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Friday, January 13, 2006

Overvaluation - A good place to start (MORN)

The overhaul of equity research and the entrance of new 'unbiased' (uninformed?) players is actually generating some thought-provoking pieces. This article put out by Morningstar (MORN) highlights what they believe are "The Market's Most Overvalued Stocks". Wow, we didn't see many people calling it like that back in DotCom 1.0. It makes my little heart patter! (Yes, I do have one.)
For your information their nominations are:
  1. Sirius Satellite Radio (SIRI)
  2. US Airways Group (LCC)
  3. MEMC Electronic Materials (WFR)
  4. LSI Logic (LSI)
  5. Elan (ELN)
I actually like this piece of research, although I do think that Morningstar suffers a similar fate as Standard and Poor's research; namely, they don't really understand who has a strategic advantage in future markets. But hey, few people do.
What they do excel at, however, is the ability to rationally look at valuation against modern valuation paradigms and identify expensive stocks.
Notice that 4 out of the 5 stocks are tech stocks.
I'm just sayin'.

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