Forum Archive Index - May 2000

[richard hermans <r.m.hermans@xtra.co.nz>]

Ben Dutton wrote:
> 
> Hi Neil,
> 
> Yup - I agree with what you say - of course one has to determine if a share
> is appropriately priced before making the buy decision.  But what's an
> "appropriate" price?
> 
> Looking at Telemedia, it's currently trading at $3.70.  That's down from its
> all time high of $10 on March 30 - and nearing it's one year low of $3.50.
> So is TMN appropriately priced?  Is it cheap?  Is it expensive?
> Unfortunately one cannot apply Buffetology to technology stocks (As the Sage
> of Omaha freely admits himself).  Mr Buffett certainly would never touch
> TMN - it has a P/E ratio of 284.62.  But others have, betting on the fact
> that it will be a winning company in the future.  They've even driven the
> share price up to $10.
> 
> Thus, by investing in TMN at its current price, one is betting that the
> company will continue to grow and prosper at a rapid pace.  I freely admit
> that this is a bet - but Chris Jones convinced me that he was the man for
> the job.
> 
> Of course, there may be problems that I'm unaware of - Lincoln Watson made
> some good comments yesterday about the possibility of TMN not being able to
> deliver at its current growth rate.  This may be true, I don't know.
> 
> For better or for worse (and we could discuss this for weeks :) tech stocks
> in today's market do not follow traditional valuation techniques.
> 
> Best Regards,
> 
> Benjamin Dutton
> 
> ----- Original Message -----
> From: <neil.selman@gfmb.co.nz>
> To: <sharechat@sharechat.co.nz>
> Sent: Wednesday, May 10, 2000 9:28 AM
> Subject: Re: [sharechat] IT Investment Forum Report - Telemedia
> 
> >
> >
> > Ben
> >
> > Thanks for the info re Telemedia.  I just want to pull you up on one
> point.
> >
> > I understand that you liked what you saw of Chris Jones and Telemedia, but
> then
> > you stated "if I had any available funds, I would invest in Telemedia
> today".
> > My concern is that, just because you just found out that Telemedia is a
> good
> > company, doesn't automatically make it a buy.  Not that I subscribe to the
> > efficient market theory, but it would say that the market already knew and
> > reflected what you just found out.   Ie the share is appropriately priced.
> Now
> > before you make a buy decision, you have to determine if the share is
> > appropriately priced.
> >
> > "You should only buy if the current share price offers a substantial
> discount to
> > the intrinsic value of the company" (a bit of Buffetology).
> >
> > I know that it isn't easy to value relatively new start up companies, but
> a
> > valuation must form the basis of your decision making.  Then when any new
> news
> > hits the market you adjust your value drivers and determine a new
> valuation and
> > move rationally.
> >
> >
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> >
> >Its great to hear all the views on TMN, A great stock I think, Have had some 
>since shortly after listing.Merryl Lynch did a review on the stock a couple 
>months ago & predicted it may reach $23 in next 18-24 months(all this b4 this 
>big correction of course) Still its been wonderfull to hear others opinions 
>today Many Thanks Margie
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