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Technology Stocks : THQ,Inc. (THQI) -- Ignore unavailable to you. Want to Upgrade?

To: Raymond James Norris who wrote (13151)	2/9/2000 11:33:00 PM
From: Robert G. Harrell	Read Replies (1) \| Respond to of 14266

Raymond, Is the analysis below the chart you posted worth nothing? Is this your analysis or someone else's? stocktrendz.com It's amazing that with this growth THQ still trades a p/e of 12. Growth in earnings has averaged above 100% and the company has no debt, strong cash flow, strong cash position, and a conservative management. How conservative? Pretty darn conservative. Considering the fact that 12 million in cash flow was generated from "Provision for doubtful accounts," it's obvious THQ may be too conservative for its own good. Companies set aside a specified percentage of items received on credit as "Doubtful accounts." This is a provision for some cash they feel they won't ever recover. In a recent quarter, 12 million that was set aside was actually recovered. Which means THQ set a huge amount of reserves than they needed. It's almost as if THQ is managing cash flows on an accrual basis! Despite this "negative factor" (which really isn't a negative), THQ has everything in order. The company has 9 million float with management owning 6% of total shares outstanding which are 10 million. THQ's accounts receivable have fallen 67% from year ago periods to 10 million. Inventory is very low at 2 million reflecting Management's tight system. THQ has $50 million in cash and a Current Ratio better than 2 to 1. Return on Equity was 49% and as mentioned earlier, the company has no debt. Profit Margin is at 10.5%. $37.4 million was generated by operating activities, according to the most recent 10-Q. The company has roughly 4$ in cash per share and 1.78$ in cash flow per share. These are "discounts" one must consider when purchasing shares. THQ's past performance is nearly unmatchable. The slight drawback is this: expected earnings are only expected to rise modestly, but THQ is known for beating expectations. So, in the long run, counting on them to beat expectations isn't a huge leap of faith. Nonetheless, Wall Street wants to see it first before they "count" on it. And thus, we feel THQ is a value. It's grown the fastest in its industry, boasts one of the best management teams,has the least debt and one of the best balance sheets among similar securities. A p/e of 20-30 is more appropriate for this class act. Also, are you saying that if someone sells a couple hundred thousand shares short it doesn't suppress the price? I didn't go the the Wharton School of Business but wouldn't heavy selling tend to drive prices down just as heavy buying tends to drive prices up? If so, a heavy short selling campaign would seem to be a fundamental event that would influence the interpretation of the trend line. Regards, Bob

To: Raymond James Norris who wrote (13151)	2/10/2000 5:17:00 AM
From: Apakhabar	Read Replies (2) \| Respond to of 14266

Raymond, Your posts are terrific here but I disagree on one point and maybe a few others. 1. You say the short position did not cause the decline; the decline caused the short position. The short position was established two years ago and it has increased slightly as the price has gone up. In December it went down about 20% as the price ran up, and that 20% has returned as the price has collapsed. As shorting is an act of selling, which depresses the price, it is more of a non sequitur to argue as you do that the decline preceded the selling. But of course, in real time and practice, when the price declines there is some "piling on" by short sellers. But the short position facts indicate that most of the position was established at the time of the loss of the WCW license, and when that position was taken (after the gap down from 32 to 27), the price declined about 40%. Two months later after the stock recovered you'll recall that B. Riley & Co. (a hedge fund that specializes in short-selling) issued a downgrade and the stock dropped 33%. The point is that short-selling has long influenced the price action of THQ. Of course it's true that during a big move down institutions are involved. That doesn't change the fact that this large short position has never been more than 20% covered and in fact has gotten more aggressive even as the price has risen over time. Finally we must notice the Rocker appearance on CNBC and the Herb Greenberg piece (he has a long friendly history with the Chanos brothers) and how these "short-influenced" stories immediately lowered the price of the stock. But the biggest day-to-day influence on the stock IMO comes from the short sellers constantly trying (and often succeeding) in improving their cost basis. The volume this year has averaged well over 500k shares a day and I don't think this isn't coming from people on these message boards or even from institutions, most of whom generally buy, hold, wait, and watch. I think the volume is mostly MMs and traders attempting to keep an orderly market with the hedge funds that are short this stock and trying to improve their status. 2. I'm not sold on the way you've drawn your uptrend lines regardless of whether you want to start a second trend in early 1998 or not. Look at your own chart. Why does the top line exceed six other significant tops while touching only three? Conversely, on the bottom, why does the line touches all the major dips yet allows three significant transgressions below the line (including the present). The upper and lower lines are, to my eye, not consistent. I do not wish to be guilty of looking through rose-colored glasses but it seems to me that if the lines must be kept parallel, they could as easily be inclined less steeply, which would keep the uptrend intact. Or, as I suggested before, a new trendline could be begun in March of 1998. You argue that the longer trendline stayed intact at that time because "institutions knew the company's value had not significantly changed." But the institutions knew absolutely no such thing. The company IMO did not reassure the street on a fundamental count until that June--when they secured with JAKK the WWF license. Raymond, overall I think your best point is that during the past two days the selling has been of such a volume that institutions have had to be selling. Likewise your understanding of what TA is supposed to do (not predict price, but to illustrate unusual price movement that often precedes a fundamental change in the company) has been artfully expressed. But speaking as a trader (of the marked-to-market variety) I believe the THQ situation is very messy right now. I believe with Sigmund that a lot of this two-day plunge owes itself to Farrell's speaking to the analysts; the MMs themselves have been emptying out a lot of their inventory. As a trader I don't blame them; I was unloading my trading shares as best as I could (and buying them back too soon, but that's a personal problem). Into this frenzy, with the major support broken, no doubt some institutions threw in the towel. I have great respect for the 200 dma but it has often been broken for an extended period of time by THQ. It happened last Feb and March, and it even happened last week when the price closed two days in a row a point below the 200dma. As for the stock declining from 39 because of some news that had circulated among institutions... I don't think so. THQI has a history of steep declines following overbought highs, and Q1 is a common time for the stock to plunge. A GREAT mistake by the way is to equate "institutions" (like mutual funds) and Market Makers. Market Makers are smart, fast, and they make piles of money daytrading. Institutions, by and large, move clumsily and underperform the market-at-large. Institutions regularly make big mistakes. Market Makers do not. If the MMs are bailing out, that is something I have to respect in the short term. But an institution bailing out is something I ONLY have to respect in the short term. THQ is trading chaotically right now and while I do NOT disagree with your desire as a risk-averse investor to be on the sidelines I think it's just too soon to even lean toward a break in the long-term trend. I hope you stay interested enough to post here during the next few weeks.