Jack, I bought another half this morning at $9.60 to complete my allocated holding at an average cost of $11.80. Trying to catch bottom is impossible... one just have to be comfortable owning the stock at a certain cost price.
The facts are:
1. It is debt free. A debt free company with $1 billion revenue and over 10,000 captive clients simply do not go bankrupt.
2. It is going to ipo inteRealty (Geac's property system). In March, an analyst forecasted that inteRealty can fetch from $500 million to $1 billion, which is equivalent to $8 to $16 per Geac share (It has 62 million outstanding shares). Essentially, an investor buying today will get the rest of Geac for free.
3. Geac is made up of ERP systems (ie mainframe software applications business) and vertical systems such as inteRealty and SmartStream Banking Systems. It sold SmartSream last week for C$160 million (3.4 times revenue). This is clear evidence that the vertical systems are worth good money. It has various other vertical systems, which can be sold off if necessary to generate more cash. The total parts of Geac is estimated to be worth at least $22 a share. So, at today's price, an investor is buying at a 50% discount to intrinsic value.
4. The ERP sector has slowed down for ALL software companies, not just Geac. After spending tons of money for Y2K, businesses are cutting back this year on software expenditures. This should be expected, but it shouldn't last long. Software is mission critical to companies, and as long as business is good, they will spend money to acquire new software. Investors thinking it is the end of the world for Geac will be proven wrong.
5. A stock price movement creates psychological momentum. Price movements are frequently totally irrational.. either too high, or too low. In this case, too low. The herd mentality has driven the stock to a ridiculous low.
6. Listen to analysts, and you'll be buying high and selling low. In April, Geac was a strong buy among analysts, with target price of $45. In late May, when momentum style money managers realized the slow down in the ERP sector, they started dumping the stock from mid $20 to $14. Subsequently, the company reported its Q4 and warned of ERP slowdown for the next 2 quarters. Analysts downgraded the stock, and cut target prices from high $40 and $30 to the mid teens. As usual, analysts downgrade and cut target price AFTER the stock has fallen. Hey... we know how to do this too!
7. Momentum money managers may have dumped the stock. But what about the value managers? They are starting to get interested now, and waiting for an opportune time to jump in. So, the circle goes round and round. As individual investors, we gotta play according to our own tune... and not that of analysts.
8. Investing is never risk free, nor is stock price predictable in the short term. However, it is more predictable long term. Buying at today's price has a high probability of doubling your money within a year or so.
9. For dumpthelackies to prognosticate and say "sell the stock now and catch it again at $6" is a fool's game. Without an intelligent discourse on how the $6 is arrived at, he could be lucky, but certainly not believable.
But then... here's a person who joined SI in Feb this year, and has singularly only frequented this board with his "dump management" messages .... what more is there to say. |
