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Strategies & Market Trends : Value Investing

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To: Michael Burry who wrote (8946)	12/7/1999 4:30:00 PM
From: Bob Rudd	Read Replies (2) of 78627

OT: Anyone look at RHAT on short side - makes AMZN look like value play. They package Linux [Freeware essentially] with their own tools and helps and offer consulting services. This year they'll do $15 - $20 million annual revenues with no profits when analyst concensus calls for 5 year growth of 'profits' @ 25%. If revenues grew at 50% annually [twice analyst projected 'earnings' growth rate], in 5 years RHAT would be selling at 126 times projected revenue [not profit, revenue] based on todays closing market cap of $19.5 Billion. And it appears that, other than brand name recognition, there's nothing to stop competitors from offering the software and a bunch of help stuff in a box. Consulting isn't scalable like software, so growth there is tethered to ability hire linux guys. There are new competitors Corel and 2 coming IPO's and I bet a bunch more are looking at coming in. Today it added a mere $3.6 Billion in market cap rising 53 to 284. With this kind of momentum, it would be nearly suicidal to short with anything other than wee tiny % of equity, but I post it here as my candidate for POSTER CHILD of lunatic valuations. bob

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