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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Chuzzlewit who wrote (75414)	10/29/1998 9:20:00 AM
From: Bob Davis	Read Replies (2) \| Respond to of 176387

Chuzzlewit, Good, well thought-out questions. I'll try to answer them in the order in which you asked them. Re "the concept of risk" - I agree that there is significant value in the "competitive position that these companies have achieved", but I also feel that this value is already reflected in their historical earnings stream growth and in the growth projections of the analysts who follow them. And it is these growth rates which are being used in the Napeague valuation tools. After all, a strong "competitive position" in buggy whips is not terribly valuable, because it is not generating strong earnings stream growth. Re "Graham's heuristics" - I have done some work comparing these formulae to "real-life" earnings stream growth rates, but I have not pulled it together to publish it. I have been planning to do this for some time…but I have always lacked "some time" in which to do this. Thanks for bracing me up on this point. But to come back to "Graham's heuristics", they are based on earlier work done by other guys who did look at these relationships. "Stay tuned for the eleven o'clock news….." Re "modeling behavior" - I think that I have covered this in the charts which compare "Monthly Trading Range vs. Intrinsic Value". As you can see from these charts, which can be found on the individual pages dedicated to each of the stocks analyzed, these stocks generally have been priced by the market near their "intrinsic value" prior to 1998, and DELL was actually somewhat undervalued until the beginning of this year. I agree that the valuation tools do not model behavior, but they do reflect relative valuations, which in turn impact behavior. Re "any economist" - Actually, most economists would disagree in certain situations, especially those which involve tulip bulbs or overpriced stocks. Bob Davis The Napeague Letter napeague.com