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

To: Pruguy who wrote (6226)	3/10/1999 10:56:00 AM
From: Manish Aurora	Read Replies (4) \| Respond to of 41369

I am not selling a 'value investing' philosophy. One can pay any price as long as it can be justified by expected growth. However, AOL's price is now unjustifiable based on its current and expected growth. A firm growing at 50% a year that should over 10 years, slow to nominal GDP growth, should not be priced at a P/E of 400. For AOL, a high double digit P/E is justified in today's environment (indeed, it was priced there only a few months ago:) but the current price implies overconfidence. Even if AOL delivers, the rewards will be underwhelming. You would be better off buying high yield bonds. If you please, take a look at the spreadsheet on my site and tell me how, as a 'growth' investor, you would change assumptions. Manish Aurora www.rationalinvesting.com