sold for a below market pe ratio in 1993 and held it until the pe ratio hit 30 times. How much a co. is worth has more to do with the co. and with the risk free rate than with arbitrary standards like high or low pe ratios. On the market, the point is, I don't believe that the market has the eps growth, dividends, mgt., financial stability or visibility of eps to support the current high pe. Is 5% eps growth worth 23 times eps? Not unless the risk free rate is 2.2%. And it is not. MB

To: Ilaine who wrote (34698)	10/28/1998 8:10:00 PM
From: Lee Lichterman III	Respond to of 132070

There are many companies out there with PE ratios in the mid single digits with "REAL" earnings on no accounting tricks and other companies with PE ratios around 10-20 with real earnings and huge growth that has been proven and should continue. These companies have low to zero debt, etc. These can be bought and as I saw during our last small peek at the bear, didn't fall in value like their inflated brothers. The high flyers will take the brunt of the ugliness once the real bear appears and when the funny money leaves the market and only the die hard, intelligent investors are left, they won't be looking to buy industries near the end of their prime, be willing to pay 60 or 80 timnes earnings for 40% growth or 35 a share for a company that loses money but promises a turn around every year (MU). Real earnings and real growth will be sought after and will gain value, the hyped stocks of today will be the penny stocks of tomorrow. I tried to play the euphoria before the drop a few times myself but there was always that "just one more play" that caught me in the down draft. Sometimes you win, sometimes you lose. That is why they don't hand you free money just for opening a brokerage account. <g> BWTHDIK, Lee