Stefan: I really like the way you approach this stock. 1997 is the year of stock pickers. Any stock with high PE ratios will out of the window soon. Look at COMS, a powerful growing company, when they announced that earnings will be lower, investors simply slammed the stock to the floor. Every 2 months investors are revisiting every sectors and started to clean the houses. For example last month Networking industry is cleaned. This month is BioTech. Most of the Biotech are now trading high and galloping. That is very good. Soon it will be software. When that comes, people like VRTY , NSCP, GPTAE, LGTO, IKOS, others will need to run for their life. These companies cannot enjoy a high trading range when their fundamentals sucks and profitability is a distant future. I can guarantee you this will happen and it will happen pretty quickly.
Thank your broker he is advising you correctly. IMO A good undervalued stock is INTC. It is trading at a PE ratio of 11-14. Globally more than 90% of household is without a PC. INTC is an industry leader in PC Board business and almost a monopoly in chip business. Their Revenue is almost say entire GNP of Africa, Australia, Asia and part of Europe put-together and still make $2B profit each quarter. Trading with a PE of 11-14. Can you imagine that? Secondly, companies like AMAT is a good buy. When there is chip war, AMAT supplies tools for both the companies who are at war. AMAT is sitting with $1.3B with hard cash. I would migrate to those kind of companies. I may be biased. I use to work for AMAT in their finance department. I love that company and that stock.
Regarding valuation of VRTY. As I mentioned in my earlier posting a very fair and generous valuation is $7. A hard ass valuation is may be $3 or less. DO NOT GO BY MY VALUATION. PLEASE CONVINCE YOURSELVES. Ask yourselves this questions, what is the compelling reason an investor stick with VRTY when there is company like AMAT, INTC, MSFT, ORCL,CSCO are their and trading with a comparatively decent PE?. When they evaluate those alternatives, then they start dumping stocks like VRTY.
There wont be any change in the pricing after the official earning announcements on 19th. Market already absorbed this bad news. Secondly, what will happen if the company announced a major merger/acquisition along with this quarterly announcement?. Things will be a lot more different. My gut feeling is that something will happen. VRTY would be in wonderland if they dont react to the market's punishing attitude. Before market downgrade it further and throw this stock to dog house, it will be more appropriate to enter with some kind of merger deal.
I am very interested to read Redherring magazine. Phillipe is a good turnaround guy and strategist. If you read in between the lines, you can easily find out what the company will do within 6 months time frame.
I hope I answered all of your questions
Happy Investing
Regards
Kumar. |
