Subject: After the Dust Settles
Date: Mon, Dec 1, 1997 23:08 EST
From: Norris 71
Message-id: <19971202040801.XAA15860@ladder01.news.aol.com>
Interesting Post From Motley Fool Thread
"Y2K has become a magnet for marginal companies trying
to make a name. There is a very narrow window here for Y2K and
earnings don't support a fraction of the stock price. This could
be a very good company at some point in time but it isn't now.
There are much better stocks for less money with decent earnings".
I respectfully disagree. Y2k has indeed become a magnet for marginal
companies trying to make the name. However, the reason most of us
are in TPRO is because it is different than the rest. It is not one
of those companies boasting the "y2k" in their press releases and
relying solely on its success. Management has expressed repeatedly
the great upshots that will occur because of the company' unique y2k
business. They're establishing ties here that will mean a lot to
their core business in a few years.
We all remember the fury and fun of the y2k stocks last year. TSRI
ran from 4 3/4 to 25 1/8 around this exact time in the year ago period.
Everyone wanted a piece of the "y2k companies" even though their
implementation and position within the industry was not even clearly
defined. These kind of furies happen all the time. Right now, we're
seeing the small electronic discount brokerage houses run like the
wind. Today AMTD was up 4 1/4 (12%) to a new 52 week high. EGRP
(E*Trade) was up 6%. Everyone is well aware of its rise.
Then and now are different just as those other y2k companies are
different from TPRO. Most here understand the significance of the
problem, its magnitude, and TPRO's role in correcting that problem.
Your comment that "there is a very narrow window here for y2k" baffles
me. What do you mean? Have you not seen the thousands of articles,
hundreds of television broadcasts, repeated mentions, etc. etc.? I
thought most in America were cognizant at least of the y2k problem.
If you're speaking with respect to TPRO capturing market share, you
have a bit more ground to stand upon. Why? Well, TPRO has told us
many times about their PlantY2kOne and its success and its client
base, etc. etc. They've also told us they are the only ones playing
the game (I love to beat myself in basketball). However, we have no
hard proof that it is a success and it's being gobbled up (sorry,
Thanksgiving still in me) by major companies. That should be put to
rest with the release of 2Q Earnings.
However, if you've called the CEO or CFO, the above is of no worry
to you since you'd already know orders are coming in through the
door, 80% of accounts are new, and the estimations of work TPRO will
perform are mind boggling. I agree with TMF Keeler when he said:
Strongly growing companies rarely are cash flow positive. It would
be a strategic error for TPRO to slow the development of the company
just to make the balance sheet look pretty.
We all hate those IOM comparisons, but this one is a valid one IMO.
When IOM was just a small company with a new product and potential,
their balance sheet, Income Statement, and Cash Flows stunk as well.
They were more interested with marketing their product then polishing
their financial forms. If your product is truly a success, the
"polishing up" of those financial forms will come on their own through
the success of the product being marketed.
Following your reasoning from the above would also seem to be
contrarian to making money in many of these small/micro caps. You
assert that this "isn't a good company now." Would you rather wait
then for the earnings to show up in all 10Qs and 10Ks and after
the stock has tripled. Will it be a good company then? Making money
on Wall Street is getting in and out before and after the crowds do.
As investors, we have to gather all information possible about a
company to clue us in as to which ones will be profitable in the
long run before anyone knows about them.
Concerning your opinion that "earnings don't support a fraction of
the stock price," at this stage would you expect it? I'm sure that
I or anyone else here could string off a list of unprofitable
companies that are still great investments. Amazon.com was purchased
by the Fools and it doesn't look like it'll turn a profit for 2-3
years! Iomega wasn't profitable when they purchased it either (but
they got an insanely low price). What possibly could have possessed
them to purchase these type of companies?
Simple. An understanding of the business and the company's role it
will undertake through expansion by a unique product or service. A
niche - what Wall Street investors dream of finding. Do you think
TPRO's 6.50 share price is because they have a loss of 36 cents per
share in their TTM? Certainly Not! It's based on what Wall Street
currently feels comfortable with. At the first sign of profits,, the
stock will most probably resume its ascent (a quick one at that).
"Small/micro-caps are full of companies with potential and promise."
I also don't agree with this and your statement that there are much
better companies out there for less money with decent earnings.
I can't think of any problem right now that represents as much
potential for businesses that the y2k bug represents. I also can't
think of any company that is essentially alone in its industry. I
ask you, do those "other companies" have the inherent potential that
TPRO has associated with the y2k problem? Do those "other companies"
have competitors or are they alone? Do those "other companies" have
proof of the reality existing with clients such as large cap names or
are they merely in developmental stages and it'll be another year or
two before any real signs show up??
The y2k problems stand to reap many rewards and punishments for
companies working in them. Some investors will be rewarded by those
few companies that are successful with their y2k business. Since TPRO
has no competition with the factory floor level aspect, it's a good
bet that if anyone's going to do the job and reap the rewards from
it, it'll be TPRO. Someone has to.
As far the MIS (Management Information Systems) side is concerned, a
lot of competition is out there. <<in a deep voice>> In the end,
there can be only one (Sorry - been watching too much Highlander).
What I mean is that when all the dust settles, the only companies
treading above water will be those that amply addressed the y2k
problem and can show profits. Some on the other hand won't and their
stock will fall fast since it is dependent upon the company being
successful. When it's discovered they aren't, people will drop the
stock like a bad habit.
I hope the above better explains why some of us feel so secure in
our TPRO investment. Those that walk the extra mile can find out
different things that can aid in evaluating a company. If I thought
there were "much better investments", I wouldn't be with TPRO.
Conservatively Yours,
Raymond J. Norris
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