Hi Jim,
You have inquired whether I have observed TFS stock being unusually sensitive to market moods vis-a-vis the tech stocks.
Actually, I have not noticed that to be the case. The stock is normally very thin, an unfortunate result of the limited degree of interest that has developed in it over the years. It seems to me that the "Street" has been virtually "uncourted."
Moreover, there is a limited float, and were I on the TFS payroll (and this is indeed an unlikely possibility!!), I would suggest to them that they do something to address this situation, perhaps by instituting a 3:2 stock split the next time the shares move based on fundamentals. That at least will hopefully address the wide spreads that categorize the stock because of the relatively small float and exceptionally weak specialist.
In my mind, the shares *should* have sold off following the last conference call (and this view is no surprise to any reader of this thread), but the stock clearly overdid it on the downside, which unquestionably exacerbated the selling due to yearend tax oriented transactions. This is the price we all pay for analysts reluctance to take a stand on this firm.
Nevertheless, though communications and depth of market could certainly stand substantial improvement, there is no question that management is doing a pretty good job managing the business. Over time, the probabilities suggest that continued good numbers will result in better valuations, certainly at least to the point where the stock will develop an *average* P/E valuation.
It should be noted that the S&P index currently trades at about 23 times earnings, and assuming TFS management is able to develop an "average" valuation for its stock, my own 1998 earnings estimate of $1.10 - $1.25 would result in valuations at least somewhere in the mid 20's, or 30% - 40% above the current price level.
We can only hope.
Have a good day. |
