Quite often I receive emails from people asking me if "Former Hot Money Favorite Inc" (symbol FHMF, or you may substitute a symbol of your preference such as: JDSU, CMGI, AMCC, ICGE etc.) will ever go back to its former high. Up to this point I have been giving my opinion on a case -by- case basis, but after reading an excellent article by Mr. Sy Harding, (READ ARTICLE BELOW) I got inspired to write more about the topic, and express my views in a more "organized" and "coherent" way. The following views encompass pretty much most of the stocks people e-mail me about, and hopefully I will never receive another email about JDSU. After having answered about 1,500 emails over the past 6 months about JDSU, I plead for mercy, please NO MORE!

    The basis for all the emails about JDSU, is the call I made in October of 2000, on the air at KWHY-22, predicting that JDSU will eventually trade below $15.00 per share. Thus, people now ask me if I see any reasons for this stock, and others of the same ilk, to return back to their former highs, any time soon. Apparently, some think I am some kind of "genius" or, "expert" on JDSU  for making that call , I wish I was, I am NOT! I was being simply rational when I made that call. Rationality has been the basis from which I valuate stock prices. So, on that basis, my answer to the never ending question of return to former glory is this : 95% of the bubble recipients of the late 90's will not return back to their former price levels, not in the near future, not in the distant future, not ever at all! Why am I so pessimistic? I am not pessimistic, I am just  a rational investor, and here are the reasons for my beliefs:

    1. Stock prices, historically have reflected growth, value, or, some combination of both. JDSU at $100 per share, or CMGI at $200 per share, or AMZN at $120 per share, or PCLN at $90, etc., the list goes on and on, reflected neither achievable growth, nor underlying value. Those prices reflected silliness, ignorance and greed on behalf of the people who were buying these stocks at those levels. We now know -some of us knew, and said so loudly, all along-  that the levels of growth implied by those prices were un-achievable under any rational circumstances. If you were naive enough to believe growth estimates for QCOM -for example- then you would have to accept that within 5 years half of the globe's population -including new born babies- would be using mobile phone equipped with QCOM's CDMA technology! Thus, given that the growth rate implied by those prices is un-achievable under any circumstances, it is also logical to conclude that rational investors seeking growth will never pay these prices. So, that leads us to the next question: how about value?

    2. "Value" by any measurement, reflects the estimated amount that shareholders will receive either due to liquidation of assets upon dissolution of the corporation, or due to merger or acquisition. How do we find value? We discover value, generally but not exclusively, in three forms:

       a) The company has a well known and recognizable franchise, a brand trusted by millions of consumers, which allows the company a competitive advantage not reflected in the price of the stock.

       c) The company has assets that are valued in its balance sheet for less than their current true market value , such as land, reserves, buildings etc..

    So, to all those who are holding PCLN -substitute any company of your choice in this exercise- hoping some day it will go back to $90, I pose this question: " what is the valuable franchise, liquidation value and undervalued assets that can justify a stock price of $90 per share? NONE!

    In conclusion, if the growth will  not be there, and if the value is not there, they only way the bubble stocks will return to those highs, is if some other greedy, ignorant and silly neophytes buy into the hype. Unfortunately, those come once every 10-20 years and they do not buy into the 'old hype" they buy into the hype of their time, because their time is different!