To: Smart Investor who wrote (2593 ) 6/11/1999 1:00:00 PM From: Dale Stempson Read Replies (1) | Respond to
CPU Stock Pick (Stockz.com)Last month these folks selected CPU as their Stock Pick of the Week. Although this info is a few weeks old, I don't recall having seen the commentary posted here and thought some of you might be interested. Regards - Dale stockz.com Stock Pick of the Week Company Description: CompUSA, Inc. is a retailer of personal computer hardware, software, accessories, and related products and services. As of 6/98, CPU operated 162 computer superstores. For the 26 weeks ended 12/26/98, net sales increased 20% to $3.17B. Net income decreased 59% to $23.7M. Revenues reflect the opening of new stores and the acquisition of Computer City. Net income reflects increased personnel and facilities expenses due to the acquisition. (MarketGuide)Reason for Picking: How do stocks become great investment opportunities? This may be one way. Take a company that has a strong business model with decent earnings but somewhat small. Realizing the potential of this business expand it throughout the United States capturing as much market share as possible and even purchase competitors that threaten to directly compete with your business. Sacrifice earnings in the short term to invest in this growth of the business. Then find other means of distribution and invest in these to broaden your reach (internet). Wall Street would embrace a company with this vision (you would think). However, this is not the case. As this company continues to invest in its growth Wall Street sees earnings begin to fall and not interested in holding a company with negative earnings growth they sell off and the stock tumbles. Throw on top short-term pricing errors on inventory creating even worse earnings and now the stock price has sold off even lower. Your 1997 30 something stock is now trading at 1/6 its all time high although the companies sales are 200% higher.
