**halfway OT**
Paul,
You'll get no disagreement from me that CELL management has shown itself to be more dependable, nor that at this point in time CELL should in fact command a premium over CLST. My interest in CLST does not in any way diminish my positive regard for CELL.
However, my investment premise is that CLST is undervalued, partially because of some durable concerns about management, partially because of the boom/bust stuff, and partially because before the recent release their earnings visibility was suspect (substantially due to TOPP). With the better than expected quarter and the various restructurings, refocuses, etc. I think much of that is resolved.
Additionally, management has given extremely strong guidance going forward which cures the visibility issue(you mentioned some details weren't in your release, they are available at the Cellstar website), has suggested that they are hoping to do better than guidance, indicated that some of the TOPP writedown may come back into earnings in the future, etc. Maybe they will have beaucoup egg on their face when all is said and done; if not, the stock will be substantially higher.
I can remember a few years back when Dell was floundering around and lost a bunch of money in FOREX trading arising from their currency hedging operations which became speculating activities. Many believed that the company was run by a bunch of clowns. When their first effort at notebooks bombed many were of similar opinion. Look at Dell now. I am not saying by any means that CLST is DELL, merely that management problems can be resolved. My guess is that several brokerage upgrades will be forthcoming in the next several weeks and that CLST's discount to CELL, its own growth rate, market multiples, and everything else will start to narrow.
In the meanwhile, here's hoping CELL reports good numbers today, though I don't doubt that they will conform with earlier guidance.
Both of these stocks have the opportunity to do very well in a really exciting industry...
Regards,
JG |
