Post of the Day
February 7, 2000

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Canada

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Subject:  The Future's So Bright...
Author:  SemperAugustus

Hey dudes,

I just won $235 billion dollars in the Manitoba lottery and I thought maybe I should invest it, you know? So I looked around for the hottest growth stock I could find, and it turns out it's this communications technology company called Nortel Networks. It's quadrupled in the last year alone, so that means only two and a half more years until I'm a trillionaire. And you know what's even better? I've got enough money so I can buy the whole thing and still have $1.4 billion left over to buy a jaguar and stuff!! Woo-hoo!

Anyway, I was all set to enter the buy order when my 10-month-old daughter told me "You know, Daddy, Nortel isn't making any money. They actually lost $0.2 billion in the last 12-months." And I thought: "Wow, that's a pretty coherent statement for her first ever words" and I even felt a little guilty having to chastise her with: "It's not about the past, honey, it's all about the future. Analysts are forecasting $1.81 for next year."

"Well, Daddy, analysts are off by > 15% four times out of ten, and anyway that's still only $2.5 billion in earnings." [It's amazing how quickly your kids can learn to say "only $2.5 billion" after you win the MB lotto].

I scowled at her, and was about to type in my trading password anyway, when she asked: "Can't we at least see what else we could buy?" By this time, my wife was looking over my shoulder too, and technically it's half her money, so I said "Hmmmphh! Well, OK, but this might take me all night." "We'll wait" they said.

I emerged the next morning with the Augustus family stock ballot:

Door # 1
Nortel Networks:
$233.6 billion in market cap
-$0.22 billion in trailing earnings
$2.47 billion in forward earnings

Door # 2:
All 5 big banks (TD,CM,RY,BMO, BNS)
2 piddly PQ banks (LB, NA)
4 mutual fund companies (AGF, IGI, MKF, SZ)
5 retailers (CTR, L, Metro, HBC, LNF)
3 electric utilities (TA, NSH, FTS)
2 pipelines (TRP, W)
2 auto parts suppliers (MG, LNR)
2 profitable biotechs (BCH, MDS)
2 media/broadcasting companies (CGS, AAC)
2 giant fertilizer companies (POT, AGU)
The world's biggest gold producer (ABX)
3 insurance companies (FFH, ELF, KFS)
2 big forestry companies (FCC, NF)
2 big mining companies (NOR, CCO)
2 oil & gas producers (POU, PCP)
2 profitable steel producers (IPS, HSG)
4 engineering/construction companies (SNC, TIH, ST.a)
Power Corporation
Bombardier
ATY Techs
Thomson Corporation
EdperBrascan
Manitoba Telecom (not as big as BCE, but profitable)
Lots of great beer and so-so wine (Unibroue & Vincor)
10 successful small-cap growth companies
2 dead fish (LDM, MCL)
Plus enough left over to buy $13 billion worth of 6% bonds in case all hell breaks lose in the market.

Total = $233 billion
Trailing earnings = $16.3 billion
Next year = > $17.2 billion (couldn't get estimates for all of them, so I just assumed constant from 99).
And by the way, $7 billion of those earnings will get returned in the form of annual dividend payments.

Can you believe it, they outvoted me 3 to 1 (even the dog turned traitor on me).

Fuming in MB,

Semper

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