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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: James Clarke who wrote (9374)	12/20/1999 12:37:00 AM
From: jeffbas	Respond to of 79003

Jim, while I agree with you on valuation, let me remind you that Internet stocks in particular had a pretty horrific correction earlier in the year and that did not stop this major run. We probably will have a significant correction shortly, but can you point to anything to suggest that tech stocks won't be leaders again on the subsequent move up? I can't.

To: James Clarke who wrote (9374)	12/20/1999 2:55:00 AM
From: Tomato	Respond to of 79003

Jim, I'd agree with you that a lot of the new nifty-fifty and internet stocks are ridiculously valued. Having said that, has there ever been a bear market without a recession and/or either inflation or deflation? I remember Marty Zweig's book, Winning on Wall Street, written around 1987, I think, saying that it took inflation, deflation, or Dow or S&P (can't remember which) P/Es over 20 to precipitate the Bear, but it seems he's forgotten his own advice and been bullish as the magic 20 number has been overtaken these last several years. And he's been right. What happened to bring about the last bear markets? 1990--there was a recession, I think. 1987: Guess you could say that was overvaluation, but a lot of people call that a big correction, since it didn't last very long. Precipitated by Jim Baker as I recall. 1973-74: Oil crisis. Any precedent for this market to crash? Another thing to remember is that the average p/e of a Value Line stock is something like 15, which isn't exactly nose-bleed territory. Of course, that only includes stocks with earnings, and I suppose you could argue that the non-earning stocks skew the results. One other thing to think about is the fact that only 28% of NYSE stocks were above their 200 day moving averages as of a couple weeks ago, which means we could be having or have had another stealth bear market similar to the one a few years ago. My stock pick for 2000 is WSP.V, a stock I've owned (unprofitably) for 3 years. It's a Canadian diamond stock trading around C$2.20 that should have the 2nd diamond mine in Canada in 2002 if things go on schedule. It's trading at a huge discount to its NPV which Deutche Bank estimates as $12-$15 or higher (at one point in the DB report the analyst suggests $25 or more is not unreasonable). They own 68% of a minimum of 16 million tonnes of kimberlite rock worth US $200+ per tonne (the deposit is open in 3 directions). They're covered by analysts at DB and Canaccord Capital. Of course, if the market crashes I don't think people are going to be buying diamonds, so I'll be screwed.;-)

To: James Clarke who wrote (9374)	12/20/1999 10:49:00 AM
From: Madharry	Respond to of 79003

Perhaps you should combine your strategies- short the internet stocks and buy calls at the same time! OT: The last stock I reccommended on this thread THQI is looking like a falling knife. Dropping 1-2 points everyday since I reccommended- I wonder if its picking up new tax-sellers on a daily basis? I guess I should have said buy this on December 30.

To: James Clarke who wrote (9374)	12/22/1999 5:04:00 PM
From: jeffbas	Read Replies (2) \| Respond to of 79003

Well, James, I jumped in with both feet on EBSC today in the late day selloff. My reasons are as follows: (As of 10/30/99, shares outstanding of 14,934,000) Book value - $15.31 per share (before Q4 earnings of perhaps $.70) Current assets less all liabilities ("net-net") - $7.60 per share (before Q4 earnings) Price/sales - 11% Earnings per share (1999) - $.70 estimate Cash Flow per share (1999) - $1.70 estimate November same store sales - +6.5% $24 million buyback authorized - 1,118,000 shares purchased for $7.3 M as of 11/18/99 (avg $6.53) - leaving $16.7 M, which would buy 3,340,000 shares more at $5, under the existing authorization. If they were able to buy 3.34 M more shares at an average $5, and adding in rough earnings of $.70 for Q4, shares O/S would go to 11.594 M, book value to about $19.19, and net-net to $9.25. The numbers speak for themselves. The point of the preceding paragraph is to point out what will happen to the values if the stock languishes at this price level - we will end up on the current buyback authorization at 26% of book value and 54% of net-net. If this is not a great value, I don't know what is. As with you, it is number one on my value parade. I don't have a number two. I also think this makes at least 3 of us to buy on our thread. Disclosure - decent-sized position, average cost $5.12