I don't think Jubimer will mind if I copy his excellent post over here.
Subj: Random notes
Date: Tue, 4 Mar 1997 20:26:03 EST
From: Jubimer
Message-ID: <19970305012600.UAA05967@ladder01.news.aol.com>
The reality of the situation is that Ampex has had this characteristic of
volatility of trading ever since the reorganization of NHI, at one time owner
of 81 % of the common. This became effective in January of 1995 and NHI
bondholders received Ampex shares in exchange for their debt. Those of us
following the situation had a tremendous opportunity presented. Bondholders
got approximately stock having a value of about $12 for each $1000 face
amount of bonds. Since the insurance companies and other high yield holders
want bonds and not stock and having such an insignificant amount reached a
conclusion that the institutional managers, who never have their own money at
risk, often reach: dump the stock. This presented a nice opportunity to
pick up stock at below a $1 to 2 a share. Bramson bought 1.6 million shares
in Feb 95 between 1.80 and 2.5 per share. It was pretty damn
impressive buy since he had just gone through 4 years of painful
restructuring. Anyway, the stock moved to 3 and back 2 and then made a 4.75
high in sept 95 and then pulled back all the way to 3 etc etc.
What's the point? First of all, forget technical analysis when it comes to
Ampex. It's irrelevant. For example, the reason Ampex pulled back from 4.75
to 3 in Sept-Oct 95 is not because it met resistance or any other bullshit.
What happened was that First Boston Special Situations Fund, which had ended
up with about 4 million shares in the NHI reorganization, had a 9/30/95 date
which allowed investors to withdraw from the fund and they
exercised their right. So the fund had to liquidate all investments,
including Ampex. How do I know? Being close to the marketmakers and having
had a continuing accumulation of stock ongoing, I got the call when the fund
was out offering stock. Now there is no mercy on Wall Street. It shouldn't
be surprising when someone has to sell this stock , the natural buyers sit
back and let stock come into them. You might buy 20000 at 4.25 and drop
your bid to 4.125 buy 5000 and drop your bid to 4 and so on until you find a
level to absorb the stock. It was a great opportunity to buy. It had
nothing at all to do with charts and such stuff. It had everything to do
with doing homework. What's happening now is the specialist has cleaned out
all the stop limit orders from 7.5 down 6.5. Margin calls are being met by
selling. There is some very strong, but disciplined accumulation going
on.
This is a story stock. We have been here at 6.5 and moved to 9-10 several
times since the summer. What moves the stock is the reemergence of the
fundamentals. Here it is one year later: the Company's balance sheet has
improved substantially; testing of keepered media by several drive companies
has resulted in one contract announced with Maxtor and ongoing negotiations
with the other top 4 as well as other companies who initiated the contact
with Ampex. Also, nobody pays any attention but revenues of DST related
products doubled year over year and they added ATT, MCIC, Sprint etc as
customers. Hello out there!!! Seen the news on News corp and American
SkyBroadcasting and Echostar and MCIC.? Asky will be out offering 500
channels, video on demand and internet service. Remember this from last
June, MCIC is using DST in a video on demand application with NBC. This is
all part of
the News corp vision etc. Recall also that FOX TV is a DST customer. They
are 20th century FOX owned by News Corp.
Anybody who bought Ampex because they thought they would announce the first
contract with a Seagate is a fool and anyone who sold because they announced
Maxtor is a fool. First of all, Maxtor is a gorilla. My definition of a
gorilla is a company with a 25-35% price advantage because of keepered in a
high volume, low margin industry,( where the 180 dollar average selling price
yields a measly 5.50 pretax profit on average ) and a 23 billion
dollar Godzilla financing their war for market share. And at some point, we
will see the rest of the drive industry begging for keepered platters to
compete with Maxtor. And don't be misled by the nonsense about Maxtor's
production quality etc. That is old, irrelevant news. That fact of the
matter is Hyundai bought 40 % of the equity in November 94 and then the rest
of the company in Jan 96 and have continued to invest about 400 million
throughout the rest of 96. They are as serious as a heart attack about
grabbing market share and production and quality will be there.
What do we have to see in the next 30 days.? I am curious to see the 10K and
the update on negogiations with disk drive manufacturers; the results of the
next phase of testing with MR heads; perhaps initial royalties on keepered;
maybe negogiations begun on an MR program. Mitsibushi settling on the
infringement of the Ampex patents on video recording and PIP picture in
picture could be within the next 30 days as well and based on the amount
that Ampex has spent on litigating this, I presume it could be a very
generous settlement. Based on recent awards in patent cases, infringers have
been getting their asses kicked for tens of millions of dollars. I wouldn't
want to go to trial if I were Misibushi, given that they paid royalties to
Ampex from 1978 to 1992 and then just stopped paying. They can hardly claim
the patents weren't valid.
Now, one could say that to sell at 10 in January was right and thats the
bottom line. Well pick out a slice of time and you can make the case for
anything. Fact is the stock went from 3.625 to 9.375 from 1/196 to 12/31/96
for 136% gain. The fact that it has pulled back is just the way markets
work. If I sold at 10 in January I am right through March 3. But if the
stock is $25 in January 98 and $50 in January 99, a sale at 10 in Jan 97
doesn't seem quite as smart.
Add in the potential for DST revenues to be several hundred million in the
next 2-3 years and maybe a triple digit stock price is not outrageous.
If your game is buying a few thousand shares for a 1 or 2 point pop, Ampex is
not the stock for you. If your interested in investing and multiplying that
investment 5 or ten fold, this is a great candidate. |
