Week 5/Year 2002: EDIG vs. NASDAQ
With its close this week at 1911.24 the NASDAQ is down 2.0% from its 12/31/2001 level of 1950.40, down 22.6% from its 12/31/00 level of 2470.52 and down 53.0% from its 12/31/99 level of 4069.31.
EDIG closed the week at $1.11, down 15.9% from its $1.32 price on 12/31/01, down 34.2% from its $1.6875 price on 12/31/00, and down 61.8% from its $2.9062 price on 12/31/99.
EDIG has now underperformed the NASDAQ for four of the five weeks of the new year.
However, compared to their respective year's low prices on 9/21/01 ($0.73 and 1387.06) EDIG remains ahead, +52% to +38% for the NASDAQ Composite.
(Let me address why I note the relative performance of EDIG and the NASDAQ since 9/21/01.
There are two good reasons to look back to that date.
First, since June 1997 there have been only two days in which the NASDAQ index fell under 1390. Those days were 10/8/98 and 9/21/01. Suppose you had perfect market timing and you sold your EDIG and invested in the NASDAQ at its low on 9/21/01. Great decision right?
Wrong. EDIG has surpassed the performance of the NASDAQ by a wide margin since that date. So even picking the best entry date for the NASDAQ in five years is no assurance that you will outperform EDIG.
Second, on 9/21/01 there were dozens and dozens of posts from bashers urging e.Digital investors to dump their shares before the stock collapsed further. My comparison shows how damaging that advice would have been. EDIG was driven down due to some margin selling by a few investors (in my opinion) and the rebound the very next trading day showed how absurd were those bashers' claims.)
Although EDIG remains behind the NASDAQ, in the past such occurances have been the signal that a large price gain might occur within a short period of time. In fact, 15 of the last 16 EDIG price jumps of 10%+ (measured from the previous day's close to that day's high) have occurred within eleven trading days of a Friday in which EDIG had underperformed the NASDAQ index.
Here is the scorecard since 12/31/00: In 38 of the 57 weeks EDIG has outperformed the NASDAQ Composite index on a year-to-date basis.
For the period since 12/31/99, EDIG has outperformed the NASDAQ index in 85 of the 109 weekly comparisons.
Actually, if EDIG rose to $1.29 (18 cents) it would match the NASDAQ index for 2002. Or put another way, if the NASDAQ fell to 1640 it would equal EDIG this year.
Some bashers like to point to the decline in price that e.Digital has endured from its 1/24/00 peak and claim that EDIG has performed worse than most tech stocks.
But consider this fact: Even after their recent sharp recovery, of the 150 largest technology stocks (by market capitalization at their peaks) 59 (over 39%!) closed this week at prices which represent more than a 90% decline from their peak value (as did EDIG, of course.) The average decline in value for all of these 150 stocks from their peak price to their 12/31/01 close was 79%.
What is the point I am trying to drive home with this weekly comparison?
Not that EDIG has been a better investment than holding a diversified group of NASDAQ stocks (although that has certainly been true at most measurement dates!), but rather that EDIG is closely following the fluctuations of the NASDAQ prior to the expected release of good news from the company.
EDIG shareholders know that they have a better upside potential than the vast majority of stocks in the NASDAQ Composite and are thus unwilling to sell their shares at these prices.
Yes, the NASDAQ will recover over time and will someday surpass its previous highs.
But when e.Digital is associated in news stories with the latest and by far the best digital jukebox and other exciting new technologies, marketed by well-known consumer electronics brands, what will happen to the price of EDIG? Could it rise above $2.98?
Of course it could, and likely will. But the NASDAQ would have to rise above its old 5132.52 all-time high to keep pace with EDIG shares purchased at this past week's price levels if that happened.
Which do you think is more likely to occur first? A rise in the overall market above its old all-time high, or the release of revenue-related news about e.Digital products that could send the stock skyward?
For me the answer is clear and that is why I have been purchasing substantial blocks of EDIG at these levels.
Stay the course and ignore the rantings of all of the foolish, manic bashers who fester on Raging Bull in lieu of a real life. Their goal is to disrupt the e.Digital investor community which has developed.
The "long-bashers" (who hold the stock but whine every day on this board that news hasn't been released to meet their impatient expectations) will be the saddest of all when exciting developments are unveiled, because they failed to heed suggestions to take advantage of a golden opportunity to average down their cost basis at these prices.
In November the company launched the MXP-100, a new IBM MicroDrive-based digital audio player with voice navigation and a new e-commerce site which will sell that product and other e.Digital players as they are released. The MXP-100 has received outstanding reviews both from consumers and from impartial media experts. We then saw a coordinated publicity campaign for that player and the new www.Edigital-Store.com site launched, including the first national television commercial in the company's history. Sales of just 100 units per day will cover all of the company's operating expenses. Fred Falk has also advised all of us in his most recent letters that the list of OEM customers continues to grow and includes some of the best known brands in the consumer electronics world. Recently Circuit City began sales of another e.Digital-powered jukebox under its house label. In rapid succession two other digital audio players using e.Digital technology were launched - the Treo 10 which has received favorable comparisons to the Apple iPOD and the MP2000.
So far the year 2002 has seen two new EDIG-engineered products announced - the MTV/DataPlay player and a wide-ranging collaboration with Fujitsu Ten MP3 drive on a new automotive infotainment system. Visitors to the CES saw several other e.Digital-designed products including the e.Digital Renegade, the new Bang & Olufsen digital player and two soon-to-be announced DataPlay players from I-River and Digiset.
We can reasonably expect many positive announcements in the near future as more DataPlay audio devices come to market this spring. The recent letter from Fred Falk and newly-appointed EDIG president Jim Collier indicate that OEM announcements and retail availability of the MXP-100 and Treo are expected shortly.
Each such product and company development should have a favorable impact on the share price in the weeks ahead.
Keep a reasonable perspective on the relative state of your investment here. It is doing just fine, given the condition of the market.
JimC |
