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Strategies & Market Trends : Value Investing

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To: Bob Rudd who wrote (14036)	2/27/2002 12:49:55 PM
From: Don Earl	Read Replies (2) of 78748

I'll toss one out as a possibility. I mentioned it back in September when it was trading a little above $1. It went as high as $3 and is currently trading at $1.90. INLD is what used to be Micron Electronics (MUEI) before they divested their PC operations to focus on web hosting. One of the things I didn't like about the stock is their former parent company, Micron Technology, held something like 50 million shares on INLD and everything in the filings suggested they could hardly wait to get rid of it. That stock has since found its way into the hands of institutional investors who supposedly intend to keep it as a longer term investment. One of the things I still don't like about the company is when they divested the PC business, there were no "hold harmless" agreements to indemnify Interland against suits left over from Micron Electronics. Those suits are still pending and I don't know of any way to assess a risk factor to the eventual outcome. So far the company is still burning cash and is not likely to stop for at least another 3 quarters. Their current strategy is growth through acquisitions. It appears to be a buyers market and so far it looks like their targets are focused on value. Book value is $2.02 which is about half cash and half goodwill. The company is basically debt free with a debt to equity ratio of .13. There was one "strong buy" rating on the stock and Kaufman Bros initiated coverage yesterday with a "buy" rating. I've been in and out of this one a few times with fairly small positions and just started a new position. In my experience, it's fairly rare for analysts to show much interest in the under $5 stocks and I'm not sure if I've ever seen a brokerage start coverage with a buy rating on a stock trading under $2. To be honest, I still can't quite decide if this one is a diamond in the rough or a dog that needs to be put down. It has the kind of balance sheet I like, but as Bob puts it, it has a few warts. There's a potential cup and handle pattern forming, but so far no breakout off the handle to confirm a reversal. I've been watching this one for awhile and still can't make up my mind if it's a good value or just cheap. At any rate, I figured I'd mention it. If nothing else, it seemed fair to pick apart one of my own picks instead of just everyone elses.

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