LA Times columnist Tom Petruno pens an article on the growth and value camps. A stock can be seen by investors as a growth stock today, then seen as a value stock tomorrow. And then some stocks go through periods where they are claimed by both camps.
He writes:
A common refrain on Wall Street these days is that many big-name growth stocks of the 1990s now are value issues, at least in terms of price-earnings ratios. After badly lagging behind the broader market over the last six years, those stocks are cheap, some assert.
Cases in point: Microsoft Corp. and Intel Corp. are holdings of the Third Avenue Value fund managed by Marty Whitman, one of the pillars of the value-investing discipline.
It would have been impossible to imagine Whitman touching most tech stocks in the late 1990s.
But this year, he said, he was able to buy Microsoft and Intel each for less than 15 times annual earnings per share. (He arrives at that P-E ratio by adjusting the stock prices for the per-share value of the companies' balance-sheet cash.)
To put that P-E in perspective, the average blue-chip stock in the Standard & Poor's 500 index sells for about 16 times estimated 2006 operating earnings.
Yet Microsoft, Intel and other major tech issues also still qualify as bona fide growth stocks to many fund managers.
I don't own either. I also don't own some other former-growth-only stocks that some think fit as value plays. Wal-Mart comes to mind.
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