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Strategies & Market Trends : Is TOTAL SERVICE SYSTEMS (TSS) overvalued ?
TSS 133.27-1.0%Sep 17 5:00 PM EST
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To: Q. who wrote (5)3/11/1997 12:35:00 PM
From: chester lee   of 43
 
Hi John,

I agree that TSS is overvalued compared to FDC. However, TSS is growing quite well and doesn't seem like it's business will suffer in the short term. I've yet to find what their margins are compared to FDC or their other competitors. I've al;so yet to find infomation comparing their grow rate relative to their industry and their #1 and #2 competitors. Sometimes Wallstreet values a company higher then it's peers because of greater expectations of better business and growth (all relative to their peers). Some may argue that FDC is undervalued (when compared to TSS), but just isn't growing as much because of it's larger size.

In any event, TSS is also paying a dividend, one of my criterias for not shorting a stock. 1. Stocks that pay dividends behave somewhat differently than pure growth, story, hype stocks because of their ownership. 2. As a short, hte shorter is obligated to pay the dividends to the buyer. 3) Stocks that pay a dividends generally have fairly solid cash flows and a strong balance sheet, which TSS does. I think there are better shorts out there.

Have youo heard of STAR (Lone star steakhouse). Barron's Streetwalker column just wrote a piece on shorting them citing reducing advertising and raising prices, both not inducive to bringing in more customers. Also, Insider selling, increased competition and market saturation (of steakhouses and resturants) are negative signs of earnings weakness to come.

Any thoughts on this one. Reminds me of QDIN (quality dinning discussed on MF boards). But, STAR is better quality (IMO) than QDIN.

Chester
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