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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony, -- Ignore unavailable to you. Want to Upgrade?

To: xcr600 who wrote (58223)	7/22/2000 2:29:23 PM
From: UnBelievable	Read Replies (2) \| Respond to of 122087

DIGL Let's Talk About This Assuming you meant my fiscal health, I am interested in your thinking. You didn't like the way in which I explained the MM manipulation of his 'over-valued' momentum stock with a small float on another thread. What has made this stock of interest to what must be a number of traders has been the periodic volatility. As you are aware, such a stock can generate gain or losses long an/or short. For whatever reason since the EOQ mark up through earnings the trading pattern has changed somewhat tending to have a more positive slope than before and less regular fluctuations. Never the less the periodic volatility remains much greater than a normal overvalued high tech test equipment company. At this point there are a number of good reason why it seems reasonable to expect another change in the overall slope. In addition to the factors which are causing such a change in most stocks of companies similar to DIGL including expected overall market direction over the next months, issues associated with TELCO companies, which are beginning to cascade to those who supply them (A to name just one), to a current price that can not be justified under any set of business functions, there are a number a company specific reasons that this will be the case for DIGL. This company is essentially focused on a single product and technology, the usefulness of which will be obsolete long before the future growth projections are realized. They have neither the breadth of products or scale which will enable them to establish wide and deep relationships with their customers nor support real ongoing R & D. Even if we assume that consistent with judgement in the first SEC suit that Bryan J. Zwan is no longer involved with running the company (though, even with his voluntary sale of 3 or 4 million shares over the last few months he remains the largest stockholder by far), that the fact that DIGL and the Church of Scientology are both in Clearwater, Florida is a coincidence, and that by agreeing to a Consent Decree DIGL no longer engages in the the "earnings management" which gave rise to the two suits in the first place (the fact they did is an allegation they can not deny - (17 C. F. R. 202.5(E)) there remain a number of good market specific reasons why this companies stock is much more likely to go down than up. A large number of additional shares have recently been added to float. In addition to the shares recently sold by Zwan and current CEO Gerry Chastelet, there are the million plus shares which were recently issued to shareholders as part of the settlement of the first SEC lawsuit. It is reasonable to expect that while many of these were held in anticipation to the run up to earnings that once any evidence of a price plateau begins to emerge these will become available, as well as those been held by other New Error Investors who will move on to the next new thing when they stop seeing 10 or 20 percent monthly price appreciation. In addition if the periodic volatility subsides it is not unreasonable to assume that a number of investors who were holding this stock for the swings will move elsewhere and the shares they were using will become available as well. While it is true that in a small thinly traded stock interested individuals can set the price on any given day maintaining and increasing stock price on an ongoing basis is another matter. Increasing from a market cap. of $314 million after it completed its initial IPO on Feb. 6, 1997 to the current $3,359 Billion (not to mention what it was five minutes before Fridays close) is quite a rate of growth. Maintaining anything like that, even if 63% of the 29 - 30 million shares (Wasn't there a question about the number of shares from one on the analysts during the conference call?) are closely held still leaves 10 or 11 million shares in float. Market Cap. of the shares in float is over $1 Billion. Given that less than 5% of the companies shares are held by funds (very low, especially for a Russell 3000 Index company) the cost of maintaining the rate of growth which attracts attention in this market are considerable greater that was required to increase share price from $5 a year ago to the current $120. So while I agree that this is not a good candidate as a day trading short, or for a marginally capitalized investor who can be squeezed, it seems to provide excellent opportunities for both Short Swing Investors as well as longer term (weeks or a month) short investors. I am only in it for the money though, and at this point I am only interested in this stock for the opportunities it seems to provide. I would be interested in your thoughts about this stock and ideas for better opportunities, long and short. If you feel that having such an exchange would be pejorative occurring on this thread because it does focus on short opportunities I think there is a DIGL thread, or we could move it to whichever thread you might prefer. If you post a response elsewhere please post a link here or send me one by PM.