Chapter 16. Value Investing: The Process

COSC: Concentrate On the Strongest Candidates

By March 2001, the market, especially for tech stocks, was in the pits. But graphics chip maker Nvidia was riding high. Microsoft had selected its new chip for its Xbox video game machine, which was expected to be a blockbuster. Nvidia had just penetrated the Mac market for the first time. Nvidia reported January quarter sales up 70 percent, and its January fiscal year earnings had soared 137 percent. With a P/E of only 29, Nvidia’s shares were undervalued by growth standards.

Much of Nvidia’s success had come at the expense of competitor ATI Technologies. Although still outselling Nvidia, ATI’s sales slumped 15 percent in its November 2000 quarter, and the ...

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