I have been reading in the WSJ and IBD about the new "FMK Ranking
System". It is very impressive, and is considered by many savvy Wall Street
analysts as one of the key reasons for the the recent run up in Internet related
stocks. The "FMK" is primarily being used by New York baby boomers to
quickly add to their retirement accounts. It's primary purpose is to uncover
hidden value in stocks that normally appear to be worthless. All of the
traditional measurements are out the window. Such things as PE, debt,
revenue, management, book value, etc. are Mooter. What the experts are
saying, is just compute the "FMK", and that is all you will need to do. For
those that cannot multiply, or are not able to get easy access to the internet,
just a quick call to your broker asking for the "FMK", for a particular stock is
all that is required. Once you have your "FMK" rating, simply subtract today's
stock price and you will see the true upside potential for your favorite stock.
For example, the "FMK" for VLNC is 100, that is the projected stock price
in about 6 months, although it may be sooner, and subtract today's price of
about 8 (rounding is permitted) and you come up with a figure of 92. A lot of
Wall Street technicians are starting to plot this information. It is a very
powerful tool.
I called my broker for the "FMK" for ULBI. Since I was quite nervous, I also
asked for the calculations that were used. He e- mailed them to me and I
thought that I would share them with you.
An assumption was made by the broker that ULBI would be at a break even
point by January 1999. He said that their sophisticated and extensive line of
primary batteries will more than cover all of the company's overhead starting
this next quarter. He then took the potential revenue from sale of cell phone
batteries from the company's new integrated rechargeable battery operation.
This is the key to the "FMK", potential. He took 50 batteries per minute
(ULBI's figures) X 60 minutes X 16 hours (2 shifts), X 363 days =
17,424,000 cell phone batteries. I asked why 363 days? He said that they will
only be closed on Christmas Day, and on Dec 3 which is the new Wall Street
holiday known as "FMK DAY". He then said that ULBI's stated sale price for
the battery was $12-15. Always be conservative and use the lower number, in
this case $12 and you come up with revenue of $209,088,000. Margins of
40% are then applied and you come up with $83,636,200 operating profit.
Divide by the number of shares 10,500,00 and you have $7.97 per share. The
"FMK" uses the standard 30 PE multiple, and you come up with a projected
share price of $237. This is also known as the "FMK". Take today's stock
price of $6 and you have a rating of 231. I said, isn't this a very conservative
way to value ULBI's prospects? He said that this is the beauty of using the
"FMK", it is always on the low side.
I asked the broker, if ULBI has a rating of 231, and vlnc has a rating of 92,
does that mean that ULBI is a better value, or a safer investment? He
respodned "absolutely", not only safer, but much more upside potential.
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