Friday, May 1, 2009


Below is something I wrote back in November 2007 to take a jab at what I thought was the general overvaluation of many stocks (especially those in emerging markets). So I picked on PetroChina and its $ 1 trillion market valuation. Unlike now, it was very difficult to buy inexpensive shares of good businesses at a fair price. The following was initially posted on November 7, 2007.

This blog didn't exist yet.

Club for Growth//Blog

What $1 Trillion Will Get You...

Posted on Nov. 7, 2007| 02:30 PM
Link to Article:
My pal Adam...just sent me and a few other guys the following email. In case you missed it, PetroChina went public on the Shanghai Exchange on Monday. The immediate valuation put the company's overall price tag at roughly $1 trillion.
I guess PetroChina is now worth $ 1 trillion. It got me to wondering. If we could pool together $ 1 trillion we could go on one hell of a shopping spree. 
The combined value of all 17 of the companies listed below is less than $1 trillion so we could own all 17 of them instead of just owning PetroChina. 
By the way, since we would still have $ 22 billion left over of play money we could then use that remaining dough to buy out all of Ferrari's production through 2030 or so....or just buy Ferrari the company itself. Whatever.
Of course, there may be some anti-trust issues owning the entire US Railroad Industry and both of Korea's major telecom companies. I don't think anyone will care about us owning both GM and Ford.
The number on the right is market value in billions.
Bank of America BAC 197.40
Altria MO 152.77
Verizon VZ 126.39
Pepsi PEP 117.4
American Express AXP 65.78
Home Depot HD 58.47
eBay EBAY 46.26
Lowe's LOW 36.23
Union Pacific UNP 32.86
Burlington Northern BNI 29.94
Korean Telecom SKM 20.52
Norfolk So. NSC 19.59
GM GM 19.52
CSX Corp. CSX 18.49
Ford F 17.66
KTC Corp. KTC 9.59
Expedia EXPE 9.32

TOTAL: 978.04 Billion

My view was that many stocks were selling at crazy valuations back in November 2007. I was also concerned about excessive leverage -- much of it, because of derivatives, not transparent enough to understand -- along with some of the other prevailing, rather dangerous, practices at some of the larger financial institutions. Yet I had no idea that we were within weeks of the peak in the stock market, and at the beginning of one vicious bear market.


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