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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Uncle Frank who wrote (2243)	5/26/1999 8:23:00 PM
From: Tom Ardnij	Read Replies (1) \| Respond to of 54805

I agree with you Uncle Frank. The focus and power of MSFT is earnings growth. I think that the business cycle beginning next month with Office 2000 and followed up by Win2000 in the fall will prove to be the largest earnings growth cycle in it's history. I am tracking money flow, MACD and Stochastics on Metastock 6.0. The last several days appear to be a definitive basing. Money is moving into MSFT now. I believe that the big players know perfectly well that they will see record increases in earnings in this cycle beginning with June. The opportunity to invest in new technologies as the company generates $2 billion per quarter in new cash is incredible. At the end of the day it's the proven ability to get a return on that investment that powers MSFT along. By the way, I'm long MSFT, CSCO, AOL, EMC, SUNW, WCOM, and ATHM. The first three companies are 60% of my portfolio. Certainly MSFT, and CSCO qualify as gorillas. I think there is a good argument for EMC and SUNW as Kings in their respective arenas. WCOM and ATHM are bandwidth plays. AOL has been fun to own. I see each as long term investments, but would bail if I thought they were becoming dead money. Best Regards, Tom

To: Uncle Frank who wrote (2243)	5/26/1999 8:25:00 PM
From: Mike Buckley	Respond to of 54805

market cap is not a meaningful metric. Agreed. Market cap is important only in the way an investor perceives it relative to many other issues, some that are quatitative and some that are purely subjective. One of the best and quickest ways to put market cap into perspective is to calculate the "enterprise value." That's the market cap minus the cash plus the debt. (Factoring in the cash and debt does wonders for putting a market cap into perspective.) Consider that ramification in terms of the classic PSR. Where P is traditionally the market cap, calculate the PSR. After doing that, run the calculation using the enterprise value instead of the market cap. Compare the two calculations with companies that have little debt and lots of cash. Then make the same comparisons with companies that have lots of debt and little cash. It will be a very revealing exercise. I use the PSR only on a very casusal basis. When I get really serious about looking at a company, I always prefer to use the enterprise value-to-sales ratio. --Mike Buckley