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Strategies & Market Trends : Advanced Option Strategies -- Ignore unavailable to you. Want to Upgrade?

To: Allen Furlan who wrote (350)	7/10/2001 8:14:38 PM
From: Joe Waynick	Respond to of 355

Sorry Allen. I meant to say 77% drop in EARNINGS, not SALES. Here’s the link and the quote: host.wallstreetcity.com “For the 26 weeks ended January 31, 2001, sales were flat at $3.57 billion; earnings fell 77% to $20.9 million. The decline reflects lower margins due to product mix, higher grain and energy costs, product recall and the effects of bad weather, the company said. “ If you go back to market guide and view their quarterly income statement history, you’ll see where for the 13 weeks ended 3/31/01 net income is down to -$6MM from +$26.9MM the previous qtr. Here’s the link: yahoo.marketguide.com Here’s my reasoning for my previous comments about TSN. Overall, TSN has had a very inconsistent earnings history. Although I don’t have a Value Line report handy, the five-year figures from market guide tell me enough. I bet the VL 10-year history would confirm. Click on the following link and look at the comparisons again: yahoo.marketguide.com TSN dividend yield is 1.61% vs. the industry average of 2.27%, MRQ Sales vs. Qtr 1 Yr. Ago up 2.05% vs. industry average of 12.59%, EPS (TTM) –60.23% vs. industry average of 7.77%, gross margin (TTM) 13.7% vs. industry average of 40.24%, ROE (TTM) 3.66% vs. industry average of 26.92%. Finally, revenue per employee of $105,000 vs. a $321,000 industry average, and net income per employee of $1,066 vs. the industry average of $20,913. If TSN is a trading stock for you, then with the appropriate hedges, it’s in the zone. But as a long-term hold, I would want to know the compelling story to reasonably expect a significant upturn in the profitability of the company first. With a ROE of 3.66%, I think I can find better uses of my capital elsewhere. For example, the option arbitrage play you discussed in your last message will most likely work out very well for you. Or, if you like the food industry, I’d find some of those companies returning at or above the 26.92% industry average ROE and invest there. I thought that one other reason you might want to trade this stock is the low price. An exhaustive study may reveal that it’s undervalued and could offer respectable upside potential in addition to trading opportunities that would cut your cost basis to the bone and all but guarantee you a long-term profit. I just haven’t done that kind of analysis on this stock. What do you see in this company that I may have missed? I haven’t really done a detailed study of TSN so perhaps you can give me your insight. Thanks. Joe