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Technology Stocks : AUTOHOME, Inc -- Ignore unavailable to you. Want to Upgrade?

To: Stuart C Hall who wrote (3067)	11/3/1998 2:51:00 AM
From: ahhaha	Read Replies (1) \| Respond to of 29970

Please do one thing: forget P/E. When you're computing that, you should have sold. You will never know what an appropriate multiple is. It is of value however for short sale purposes. If you must attempt a computation, draw a graph of quarterly top line values. Draw a line across the points. Assuming the line is rising, figure average % increase per year (the slope). That's growth rate. Don't compute earnings growth. If the company can't keep costs in line with top line, forget them. Next, look up P/E in S&P or wherever. Then get a ratio of growth rate to P/E. At a ratio of 1 the stock is fully valued on current results. You can get clever with projections and conclude a company is undervalued, but hard experience has shown me that such fine-tuning isn't worth the effort. Economics has no business with fancy calculations. MSFT is valued currently at 2x growth rate and growth is slowing. MSFT is way over-valued and when the current rally ends, MSFT will hit the skids and won't stop falling until 2000 where it will be worth 40. When you apply the above exercise to T, you get a similar result. I claim T will double by 2000 and that will be during a bear market! So what gives? I claim revenue growth will start rising rapidly and potential future growth acceleration and earnings visibility will cause the stock to sport a stable 2x growth rate with a nominal P/E of 34 in an environment of rising prices, rising interest rates, and contracting P/Es! It is all a matter of your conviction level. Conviction level, a construct of my ex-boss, makes all the difference. It comes when you share the vision or see it more completely than the company can imagine. To have this vision you must know what is in the world and where can it go. That requires knowledge. Knowledge requires information and in this information age, we don't have it, instead we have the most mindless misinformation the world has ever seen far surpassing the worst of the Dark Ages. On the T thread I have asserted T will become the greatest corporation in the world with their vision of worldwide face-to-face voice and unlimited scalability data communications. Nothing can stop them including competitors, governments, and acts of god. Like their inevitable sibling they are truly a remarkable investment. If ATHM ends up being absorbed by conversion, I wouldn't sell a share.