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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: Dan Duchardt who wrote (12979)6/28/2000 9:04:00 PM
From: virgil vancleave  Read Replies (1) of 14162
 
I actually have ames on my watch list and like yourself saw it about 2 years or so ago when it was at 4. I also watched it go to the 40's wishing I had bought. But as they say, hindsight is 20/20.
The retail sector has been out of favor for a while now. Take a look at the charts of tom, anf, aeos, and a few others and you will see what I am talking about. The stocks have been beaten down so far that there is some real values showing up now. the chart of ames is actually resting on some weak support going all the way back to 1997. The valuation at present numbers shows ames is now undervalued and looking at the stock price action, people seem to be bailing as if the company is folding (which is quite doubtful). With a book value of 20, cash of $1.50 a share, and a price to sales ratio of .06, ames truly does appear to be undervalued. Only thing that bothers me with the current trend in interest rates is their debt to equity ratio, which is a 1.44. The company is making money and is projected to make over $2 a share next year. At under $8 a share, it really looks like a bargain. Looking at the chart, I would wait for the current downtrend to stop, with the price action leveling off or breaking the trend, especially since they just recently prewarned of slowing sales.
All that being said, ames may well be an excellent covered call candidate.

Hope this helps. Good luck
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