Yeah, it is tough watching this thing bounce around. I have been in it for 2 1/2 years, so I understand. They have turned it around very nicely, but they don't bang the drum to Wall Street, as apparently they got burned in a lawsuit a few years back. Since the last conference call they have gotten a lot of advice from people, including by someone from a big investment house, on how to manage the news process a little better. We will see. This is how you uncover the little hidden gems. They have nice solid fundamentals, and growth is ramping up a lot over the last year, yet they trade at about half the P/E they used to trade. It makes no sense to me.
As for insider selling, it is in very small quantities relative to the holdings of those selling. In Peter Lynch's book, "One Up on Wall Street," he writes that it is silly to act on anything other than massive insider selling. He states that insiders sell for a variety of reasons, almost all of which are unrelated to the company (such as wanting to buy a bigger house, put kids in college, or cash in a bonus, just to name a few). But, he adds, there is only one reason insiders buy: belief that the company is going to head north. So I would put very little stock in the insider sales. Hell, Yossie, Rony, and Dahlia can't even dump their huge stakes unless they agree to sell the whole company in mass. When that day comes we will all make a lot of money. For now, their Founders Agreement limits them to one or two percent per year, as I understand it. That is nothing. The beauty in that is the fact that these insiders cannot sell, so they HAVE to work to kick butt, as their nest eggs are tied up in it. I wish more companies had these arrangements, so more managers would not rape a company for bonuses, then jump ship (like Merisel...check out that piece of crap).
This stock seems to trade between 10 and 14 they same way it used to trade between 4 and 8. The difference now is earnings have picked up, and should continue to do so. Thus I think they will rachet higher by the fall, maybe bounded in a trading range between 15 and 18. Ultimately they should trade higher than they did in 1993, as they are a tremendously better company, with much better and MORE products. That ought to make them a $30 stock in a year or two. Given the year over year growth rates of 30-50% for revenues in the last three quarters, I think it is silly that they now trade at what, 18 times earnings? If you toss out the tax benefit in the fourth quarter, and give them ONLY 15 cents for the current quarter in operating earnings, then you have a P/E of 16. Does that not seem silly to you? It does to me. |
