Jim, I'd be interested to hear your reasoning for buying this stock for your daughters. At what price and/or under what circumstances would you advise your daughters to sell? I sure hope your daughters will profit handsomely in 1998.
BTW, there'a writeup on Valuations on the Motley Fool today. TEAL was mentioned, excerpts from the writeup:
On the other side of the equation, buying at a high valuation is often the kiss of death. The best case
scenario is that the company does well and you get a market return. The worst case scenario is when
you have company like TriTeal Corp. (Nasdaq:TEAL - news) , whose business starts to fall apart
after it crests at a high valuation. TriTeal sold for 6.5 times profitless sales when it came public and
actually peaked at 17.4 times sales when it made a few pennies per share in the fourth quarter of
1996. Coming into 1997 with a valuation of 17.4 times sales, the company was an accident waiting
to happen. Although it was not certain that the fatality would occur, the higher the valuation spiraled
the more likely it was that the company could not live up to expectations and deliver the cash flows
that the share price indicated investors were expecting. Investors who bought at 17.4 times sales lost
their shirts, seeing the stock declining a shocking 93.3%.
Although buying at a low valuation does not guarantee excess returns and buying at a high valuation
does not mean you will lose everything, these two extremes indicate a central tenet of investing that
many investors ignore at their own peril. Valuation matters. When you pay an extraordinary price,
you have to have a company that has extraordinary performance to make money. When you pay a
dirt-cheap price, even a moderate business performance can given you a decent return.
The last sentence reflects one of the main reasons I bought TEAL recently.
Regards,
Tom |
