Sigmund, I have shared with you all of the information I have. But
even with -6 cents earnings after the acquisition, THQ's trailing
P/E would be 14.7 right now and I can definitely live with that in
front of Q3 and just 2 months before the start of Q4.
I do think P/E (current and forward) is a very useful measure of
valuation, especially when put in a historic context. In the case of
THQ, a P/E of 13.5 is near the low end of its P/E range in the past
three years. During the past 6 months, THQ's P/E has been as high as
30. That gives me an indication that THQ has discounted a level of
risk for me to continue buying in the next three weeks. If the risk
premium shrunk too quickly it would not give me an opportunity to
buy the stock in front of Q2, Q3 and Q4 at a P/E around 13.5.
It helps me tremendously to look at P/E in a historic context. It's
also useful to know what benchmark the analyst community is using for
the industry average. A P/E average of 22 is conservative, whether or
not one decides to assign the higher P/E multiples (as they should) to
the companies with negative earnings on Vic's list. Not that the list
is all inclusive but it's a good representative sample.
There is an article in the new Economist on the interactive software
industry (P.70) It is a bullish piece on the industry. It argues that
the interactive entertainment software sector is now the main catalyst
or PC sales. Here is an interesting excerpt: more than 30 million
Americans, most of them married, buy at least 3 PC games a year. Also,
14% of households with no children now have a game console, an
all-time record.
Lastly, it looks like the G-7 meeting propped up the yen a bit and
that Hashimoto will offer an S&L bailout style plan for Japan before
Bastille Day. I still think the global markets will rally on (our) Monday.
Bleeker
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