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Strategies & Market Trends : Three Amigos Stock Thread -- Ignore unavailable to you. Want to Upgrade?

To: Ken W who wrote (16300)	7/14/1999 9:29:00 PM
From: Ditchdigger	Respond to of 29382

Hi Ken, CADE has made quite a run in the last few weeks,,haven't followed closely,,but think there was a newsletter put out on them..DD

To: Ken W who wrote (16300)	7/14/1999 9:32:00 PM
From: RCJIII	Read Replies (1) \| Respond to of 29382

Ken, you raise several good questions on NAMC 1) As far as I know there is no "settlement cap" for their on line service. In the several media stories released recently, no mention is made of a maximum settlement amount, so I will assume for now that one does not exist. I will call and check on that. 2) You are correct. The fundamental offline mediation and arbitration business lost money in the last nine months. Some things to consider. Part of that loss was $200,000 in one time investment losses. So the real loss was more like .27 or $880,000. The online settlement business is said to have large margins. I would imagine margins will greatly exceed 50%. It is all on-line, costs will be minimal. Currently fees to be generated are a minimum of $75 and a maximum of $275. Lets assume something right in the middle for an average of $175 per case. The company will have the capacity to handle 10,000 cases within the first year. If they operate to capacity, they will generate $1.75 million. At 50% margins, that would create profits of $875,000 within the first year. I would bet that margins are much higher. The success of the business depends on volume and fully utilizing the system. The CEO claims that after the first year they will be able to handle "several thousand cases" per month. Assume several means 4000 or more. At the low end you are talking about 50,000 cases a year. That would generate revenues of $8.75 , million with profits of over $4 million. The key will be the commitments they can obtain from insurance companies. They have said that they received a tremendous response 3,000 clients they have demonstrated the system to so far. Travelers has agreed to use the system. If they are happy with it, they may send significant business to NAMC. Hopefully many others will sign up. As for the main business as a drag on the online operations, we must realize that NAMC will cross promote. Those cases that don't settle on-line may be diverted to offline mediation or arbitration. The more dependent their clients become on the on-line service, the more likely they are to also use the offline service for cases in which it is a more appropriate venue. Also, the exposure NAMC will receive due to its online operations should certainly fuel business for its more traditional services. Therefore, maybe the drag will be diminished or eliminated. Another option is a spin-off. If they spun the online operations off, it would have the chance to be highly profitable considering its low overhead and high margins. A profitable niche internet company is such a rarity that who knows how high the stock price could reach. Also, maybe a buyout is possible. I have been trying to think of companies that might be interested. Would EBAY be interested? They are certainly seeking to offer the most comprehensive service possible. What about another auction site looking to add a unique feature to its offering to bring more customers and eyeballs to the site? What about Yahoo or AOL? They could sack or sell off the offline business and keep the auction site. Maybe this would somehow add value to their offering, maybe not. Insurance companies? Other larger mediation firms? Law firms? Even after a 600% increase in the stock price, the company is valued at under $20 million. The online business has a real chance of being profitable, even more so if split from the drag of the parent. How many internet companies with a strong chance of achieving profitability near term trade for only $20 million? Obviously, I am using many assumptions and theories in my analysis. But most internet companies require even larger leaps of faith and reasoning. For the above reasons, I have been heavily buying the warrants. At a current price of $1.31, with an exercise price of $6.00 and a few year wait until expiration, I think my odds of making good money are very good. Any major news or contract announcements could send the common into double digits and cause an exponential increase in the warrant price. What if the CEO appears on CNBC? It is certainly an interesting concept company, therefore it is a worthy story. Also, these guys are obviously very media savy having received coverage in Forbes and Business Week. Any major TV coverage and the common spikes causing an explosion in the warrants. Another consideration that I just came up with today. What about the Year 2000 problem. An avalanche of lawsuits are certain to arise from the problems that will certainly arise. This could be big business for NAMC's on line and offline services in the years to come. Even if not a single additional suit is brought to NAMC for these problems, certainly the hysteria leading up to Dec. 31st will cause people to look into and buy stocks like NAMC. Many will be asking themselves, who stands to benefit and who stands to lose from Y2K? NAMC could be a big winner. Anyway, I apologize for the long response, but I feel even at these levels, my odds of making money on NAMCW both long and short term are very good. Take Care, RCJIII