Thursday, September 22, 2005


One of the services to which I subscribe is Morningstar. The stock screening tools are pretty decent and I like to use the comparison tools. I find that if Morningstar. recommends a stock, it might be pretty dull but a pretty decent value.

Last week the company. added three more stocks to its 5 star list. Gannett (GCI), Pier I Imports (PIR) and Sanmina-SCI (SANM). I think (GCI) is the most interesting pick. In an age when EBAY, Craig's List, Google and others are taking away a big chunk of advertising business from the newspapers, these old powerful companies have strong cash flows and solid balance sheets.

I know a lot of folks who just cannot bring themselves to pay $300 for shares of Google. I think this is a mistake but those who want to own a solid company should consider Gannett. I believe the risk in Gannett is lower than the risk in companies such as SBC. The phone companies have the same problem (that technology has destroyed the old way) but the phone companies are spending billions to become cable TV, ISP, phone companies.

Google. is building a competing network and is pricing its products based on the future costs of storage and transmission, which is expected to approach zero! SBC and VZ currently are paid billions to transmit data. If the cost approaches zero, how much will these firms be able to charge? Google. will collect revenues for matching vendors and customers. Google. is willing to send a person a half hour TV show in exchange for a relatively small amount of advertising space.

Without looking it up, I suspect < Morningstar is a good place to find information but the reality is that no one knows who is going to win the "net" race. John Battelle writes in "The Search" that the product life cycle of search is in the first 5% stage. Search is going to improve dramatically. Consumers will be the big winners. Consumers will read and view what is interesting to them. Instead of reading about the local high school game in the newspaper, interested folks will watch the game on IPTV. In five years, Google. earnings have grown something like 47,000 percent.
All investors must think twice before buying a stock selling at $300 per share and at a PE ratio of 70 times. On the other hand, all investors should think twice before passing up the chance to own shares in a company that can send you audio, video and unlimited text for free.