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Everyone has a different way of evaluating a companies worth. This is the
harvard business school. There are those that value based upon return on
assets, Buffet, there are funds that value based upon cash flow and there are
other that base upon growth, PE ratio, book to bill, and dozens of other
methods. The fact is that stocks have absolutely no value except at liquidation
or there is a dividend return upon invested capital. Other then that it is all
based upon the greater fool theory. No matter what you pay for a stock it is
worth no more then what someone else will pay you for it. No matter shat the PE,
cash flow, growth, balance sheet, etc.. There are retirement funds that own huge
positions in companies and yet have no say in its operation. You can check with
the California Teachers Assoc. as to some of their positions in the past. The
only thing that really counts in ones evaluation is if someone else's money is
going in, price is rising, and you can get in and get out before someone else
says "Oh, Boy, I think that I will sell this one." The reverse is true on
stocks heading south. You can have 2 stocks in the same industry, with the same
sales and profit structure, and the same balance sheet, and they are trading a
very different prices. Why? One is followed by the major firms, touted by the
gurus, and recommended to the funds and the other doesn't bother to go to dog
and pony shows put on by the industry. The charts tell the whole story that is
of interest to any trader or investor. This may be very simplistic, but you
will find that it is true. Price will go down until it turns around and goes
back up again and it will go up until it turns around and comes down again.
Trying to guess bottoms and tops is living in a fools paradise. In over 30
years I have never sold a top that didn't eventually go higher or buy a bottom
that didn't eventually go lower. Everyone that trades or invests successful has
a system. If the system is good it will reap profits. If the system is flawed
losses will occur. The most important part of any formula or system is the
implementation. So no matter what the out come, you are solely responsible for
the outcome. Ira.
BobR wrote:
> Sourced in part from Harvard Business Review May - June 1988. More detailed
> explanation is attached.
>
> V = EPS(8.5 + 2g)4.4/Yaaa
>
> V = company's intrinisc value
> EPS = company's last 12-month earnings per share
> g = company's long-term earnings growth estimate
> Yaaa = is the yield on AAA corporate bonds.
> 8.5 represents the appropriate P-E ratio for a no-growth company as proposed
> by Graham
> 4.4 was the average yield of high-grade corporate bonds in 1962
>
> To apply this approach to a buy-sell decision, each company's relative
> Graham value (RGV) can be determined by dividing the stock's intrinsic value
> V by its current price P.
> RGV = V/P
> An RGV of less than one indicates an overavalued stock, while an RGV of
> greater than one indicates an undervalued stock.
>
> bobr
>
> ----- Original Message -----
> From: "Don Ewers" <dbewers@xxxxxxxxxxxxx>
> To: "Real Traders" <realtraders@xxxxxxxxxxxxxxx>
> Sent: Sunday, March 11, 2001 5:37 AM
> Subject: [RT] Valuation - Tech
>
> > Avoiding trying to figure when and where the NASDAQ will potentially turn
> > for the moment, what is the criteria one should use to invest again in
> > technology.
> >
> > If possible let us also avoid an economic turn which understandably is a
> big
> > part of the formula as is "product", market potential and so on. It is
> > certainly not just price (XYZ has dropped below $20).
> >
> > Past earning performance, price to sales, price to book . . . . what does
> > the "institutional" investor use to decide when to step in and "invest"
> once
> > again in this sector (or should I say carnage) assuming their investment
> > horizon extends out for 1-2 years maybe more.
> >
> > Is there anyone on the list that knows what they look at (understanding
> > there may be better areas to invest in such as energy, value companies
> etc.
> > right now).
> >
> > Bottom line when will the Intel's, Sun Micro's, Cisco's, Microsoft's, LSI
> > Logic, ADC Telecommunications have "value"? Thoughts anyone. Does this
> > really represent a significant opportunity today for one who has so far
> > avoided this massive drop, as some are touting?
> >
> > The charts should tell us when to invest and that may be the ultimate
> > answer, but for the moment is there any "fundamental's" one could look at
> > also.
> > don ewers
> >
> >
> >
> >
> > To unsubscribe from this group, send an email to:
> > realtraders-unsubscribe@xxxxxxxxxxxxxxx
> >
> >
> >
> > Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
> >
> >
>
>
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>
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>
> ------------------------------------------------------------------------
> Name: RGV.rtf
> RGV.rtf Type: WINWORD File (application/rtf)
> Encoding: quoted-printable
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