Ghassan: One can not always be on the mark with estimates because we lack all the information. Perhaps my response to your questions should be posted on the Novell Board rather than here BUT I will try to address your inquiries.
First, I am an investor and make all my $$ from investing. As a result, when I take a large position in a company, I research it, study it and establish short and long term expectations which I feel the company must meet. My goal is to grow my capital, with low risk and generate enough gains to pay my bills and have fun doing it. I can not afford to loose any of my capital, so I focus on portfolio diversification, and undervalued companies.
Some people put more time in researching buying a VCR or TV rather than their investments. I have shared with Stock Talk Investors my day to day and other observations for this one company as it is a very interesting case study of one "High-Tech" company. I feel Novell is quite undervalued with a better than average chance of completing a turnaround (re-focusing its resources and assets) to generate higher and consistant returns in the future. Typically, you do not see this in the "High-Tech" sector and more times than not, these companies will just fade away.
Do I get paid for my research? No, but if anybody wants to make contributions, maybe we can work something out. Since I spend 90% of my time researching investments, information and investment ideas are important and that each individual follow their own investment philosophy rather than following the heard or the "hot" tip. I typically invest in companies which are beaten down and out of favor...ALWAYS buying companies which are BELOW their 200 day moving average. Right now I am looking at new investment ideas which I will be selling 18 months to 3 years from now. There are still some very interesting and undervalued companies available. I have been studying the NASDQ and small cap companies over the last seven years and this sector is much more difficult (for me) to utilize my value investment approach.
Always look at the negatives along with the positives. Dodn't fool yourself. Things change and one must be quick to act but only on continued unexpected changes. If in doubt give your management team a chance...that is why they get paid the big bucks.
My earnings estimate for Novell was off from my $0.06 estimate to <$0.15> loss. I do not report to anybody but myself and take the consequences accordingly. I have not really spent the time to measure my estimates with actuals to determine where my numbers were off because it is a moot issue. More importantly, as I stated in earlier posts, is what were the changes in the Income Statement and Balance Sheet after the Q2 reporting. I also provided an analysis of 'expected' re-channeling estimates by an analyst and stated that the company was doing better than that analyst's expectations.
Back to my estimate. My adjusted sales were off a bit as I did not back out enough for previous revenue from the WP product line. The 1995 annual statement did not give me the detail breakout and I guessed too low. My one time adjusted expenses were too low and should have included more write downs for employee reductions. These numbers are very difficult to estimate using the 10K and 10Q reports. Companies which have complete accounting staffs have a hard time pinning these numbers down. Therefore, I would not put too much on any analyst 'exact' estimates BUT rather the components and what those components will look like going forward. Going back through my notes, I was originally looking at $0.17/share until I understood what this re-channelling was and how it would impact the reported sales numbers.
Finally, I try not to spend too much time on where the companies been, only that it is out of favor and its asset base is solid. I am more concerned as to where (and the potential) for the company going forward and that the "market" will evenutally price the company to an industry average 'fair' value.
For Novell...I take similiar companies in the Industry, CA, MSFT, etc see where they trade...PE range 26-35 if everything is working. Novell should earn $1.00-$1.20 next year, the stock should sell between $26-$31.20-$35.00-$42. Therefore, $14.25 is a steal, $20.00 is still a bargin and $31-$32 is a resonable target in $18 months.
When I invest my own money, I must answer to my own criteria, my own decisions and to me only. If I am responsible for other people money, my overall philosophy might change. That is why I only trade my own account.
One last word of advise...People in general are greedy and want to make the fast buck with no risk...the sure deal. Well life is not always that straight forward. Believe in your own research, your own information, do your own thinking...nothing gained is ever free and requires hard work and always a bit of luck. Luck for your management, luck for your products which you sell, and perhaps a bit of bad luck for your competition. You can minimize the 'luck' component if you do your research on your products, management's experience and previous track record, and the overall industry outlook for growth. I believe Novell fits all of these characteristics. Also, one of the benefits I find is I really enjoy what I am doing and am comfortable with my investment philosophy AND do not get caught up in the greed and fear swings of the market. I plan to get rich slowly...
EKS
PS It might be interesting to hear other forum member's investment philosophy and ideas on investing. No one way is the best or correct way. |
