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Technology Stocks : Semtech (Nasdaq:SMTC) -- Ignore unavailable to you. Want to Upgrade?

To: Jeff Bond who wrote (713)	12/5/1998 1:30:00 AM
From: Stu Bishop	Read Replies (1) \| Respond to of 1225

Jeff, I'm in buddy. My disposition is to invest in companies I can hold long term. I get antsy after having felt like I should cash in, but didn't, and then got burned. I try to learn from all of my investing experiences. As I said, it appears that the growth rate of this company has fallen in half. If this is not a temporary situation, it tells me to value the company at roughly half what I used to. Let's say a company earning $1.00 is growing at 50% annually. I would oversimplistically (wow, what a word) value that company's shares at $50. Now if that same company, two years later, is earning still $1.00, and the going forward growth rate was pegged at 25%, I'd value that company's shares at $25. Since I believe a company's shares should follow fundamentals, I'd expect the shares to grow at 25% annually. At that rate, the stock would take 3 years to finally break past $50. So you held a poor performing investment for three years without gain. Remember, using the most optimistic, high-side estimates from you and the company, I came up with 26% growth and $1.20 earnings. Repeat: 26*1.20 = $32.2. Both the 26 PE and the 1.20 earnings are optimistic. In my opinion, if the estimates hold true, this stock is now 6 months ahead of fair value. Of course, this is based on fundamentals alone, and ignores the current market euphoria. Right now, I'm holding due to the upside momentum, the market euphoria, and the company's history of huge, overdone stock rallies. Thanks so much for your thoughtful advice. Stu B