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Strategies & Market Trends : Sharck Soup -- Ignore unavailable to you. Want to Upgrade?

To: Jim Spitz who wrote (14913)	4/5/2001 1:19:29 PM
From: besttrader	Respond to of 37746

Here is a post from KREM poster. Great post: krem valuation by: redhot98c5owner 04/04/01 11:23 pm EDT Msg: 17012 of 17181 I initiated short postions in this stock by buying puts in January while the stock was in the 60's. I bought May puts then and more recently when the stock was near 80. I control 2500 shares and am now ahead over all. Each dollar down from here is 2500 in profit. :) How low will it go? Obviously krem is a good company with earnings expected to grow at a good rate. Current year earnings are expected to be .69 per share. 2003 year earnings are expected to be .86 per share. current earnings: .69 x p/e of 20 = 13.80 .69 x p/e of 25 = 17.25 future earnings .86 x p/e of 20 = 17.20 .86 x p/e of 25 = 21.50 I am a Nebraska resident and know a bit of Warren buffets philosophy and ideas on the market. He does NOT feel that there are many bargains in the market even now! Don't get me wrong, I am NOT a confidant of his, I just watch the news. That being said I guaranty he would not buy this stock anywhere these prices. A wise investor tries to buy stocks with decent growth at a decent valuation with room for that valuation to have reasonable growth over the next few years. This stock would have to have a much higher growth rate to justify a p/e of higher than 20. Think about it: say you were a billionaire (like Buffet) and could afford to buy the whole company. (He has done it with at least 2 in the Omaha area: Nebraska Furniture Mart and Borsheims Jewelry). At this price per share, 30.25 as of todays close, if you bought the whole company you could expect to earn .69 this year for each 30.25 share you bought. THAT IS A RETURN OF 2.281% ON YOUR INVESTMENT! 2003 EARNINGS SAME CALCUATION: 2.843% if you would not buy the entire company for the expexted rate of return, why in the heck would you buy even 1 share of it? I wouldn't. Another key point: We are in a bear market! It is difficult for even good companys to fight the market downtrend for a variety of reasons, margin calls not the least of them. So where do we end up? I will probably close some puts around 19 or 20, the rest 14 or 15 if we make it there.