Cable Car Beverage (DRNK) Message Board

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Non-Tech : Cable Car Beverage (DRNK)

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To: MKEL who wrote (103)	5/23/1997 1:18:00 AM
From: Steve Patterson	of 284

Perhaps I should explain more. My current theory on exit points is as follows: If the stock becomes overvalued to the same degree it was undervalued when I bought it, based on trailing EPS, I will look for an exit. This assumes the rule of thumb that fair PE = long term growth %. "$6.88 in the short term" comes from assuming 30% LTG, noting that P/E was around 17 when I bought, and calculating (30 - 17) + 30 = 43 P/E times $.16 trailing earnings. This number will move as trailing earnings change (and hopefully increase). If the stock becomes fairly valued according to my best estimates of earnings 7-8 quarters out (right now that would be calendar year 1998), I will also look for an exit. This was the basis of the second calculation. The numbers here will obviously change as news causes me to revise my estimates for the future, and as time provides new numbers for trailing earnings. And there is no guarantee that I will actually follow my own advice: for instance, general market attitudes may cause me to bail early or hang on longer. I am just sharing my thought process with the group in case it is of help. Still long, Steve

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