Johnny: Compared to Paul Richards, you are a breath of fresh air. There is certainly room for disagreement about any company. I appreciate your adverse position. It helps us all keep everything in perspective.
For you and all who share your feelings (excluding crazies like Richards), it might be helpful to look back over what happened in 1Q97. This is my take on the situation. I have no evidence to support this, but it seems to be a reasonable explanation.
Leading up to and during Jan-97, TLC was losing market share as a result of some unwise decisions regarding pricing policies. One or more large institutional investors (including J. P. Morgan) became uncomfortable and decided to substantially reduce their positions. This intention was discovered by Oppenheimer & Company who advised its clients and subsequently downgraded the stock in advance of the pending selling pressure, causing the crash and subsequent decline of the stock price to below $6. In retrospect, the decline in market share can be seen to be a brief artifact. There was never a significant deterioration in TLC's fundamentals. Thus, it follows that the decent of the stock price into the valley of the shadow of death was a stock market anomaly.
All who have followed this thread know that we agonized over what was wrong with TLC and came up with all kinds of elaborate explanations for Wall Street's treatment of the stock. Your position, Johnny, is probably a remnant of this soul searching.
In my opinion now, TLC was simply unlucky in its treatment by investors last year. It has been and continues to be a healthy contributor in its sector. TLC and Cendant control most of the market. TLC is a pure play for investors. Cendant Software is an unwanted step-child in the CUC/HFS merger. If you believe that there is a place in our economy for a mega-publisher of consumer software focused on the education of our children and other consumer applications, then TLC seems like an obvious winner.
With its clout, TLC should grow. A 20% to 25% growth rate is not unreasonable, nor is a P/E of 20 to 25. We might see yet another round of increases in analysts' target prices in the short term. |
