Roger, I am surprised you are not hedged in the y2k group. As 2000 approaches you can bet the sector will receive widespread coverage by the media. Even today, the SEC is asking brokerage firms to disclose their y2k preparedness. As the century draws to a close, you can bet people will begin to panic with the daily bombardment of the news media (just look at their fascination with the recent White House crisis). If y2k does turn out to be a hoax, it will not be known until after the century rolls over. Why don't you wait until the latter half of 1999 to short when the frenzy is at its climax? Seems like it would be much safer. You should at least hedge with some y2k longs.
Take a look at C.K. Houston's report on TAVA and listen in on their conference call. Since TAVA has no competition to speak of, I am convinced y2k dollars will start coming their way within the next 6 months. They have recently begun shipping their CD ROM. The license costs $5k, fee to access their database is $3k, and each report is $200. The CEO figures the average user will spend $20k just on the CD-ROM/database package alone. Recently, 30,000 CD's were shipped. If just 10% are sold within the next 6 months, that's 3000 x 8000 = $24M in licensing fees, or $1.50 per share, with another 3000 x 12000
= $36M or $2.25 per share coming in over the next 18 months. So if gross margins run 85% on the CD, as stated by the CEO, and taxes are 35% of that, this yields .85 x 1.50 x (1 - .35) = $.83 per share near term, and $1.24 per share over the next 18 months. And this doesn't even include any services TAVA may provide at more than $100 per man-hour and gross margins of over 50%. So you can see why at least one broker is estimating $1.20 per share for this company next year. At a P/E of 15, that puts the stock at $18. I expect earnings to be greater, hence, I see the stock at $40+ sometime next year. |
