December 6, 1998
Friday's close: Dow 9016, S&P500 1176, NASDAQ 2003 November 23 Dow 9374, S&P500 1188, NASDAQ 1977 July peak: Dow 9337, S&P500 1186, NASDAQ 2014
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The averages have retreated a bit in the last week, giving rise to the spectre of a trading range bracketed by the September and October bottoms around 7500 on the Dow and the July and November peaks around 9300 on the top end. It's hard to make much of a bullish case with average P/E ratios around 29, financial instability around the world, and nothing special happening with corporate earnings. The tech stocks may be an exception. If they can find or develop new things which boost productivity, a lot of money will flow. It's interesting to apply the techniques of Buffettology to tech stocks. We must limit ourselves to ones which have positive earnings. Buffettology has no insight into stocks like Amazon.com or Yahoo! which deliberately lose money in the attempt to gain market share in the emerging Internet marketplace. But there are still plenty of tech stocks in established fields which reliably make positive earnings quarter after quarter. Here's a table of my favorites, with a five year Buffett style projection of total rate of return (after tax). |
Ticker Price Earn Div Book PE ROE Fut Price Divs After tax 5yr RR DELL $66.00 $0.93 $0.00 $1.26 71 73.8% $1,819.64 $0.00 $1,402.91 86.0% AMGN $78.75 $3.04 $0.00 $9.22 26 33.0% $435.32 $0.00 $285.26 35.8% ORCL $36.56 $1.00 $0.00 $3.17 37 31.5% $189.45 $0.00 $122.31 34.2% PMTC $16.17 $0.38 $0.00 $1.27 43 29.9% $77.75 $0.00 $49.27 32.3% MSFT $127.38 $2.04 $0.00 $7.29 62 28.0% $559.77 $0.00 $345.92 30.0% IBM $164.25 $6.21 $0.88 $19.71 26 31.5% $690.54 $13.25 $429.12 29.3% BMCS $47.19 $1.19 $0.00 $4.39 40 27.1% $199.00 $0.00 $121.45 29.0% CPWR $61.88 $1.31 $0.00 $4.90 47 26.7% $256.38 $0.00 $155.61 28.6% PFE $112.44 $2.49 $0.76 $6.66 45 37.4% $449.40 $11.05 $276.31 28.2% GTW $51.31 $1.96 $0.00 $7.67 26 25.6% $201.01 $0.00 $119.75 27.2% LLY $86.13 $1.79 $0.80 $4.10 48 43.7% $315.31 $10.95 $190.02 26.2% ABT $49.75 $1.43 $0.60 $3.54 35 40.4% $176.06 $8.02 $105.94 25.6% INTC $116.31 $3.25 $0.16 $13.08 36 24.8% $415.18 $2.15 $240.41 25.1% BMY $126.19 $3.46 $1.72 $7.60 36 45.5% $434.73 $22.57 $260.60 25.1% VSIO $35.63 $0.89 $0.00 $3.76 40 23.7% $127.45 $0.00 $73.46 25.1% PSFT $19.75 $0.62 $0.00 $2.65 32 23.4% $69.72 $0.00 $39.98 24.8% CSCO $78.25 $0.94 $0.00 $4.55 83 20.7% $241.46 $0.00 $130.57 21.7% SUNW $75.19 $1.95 $0.00 $9.92 39 19.7% $220.69 $0.00 $116.40 20.6% MRK $157.63 $4.16 $2.16 $10.63 38 39.1% $443.45 $24.73 $243.75 20.6% SBC $50.13 $1.98 $0.93 $5.89 25 33.6% $134.13 $10.30 $73.49 19.8% BGEN $80.44 $1.68 $0.00 $9.09 48 18.5% $222.52 $0.00 $113.67 19.3% ASND $57.06 $1.12 $0.00 $6.09 51 18.4% $157.13 $0.00 $80.05 19.2% CA $43.81 $0.96 $0.08 $4.82 46 19.9% $119.83 $0.90 $61.36 19.1% HBOC $24.00 $0.56 $0.08 $2.75 43 20.4% $63.01 $0.88 $31.74 18.4% SYMC $20.31 $0.70 $0.00 $4.98 29 14.1% $44.72 $0.00 $19.52 14.4% HWP $63.63 $2.77 $0.64 $16.70 23 16.6% $130.75 $5.97 $57.34 13.7% ADBE $45.13 $1.44 $0.20 $10.33 31 13.9% $89.09 $1.82 $36.28 12.5% MUEI $20.50 $0.50 $0.00 $4.35 41 11.5% $39.38 $0.00 $15.10 11.7% AOL $88.00 $0.30 $0.00 $2.67 293 11.2% $166.71 $0.00 $62.97 11.4% QCOM $53.94 $1.47 $0.00 $13.56 37 10.8% $100.02 $0.00 $36.87 11.0%
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This top 30 list is my blue chip tech list. I've included one baby bell - SBC - to represent one of the more tech oriented telcos. Note that Worldcom loses money and so doesn't fit the Buffettology model. It's interesting that Dell, with its sky high PE, comes out on top in this value oriented model. That's because it gets great returns on book value and even after compounding only five years, it comes out on top as a result. |
Richard Gillmann (richard@nwfolk.com)
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