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Strategies & Market Trends : Pump's daily trading recs, emphasis on short selling
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To: Michail Shadkin who wrote (5057)8/7/2001 8:07:39 AM
From: Graeme Smith  Read Replies (2) of 6873
 
Michail,

What do you think of Avanti as a long? It seems to have oversold on the current news with $1.50-$2.00 of annual earnings selling for $7.

As far as the current court case the $200 settlement will reduces their book value but should not affect significantly their earning potential. Given their current cashflow they should have no problems establishing credit lines to pay off the remaining debt and fund themselves.

The big risk, and I assume this is why they have been pummelled is that Cadence is pursuing a second civil suit (a prior one was already settled as well as the current criminal). I assume the expectation is that if this is successful it will bankrupt them (and also could affect current business if their customers believe they are at risk of going out of business). However I don't know any details. My thoughts are that it will be years before it is finally settled. By which time should have further retained cash to cover costs if they lose (bankruptcy still probable) and if they don't then you have an incredible bargin.

I would expect over the medium term (6 - 12 months) this should again trade in its previous range on $15-$20 (10x PE) with good growth but the risk of litagation and bankruptcy over its head.

Graeme.

PS. Just joined your site as TheTourist.
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