To: LindyBill who wrote (23211 ) 3/1/1999 7:07:00 PM From: Doughboy Read Replies (2) | Respond to
I'm always a bit fearful when people start acting as though there is a "new" way of valuation or that the laws of gravity have been repealed in the special case of MSFT and CSCO or more pointedly AMZN, YHOO and the other internet high-flyers. That kind of thinking lead to Japan having companies with P/Es of over 1000; the Nikkei lost 60% of its market value in the 1990s, and it hasn't budged upwards since (and it still has a market P/E greater than the NYSE). What goes around comes around--and you'll be sorry if you're not prepared for the backlash. As for the Gorilla game, I'm one of the dipsh*ts who bought Manugistics and I2 as "gorillas" according to that book and saw a 90% loss on those investments. I would love to see someone do a study on the "gorilla" stocks a decade from the publication of that book and see what transpires. IMO, about 1/3 of them will be on the ropes, 1/3 will be gone, and 1/3 will have revenues of 100 billion. Don't get taken in by a book that was published 18 months ago in the midst of a bull market simply because more than half of the stocks are still cruising along. The proof is in how it well it will work when the technology run ends (which, sorry to say, it undoubtedly will). The truth is that at any given point in time, it is impossible to know which are the gorillas and which are imposters. It's completely random. Could anyone have forseen the fall of IBM as a "gorilla" (or Xerox, General Motors, and Boeing for that matter)? Can anyone say whether the recent rise of Linux is an actual challenge to Microsoft's gorilla status or just another in a long line of software companies about to be steamrolled? I'm not smart enough to answer these questions, but more importantly, no one is. I am long Cisco, but we'll have to worry about valuation, discounted cash flows, P/Es, and yields just like the rest of them.
