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Actually that formula wasn't from the Harvard Business school. It was from
Benjamin Graham in 1962 and revised in 1974. HBS just wrote about it in
their rag.
bobr
----- Original Message -----
From: "BobR" <bobrabcd@xxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Sunday, March 11, 2001 8:31 AM
Subject: Re: [RT] Valuation - Tech
> Of course charts will tell you the answer just like finding a lost item
will
> be in the last place you look, but Don asked for something fundamental, I
> don't know how more fundamental you can get than earnings, growth rates
and
> bond yields. Weather that formula holds today is another question. In
1987
> it worked remarkably well in predicting the crash lows of 2,000 stocks.
>
> not a fundamentalist, just a collector of mkt trivia,
> bobr
>
> ----- Original Message -----
> From: "Ira Tunik" <irat@xxxxxxxxx>
> To: <realtraders@xxxxxxxxxxxxxxx>
> Sent: Sunday, March 11, 2001 8:13 AM
> Subject: Re: [RT] Valuation - Tech
>
>
> > 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/
> > > >
> > > >
> > >
> > >
> > > 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/
> > >
> >
> ------------------------------------------------------------------------
> > > Name: RGV.rtf
> > > RGV.rtf Type: WINWORD File (application/rtf)
> > > Encoding: quoted-printable
> >
> >
> >
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> > realtraders-unsubscribe@xxxxxxxxxxxxxxx
> >
> >
> >
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http://docs.yahoo.com/info/terms/
> >
> >
>
>
>
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>
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