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

To: Dale Baker who wrote (12159)	3/11/2001 3:33:06 PM
From: Paul Senior	Read Replies (2) \| Respond to of 78476

My opinions on ALLY and LPAC need a preface and disclaimer. I've looked at both stocks. Of course value investors differ, and all have their own methods and will make their own conclusions. For readers here looking at ALLY and/or LPAC and considering the opinions presented, my suggestion would be to discount my take on these stocks and weigh much more heavily the opinions of Dale. (I'd say he likely knows what he is doing, and I often... miss a few things.) LPAC: stocksheet.com From 1994 to present, the revenues for this company have been between 28-32M/yr. It's a profitable little business (good ROE, ROA). It ought to be a fairly easy mom&pop company to analyze (17M market cap and 225 people). But I am having my troubles. I know we might do a discounted cash flow, etc., but I'm going to assume that this company is in a very stable business (consistent revenues) so that what people have paid for the stock in the past 5-6 years might be a good indicator of the range of values for the small investor (as opposed to controlling shareholder(s)). Unless I am missing something here about the future. For example, any new business opportunities with digital downloads direct to movie theaters (??) or the potential of their new joint venture, digital video effects business. So unless informed otherwise, I have to look backward here and the analysis becomes a pick-your-spot-on-the-graph. finance.yahoo.com Imo, the stock seems fairly valued (for a non-controlling shareholder) - no great bargain - at about 2 1/4. OTOH, the stock has traded higher, and at some point, a price of 3 1/2 could easily be achieved. (50% gain). This brings up two further aspects. If one buys now expecting to wait for a 50% gain, how long would one be willing to be in that stock for that gain? Secondly, regarding risk/reward, is the glass half full or half empty? Given my proclivities at this time (the current market and my current holdings), I see the possibility (which I might very wrongly translate to likelihood) that the stock goes lower before it trades higher. I will put this stock on my watch list now,betting that I can enter at a lower price than now and that it will regress higher once again. More confident investors who are willing to take on a microcap, might consider a purchase now. ALLY. Some people have said that the airlines exist for the purpose of enabling Boeing to make a profit. Perhaps with gambling, the casinos exist primarily to provide profits for the slot manufacturers. I'd say ALLY's current stock price already reflects ALLY's strong presence in many aspects of the slot and gaming business. To me, the way some of these slot manufactures try to design their games and equipment, it is similar to the electronic games business. Which means a hit product can catapult the stock. Similarly, although it appears that ALLY has a very good installed base, it's possible (maybe not likely-- I just do not know) that their units can become obsolete. The best investment,imo, has generally been the dominant player (ERTS in games, IGT in slots). While ALLY might be undervalued relative to IGT or SLOT, I'm uncomfortable with making an investment here on a "relative undervaluation". (Relative-to-similar-company buys are always dangerous, imo.) With ALLY, I ask myself, "How long would I be in for?" I believe here, I'd see a problem I have, which is that I would fail to sell promptly if/when the stock were to drop. This stock already has had a terrific run up. It's recently got an analyst's strong buy recommendation. I notice that you (as opposed to me) are very good and quick about cutting your losses and moving on. Probably very good about capturing gains too. I see that Dreihous is in this stock. They are imo, excellent momentum players, maybe value momentum. And they are VERY quick to eliminate their positions. For me then, I see it this way: I'm coming late to the party, and I'm playing somebody else's game. The odds have to be against me on this one. If anyone else here can add some insight or information or analysis relating to these two stocks or my perception thereof, now would be a good time.