Apple since 2003

Microsoft: Up 25,000% since IPO in 1986

Microsoft loses 11% on 4/28/06

Bill Gates loses over 3 Billion dollars… in one day 4/28/06

NOW HE IS ONLY WORTH 55 BILLION DOLLARS.

Bill Gates $113 Million HouseBill Gates $113 Million House

Most expensive residential house ever built. The $1.4 millionguest wing has two bedrooms, 2 bathrooms, & its own dinning room.

http://www.usnews.com/usnews/tech/billgate/room12a.htm

Pool:Pool: $6 million, 60-foot long, complete with a waterfall and itsown underwater stereo system. 12 bathrooms12 bathrooms. . 3 kitchens3 kitchens. LibraryLibrary has 10,000 rare books including da Vinci’s 72 page$31 million scientific notebook.

Bill’s garagegarage has 3 Porshes, 1 Mercedes, 1 Jaguar, 1 Ford Mustang,and a Ferrari. His other $1.2 million garageother $1.2 million garage will hold 30 cars. Bill can jump off excess energy in his trampoline roomtrampoline room with20-foot high ceilings.

Consider that he made this money in the 25 years or so since Microsoft was founded in 1975. If you

presume that he has worked 14 hours a day on every business day of the year since then, that means he's been making money at a staggering million dollars

per hour, around $300 per second. Which means that if, on his way into the office,

should he see or drop a $1000 bill on the ground, it's just not worth his time to bend over and pick it up. He would make more just heading off to work.

Bill Gates’ Opportunity Cost of stopping and

picking up money on the street

Lucent Technologies: Ouch!

GENERAL MOTORS: OUCH!

Which car is more expensive?

$5,000$8,000

Which stock is more expensive?

• Whirlpool at $67 a share… or…

Or Maytag at $27

To find out which is more expensive…

• You need to understand the P / E ratio, or the PRICE TO EARNINGS RATIO.

• This is what matters, not the stock price

PE RATIO FORMULA

Stock Price ---------------- = Price to Earnings Ratio

Earnings per Share

27--------- = 12 P/E Ratio2.18

The price you are paying for Maytag is 12 times earnings!

Another way to look at the PE formula

M (Multiple) X E (Earnings) = P (Price)

M X E = P

WHIRLPOOL’S PE RATIO

$67-------------- = 11 PE RATIO

6

WHIRLPOOL PE = 11

MAYTAG PE = 12

WHIRLPOOL (AT $67 A SHARE, IS ACTUALLY THE CHEAPER STOCK: It trades at 11 TIMES EARNINGS)

Maytag at $27 is the more expensive stock which trades at 12 times earnings and is more expensive…. But…..

Maytag is growing its earnings at 9% a year and Whirlpool is growing at 5%

Most investors would argue since Maytag is growing twice as fast, it’s PE Ratio should be twice as high Whirlpool’s.

So Which stock is really Cheaper?

MAYTAG, even with its higher P/E Ratio, because it is growing twice as fast!!

• Maytag is more likely to produce a Win. Maybe the “line”, or PE Ratio is wrong

• Always compare the P/E of a Company to its competitors, or cohort, and the average of the S & P 500.