Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : America On-Line (AOL) -- Ignore unavailable to you. Want to Upgrade?

To: Chuzzlewit who wrote (4014)	1/29/1999 4:35:00 PM
From: nghi vu	Read Replies (2) \| Respond to of 41369

You have spend the last few days here trying to justify why you should keep it in your portfolio. With all due respect to your CFA analytical quant skills, the answer is not going to be there just as the answers for a)why value stocks have underperform growth stocks the last 5 years b) why brazil's problem hasn't create a crash. c) etc..... You not going to get the answer. The stock market is 80% emotional and 20% mumble jumble number babling. This is not an insult to your curiousity with this stock but why beat a dead horse? Just how many stocks do you follow that come close to your free cashflow, discount cashflow, and whatever models that you used so far? Is Mc Donald's worth the 40 pe with 6% growth annually at best? HOw about Coke? or AT&T? you are wasting your time searching for THE ANSWER.

To: Chuzzlewit who wrote (4014)	1/29/1999 8:39:00 PM
From: Joe E.	Respond to of 41369

"if you consider a mature company with little or no growth prospects, it will generally have a free cash flow in the neighborhood of approximately 1/7 its capitalization given current market conditions. On a cash on cash basis that number represents about a 15% prospective cash flow yield, which includes an adequate risk premium" I don't think you can get that in today's market. Seems to me more like 8% cash flow yield out there. Cyclicals may look close to your number but they are priced to go down when the economy contracts (should that ever happen again). IMHO

To: Chuzzlewit who wrote (4014)	1/30/1999 4:33:00 PM
From: Reginald Middleton	Read Replies (1) \| Respond to of 41369

<At some point market cap needs to be based on free cash flow. I have yet to see the free cash flow that would justify these kinds of valuations.> This is not true. Free cash flow does not take into consideration monies that are spent on reinvestment to grow the company that would hae flowed to retained earnings or dividends in a mature (cash cow) company. AOL does not have to sink the funds into marketing that it does. MGMT is trying to increase market share and is doing so at the expense of accounting earnings. This process can go on for quite some time (reference MSFT). This is understood by the street, hence the higher valuation (reinvested cash flow, amortized for necessary expendituress) are beins counted as operating profit. See See the Case Against Earnings at rcmfinancial.com