Robt,
I appreciate your comments. With respect to a framework, OXHP
fits into a framework very nicely developed by Ken Fisher -
a Super Stock hitting a glitch. This also fits with Graham,
who observed the markets overpunish litigation. Buffett agreed
with Graham here and felt the market's reaction could create
buying opportunities in otherwise solid long-term stocks.
Fisher observed that in the absence of earnings, for example
during a "glitch," one can judge the popularity of a company
based on PSR. IOW, when nothing is certain about the bottom
line, the top line is still fairly predictable. If investors
ignore continued top-line growth and continue to revise the
PSR downward, that is a sign of significant disfavor.
The theory goes that with top-line growth persisting, a floor
develops on the PSR even amidst all the disfavor. In such
a setting, the most likely direction over the long-term is
upward. Requisite are that the stock is a former high-flyer
with a significant analyst following that has fallen 50-90% due to
general analyst scorn.
As popularity returns, the PSR is bid up, earnings reappear, and
old PSR levels are hit at higher revenue levels. If one buys
at a PSR <0.40, and the stock gets back to 1.6 several years
down the road when revenue is 50% or higher and profitability
is returning, you have a 2 or 3 year 5-10 bagger. Hence,
a "Super Stock."
This is a pretty powerful concept, but it is key to understand
which companies have the financial and business strength to
survive. As we know, OXHP is going through a lot right now,
and it is hard to imagine many companies more unpopular than
OXHP. The PSR is in the basement, revenues are projected
to continue growing even by mangement's very conservative
estimates, and I at least believe management that operations
will be profitable next year to the tune of >$1.30.
In fact, increasing
revenues in the face of a crisis is a sign of significant strength.
I will be watching the top-line closely over the next year or so.
For OXHP, PSR may be replaced by the market cap/enrollees.
It looks like the buyer now owns the enrollees at less than
$1000 per. I'm looking for a double in 3 years.It meets
Fisher's criteria for financial strength. I'm weighted
at 12% and will only by more if it hits 20 again.
Re: the rumor, it was just something that I got along with
the flood of e-mail after my article was published.
Good Investing,
Mike |
