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Technology Stocks : TLAB info? -- Ignore unavailable to you. Want to Upgrade?

To: Ian@SI who wrote (5509)	5/5/1999 3:45:00 PM
From: Chuzzlewit	Read Replies (2) \| Respond to of 7342

Hi Ian, One of the approaches I use in valuing stocks is the CNPEG and CNPEG2. The rationale is quite simple: absolute valuation techniques are problematical because of the multitude of issues involved, including such intangibles as market sentiment. In addition, the usual quick and dirty techniques fail to take into account such important parameters as interest rates. In order to cut through this morass I created a metric the CNPEG. Basically, the CNPEG is designed to provide a relative valuation for a stock, by calculating the YPEG for a particular stock (the year-ahead P/E divided by the consensus growth rate) and dividing it through by the YPEG for the S&P 500. The interpretation of CNPEG is simple: a stock with a CNPEG of less than 1.00 is presumed to be undervalued with respect to the cost of growth compared to the general market. Unfortunately, CNPEG fails because it does not take risk into account. In other words, I believe that there must be a discount to the price of a stock based on its riskiness. Another way of putting it is that if stock B is assumed to grow at twice the rate as stock A it should have something less than twice the price because of its inherent riskiness. There has been a significant body of work showing that beta is an inadequate measure of risk, yet it is the only metric that makes any sense. Therefore, I have normalized the model further by multiplying through by the beta for the stock. The interpretation would be that a stock with a CNPEG2 of less than 1.00 is undervalued with respect to the general market. As a corollary, dividing the current price of a stock by its CNPEG2 ought to provide us with the fair price of the stock relative to the market. I will shortly post specific numbers for stocks of interest to me in my universe. TTFN, CTC

To: Ian@SI who wrote (5509)	5/5/1999 3:50:00 PM
From: John F. Dowd	Respond to of 7342

NN might be an acquisition candidate now that it is seen that they need marketing clout. Regarding TLAB and other telco equip.cos. the ATT deals should be a spur to this sector. The reasoning goes like this. The ATT deals have the telco world in a tizzy but I think this will be bullish for AOL and the telco equip. cos. like TLAB et al. I can't imagine the RBOC's are going to sit around and let the biggest long distance carrier end run them without their trying to provide the one stop shopping that T is offering. They will do this by offering broadband via XDSL. This is the kind of competition the regulators had hoped for they just never figured itwould work out this way. But now the RBOC's are going to be forced to speed up their deployment of XDSL so that they are not overtaken by ATT. AOL will therefore see an acceleration in the introduction of ADSL to their customers. This also bodes well for the telco equipment people who took a hit today. To catch up/stay ahead of T RBOC's will have to buy a lot of XDSL equip. Additionally the RBOC's will be extending their long distance capabilities further benefitting the telco equip. suppliers. CIEN and TLAB should benefit from the goad supplied by ATT's cable end run. JFD