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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Electric who wrote (17734)	11/13/1998 10:45:00 AM
From: BI*RI	Read Replies (1) \| Respond to of 42787

Electric, I'm with you on DELL. I'm just mad at myself for selling in the 50's back in Oct. when I promised myself that I never would. I just wanted the profit to offset some losses when things were looking bleak. Anyway, to support what you are saying about the fundamentals: There was a very interesting article in the 11/9/98 issue of Fortune magazine that described Economic Value Added (EVA) as the only true measure of a companies value and growth. This is because all capital, including shareholder equity which is treated as a cost is included in looking at EVA. "EVA is simply annual operating profit after-tax - minus a specific charge for the cost of capital. ...In financial statements, companies pay nothing for equity capital. It looks like free money. But equity is really very expensive. To raise money from investors companies must return at least as much as shareholders could earn from a basket of stocks with the same risk -say, 12% a year. That's the cost of capital. ...Hence, generating accounting profits is like playing volleyball with the net down. EVA puts it back up. Companies pay a stiff fee for all the equity they use, including retained earnings and the proceeds from stock sales." "to move share prices they shouldn't grow earnings at any cost, but simply grow them faster than they add new capital, like plants and inventories. ..EVA is changing not only how managers run companies, but the way Wall Street prices them. In the past three years, Credit Suisse First Boston and Goldman Scchs have instructed their analysts to deemphasize measures like earnings per share and reurn on equity in favor of EVA." I went through the list of 200 large cap companies provided and highlighted all that had a Return on Capital of 20% or more; here are most of them, as well as some other familiar names: MSFT 53% CSCO 51% INTC 43% KO 36% 3Com 37% SGP 36% ORC 35% CPQ 31% MER 30% SUN 28% EMC 26% MRK 23% AMAT 23% PFE 20% GPS 20% ALL 20% GE 17% IBM 13% TXN 11% GM 4% DELL??????? 249%