finallly..., page-11

Dhukka: Not factoring price against value is folly in my oppinion if PE ratios and Earnings yeild which use price against the value and tell us what we are paying are not your cup of tea that's fine I like to use them and have found them very helpful. If its good enough for Peter Lynch who came up with the PEG, Anthony Bolton and Joel Greenblatt who uses earnings yield as a major part of his work then its good enough for me. Asides from that I have found your latest blogs very helpful and quite accurate. I'm not blindly just using PE of course I factor in as much as I can for quality ie: debt levels, ROC, growth rate, dilution,management, free cashflow etc. The PE helps (I emphasise "helps") determine the price that you pay for that value. Ivanovich that's interesting about the correlation between PE and market cap I have noticed that also, that's why I stay in the microcap area so I can hopefully get that expansion, I don't see larger companies as higher quality just because they are larger and I like to get in at low multiples. I also think that the larger a company gets the harder it is to make eps accretive acquistions, mainly because when its larger it is harder to find good acquisitions at the right price that make a difference in eps growth,hence why I think BGL is at an advantage being small. I bet the multiple on MTU shrinks if they can't find further decent acquisitions, they might have to step outside their expertise in the pursuit. Soros wrote a very interesting part in the alchemy of finance about the conglomerate boom of the 60s where this happened and caused a boom/bust which is worth a read.

All my posts represent my personal views only.