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To: Chuzzlewit who wrote (69)	2/2/1999 5:33:00 PM
From: Reginald Middleton	Read Replies (1) \| Respond to of 419

I have used a homegrown risk measure for some time now. See rcmfinancial.com and scroll towards the middle of the page.

To: Chuzzlewit who wrote (69)	2/2/1999 6:39:00 PM
From: Joe E.	Read Replies (1) \| Respond to of 419

Chuzzlewit: "So when you evaluate the method in terms of PV of cash flows I think you are making two unwarranted assumptions: first, that you know the risk-free discount rate the market is applying, and second, that you know the risk premium. " I was actually just trying to point out that while the YPEG ratios are a good equalizer for most growth companies (up to 35% growers, at least), they don't work that well for hypergrowth companies where the hypergrowth is expected to continue for some time. High growth companies should have higher YPEG ratios, just based upon the compounding effects of the high growth rates. I was trying to give an example, but it certainly got involved, perhaps obscuring the point I was trying to make. "The biggest problem I have with my metrics (and I'm not sure how to handle this easily) is that there are some stocks in the S&P that don't have earnings, or whose earnings are minimal. Nevertheless, these companies have "value" based on their assets. Perhaps these need to be excluded because they provide an inflated forward P/E." Isn't the S+P driven mostly by the 10-15 biggies, all of which have earnings?? I don't see this as a problem, myself.

To: Chuzzlewit who wrote (69)	2/2/1999 11:07:00 PM
From: Steve Robinett	Read Replies (2) \| Respond to of 419

CTC, You comment, With regard to CNPEG2, I too am uncomfortable with the inclusion of betas in the calculation for a variety of reasons mostly related to how good a surrogate it is for risk. Why use beta? Use volatility. Beta measures the stock's movement relative to the general market. When investors pay up for high growth stocks with pie-in-the-sky prospects, they are not trying to keep a low beta portfolio, in other words, not gauging risk with an eye to the general market. If you want a number that reflects the market's risk assessment of an individual issue, use volatility--the annualized standard deviation of a stock's daily change. After all, volatility is used to price risk levels into options and, IMO, more accurately reflects the present perception of a stock's risk than beta. Best, --Steve