Brooks,
I agree that QGLY is not a value stock.
I just said that it is of value to me. When a company's growth rate can far exceed it's P/E for a decent period of time (a year or more), then it is likely to outperform the market. When a stock has increased revenues 4000% in the last year, it's not hype, but performance. I agree that they will have competition one day and I'm not able to predict when. I do know they announced a military base approval to sel their product and are trying to get a relationship with a company to sell abroad. If they hook up with a strong dominant partner, then there will be plenty of growth left. They also are buying back shares, which is a desparate attempt to bolster the price if they are dishonest, and if they are honest, then they think the company's price is undervalued. I'm not taking a large position in it and if I make 20-30%, I'll probably sell 2/3 and play the rest with profits. I've read in a local paper how customers preferred Cold-eze to some Hall's product by a wide margin. With a market as shaky as this, I'd be less prone to buy this type of stock, but I do find value when a growth rate far exceeds the P/E. They stated they thought they could grow by 20% in 1998 also and earn over 1.10 this year. If so, then a P/E of 13 is rather inexpensive. I'm sorry if I implied this is a value stock where one's principal is entirely safe. BMLS is one more along this line with a book value over $4.00 and a p/e around 10 when it trades under $3.00. It will be unlikely to return more than 20% in a year, while QGLY has much more potential. AOL is growing around 50% in revenues, slower than QGLY right now, but has an astronomical projected P/E around 100 or more. By comparison, QGLY is providing much more value as AOL has to dominate for 4-6 years to grow into it's price. If QGLY can continue to grow by even 10%, then it is cheap, If not, you're right that there will be very little value left. At this time I don't know if they will grow, but the trend looks decent. That's what I meant by value.
Paul,
I'm 10% in low P/E, high growth stocks, 10% in microcaps and 60% in REITs right now. I have 20% cash also. Most of the REIT's I trade short term looking for 7 - 12% in 3 months or less. For the last year about 80-90% of my trades have been able to return 5% or more in just months, and about 5% were break-even/small losses. By holding on long term, REIT's owing golf, warehouse, and office space properties should be able to provide 15% (+/- 5%) returns combined appreciation and dividends for the next 5 years. From what I have gathered, but need to research more, it seems that Real Estate has provided a similar or better return than stocks for decades until 1989-1990. Since then, the stocks have outperformed real estate returning 300% to maybe 50-100% for real estate. This seems to me that real estate should be able to outperform stocks over the next few years. The book value of the Dow Jones stocks has only grown from 1075 to 1414 since 1988 End of Year (some of this is probably understated since Disney & Philip Morris have negative book values and Merck is less than $5 book. Earnings were 215.46 then and are estimated at $420.00 for this year. If earnings slow down or inflation picks up, then their is plenty of downside opportuntity.
A few nice things about REIT's. They are yielding more than almost any investment out there since Bonds and Utilities have been incredibly strong for the last 2-1/2 months.
REIT's generally trail utilities by up to 6 months. The utilities haven't put in a definite top yet, but when it becomes apparent that they have, a trader will be able to lighten up on REIT's if this pattern continues. For some REIT's that have produced 15% + return annually for more than 10 years, look at NPR, HCP, MT, NHP. I wouldn't necessarily buy any of these now, as I feel there are better values, but it is a steady consistent growth. This includes the last 10 years which weren't banner years for real estate until maybe last year. REIT's will get clobbered also if we have a full scale recession, but so will just about every other investment imaginable.
By the way, does anyone think gold is becoming a value play? It may be 1-5 weeks too early to buy gold still as a definite bottoming formation hasn't occurred... Not too much upside potential for gold unless inflation picks up and Greenspan can't act due to the Asian crisis.
Richard |
