Shorting stocks: High fliers Message Board

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Strategies & Market Trends : Shorting stocks: High fliers

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To: Mark Marcellus who wrote (704)	9/25/2000 5:26:45 PM
From: Bob Rudd	of 709

Mark, I looked at this around the same time frame 97/98, thought it was way overvalued, but didn't short for reasons I can't recall. Did a quick and dirty on it today based on current expectations and come up with it being pretty fairly valued as of today's price. My reasoning: Take .42 2000 estimate out 5 years at expected 23%, apply a 30x multiple and you get a 16% return from current levels. [All based on current consensus estimates FWIW]. Unlike 1998, none of this looks out of whack or unattainable and the results could come thru a lot better [or worse]. When you shorted in 1998, this looked way overvalued, now it 'looks' pretty fairly valued. IMO, you need a much better risk reward than this to justify a short. One of the mistakes mentioned by Staley [book Art of Short Selling] was shorting something that isn't that bad. On the surface, this looks like it fits that description. Like I said, this was quick and dirty...I didn't look at quality of earnings or other issues or dig into the statements...If the earnings are rotten underneath, this may be a solid short. Just doesn't look it on the surface. Bob

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