THDO has a long way to go before any meaningful turnaround. Remember that a strong balance sheet won't remain strong unless the company is profitable. And you have to be comfortable with GTIS' operating model and management to buy the shares. GTIS is trading at a multiple of about 12 times CY1998 EPS estimates. That sounds cheap, eh? Well, THQI is trading at about 12 times my estimate for 1998, so I'm much happier owning THQI for the same price.
Looking for similar turnarounds (a la THQI, RADAF or even EIDSY) can be very dangerous. When I first bought THQI, it had just reported 1995 Q4 results, showing a 17› profit, following 2 years of $8-10/share losses. THAT was a turnaround. Although I bought at $4, there has been plenty of time to buy since then (even at less than $6 one year ago, when the turnaround had been completed). I recommend caution in buying THDO and GTIS, because they may not perform as well as THQI or RADAF in the future. In fact, they may go out of business (GTIS probably won't). Also, many turnarounds never happen, or fail outright (see SEVL, MPRS). If you're looking for speculative video game stocks, take a look at TTWO.
For now, I'm happy with my huge THQI position and my small positions in RADAF and EIDSY.
Todd |
