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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Pirah Naman who wrote (50197)	2/5/2002 1:04:43 PM
From: hokieharry	Respond to of 54805

Not a tech or G&K company but one Bruce and I have kept an eye on. Krispy Kreme Doughnuts(KKD), is seeing a 400% increase in shares traded today, opened at 35.50, off from a closing 36.89 yesterday and hit a low of 33.00 today before moving back up to 35.80. Why.....maybe this Forbes article entitled "Debt? Who, Me?", at forbes.com

To: Pirah Naman who wrote (50197)	2/5/2002 1:31:48 PM
From: Stock Farmer	Respond to of 54805

Hi Pirah - great reminder. IMHO are two great things to look at for growth stocks: (a) free cash flow, which is a measure of the profit generation capabilities of the business. But in case it's all being peed away... (b) the balance sheet and growth in shareholder equity, excluding "additional paid in capital" (equity financing). After all, if we expect a company is generating cash, sooner or later we should expect to see some piling up in the corners. And it is useful to discern between the cash piling up in the corners generated by the business, versus that left by shareholders as a deposit against a future claim of the total. As an exercise in curiosity, this generally raises a few eyebrows. What if we look inside the balance sheet at the asset ledger? Set aside the high risk "assets" such as Inventory (remember Cisco evaporated a few billions with a stroke of a pen?), Goodwill (remember JDSU?), Investments in Private Companies (having learned from those time.bombs), and the very creative but highly suspicious Other Assets (shudder)... and one is left with a slightly lower balance. Subtract short term and long-term liabilities (generally very low risk of turning into negative cash) and one is left with a conservative estimate of the company's tangible economic assets that have been accumulated to date. Which came from two sources: (a) the economic results of operations, and (b) the contributions of shareholders in the process of buying slices: otherwise known as the company's recourse to equity financing. Subtract whatever shareholders have contributed. Most people don't know where to start, but to save us the trouble of going through the complex forensics, this number finds itself under the heading "additional paid in capital. Those with a DIY bent whose minds are boggled into disbelief by the relative size of this sum can do the tedious math and work it out using the cumulative statements of comprehensive income. But me, I trust the company's lawyers to help the company get this one right. Although sometimes it's useful to do the calculation and use market prices instead of what the firm actually received in return for its dilution. But I digress. Back to the exercise. What's left is the tangible actual lifetime economic output of the firm. This does not represent future potential. Merely the sum of all previous future potentials realized, lifetime to date. Or in other words: Dollars per Lifetime. Divide by shares. Take share price and divide by this number. Gives the number of lifetimes left before payback in a zero inflation linear world. Food for thought. Although any conclusions thus reached should be handled with care. John