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Strategies & Market Trends : Bill Wexler's Profits of DOOM
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To: Bill Wexler who wrote (2919)9/24/1998 4:49:00 PM
From: Czechsinthemail  Read Replies (1) of 4634
 
I have some questions about your GBUR short position. I looked over the companies financials and on the negative side, the company has been losing money pretty heavily over the past two quarters. But reading management's explanation, it seems primarily related to significantly increased advertising and marketing expenses, partly related to new product introductions, plus startup costs on a new manufacturing facility. Since management predicts lower advertising costs in 2H98 and presumably the company will be realizing production rather than startup costs on its new facility, it would seem there is a chance that margins will be improving this quarter and next. Meanwhile, sales have been increasing significantly. I'm not sure they can maintain high sales growth while cutting back on their advertising budget. But if they do, it would seem to be a situation where you run the risk of higher sales with improved margin providing a big improvement over recent quarterly results. One other factor is that insiders have been buying stock.

I have neither a short nor a long position in the stock, but would like to see some discussion of the rationale for shorting it and the possibility of their turning the losses around.

Baird
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