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Technology Stocks : NASI (North American Scientific, Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Wayners who wrote (650)	4/29/2000 8:18:00 PM
From: Bob Davis	Read Replies (1) \| Respond to of 658

Wayne, Actually, I have thought about it quite a bit... Basically, you are saying that the market price for NASI is "right", in that it gives a more correct valuation of the stock than does the "intrinsic valuation model" that I use. However, if you believe that the market price gives a relatively correct valuation of the Company, then you also believe that a change in NASI's market price is the result of some change within the company's business, which has changed the value of the business. If you believe this, then on March 31st, NASI as a business was "correctly priced" by the market at $146 million, which is $21.50 a share, its closing price, multiplied by 6.8 million shares outstanding. Then, you must also believe that, on April 14th, the Company was also "correctly priced" by the market at $96 million ($14.13 times 6.8 million shares). So, if the market correctly valued the Company on both of those dates, then something must have changed within the Company's business that caused it to lose $50 million in value during the first half of April. But nothing seems to have happened that would cause this... Now, you are probably going to respond by saying "you are really stupid - don't you know that the market dropped between March 31st and April 14th!" Of course I know this - in fact, to some extent I predicted it in late March in stuff that I wrote in TNL. But, if NASI's market price dropped by a third in that two week period, while there was no significant change in the basic value of the Company as a business, do you still feel that the market provides a realistic valuation for the Company? A share of stock in NASI is a share in the ownership of the business itself. The business has a value, and that economic or intrinsic value can be determined, and it can be used to value an individual share of its stock. Normally, I use this technique to identify undervalued stocks. Sometimes they are "revalued" by the market, and sometimes they are acquired at a higher price. NASI is an excellent example of this method in use; the stock was first profiled in TNL on January 11th when it was at $8.75 a share. You can find "portfolio results info" on the Napeague web site - and you can find the web site by clicking on the blue "Bob Davis" at the top of this post. Bob Davis The Napeague Letter