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Strategies & Market Trends : The Rational Analyst -- Ignore unavailable to you. Want to Upgrade?

To: ftth who wrote (89)	12/19/1997 6:14:00 AM
From: HeyRainier	Read Replies (1) \| Respond to of 1720

[ Short-Sell candidate: CWTR ] Dave, I have some research for you about the potential short pick you were considering. I took a look a comparative look at Coldwater Creek (CWTR) and some of its competitors in the mail-order industry: Land's End (LE), Finger Hut (FHT), and Damark (DMRK). Some findings: The industry sample is growing very well, and growth is projected to continue through 1998. The market has hence awarded an apparent leader of this pack with some unbelievable multiples. Keep a close eye on the valuations: Finger Hut (FHT): 1. P/E ratio of 17.2, and is expected to grow earnings for the next five quarters by 30.6% (compounded), for a PE/G ratio of 0.56 (the lower the better). 2. Price to book ratio of 1.5 <=== good in current market 3. Price to cash flow of 8.4 <=== very good 4. Price to sales ratio of 0.49 <=== very good Overall, very attractive on a valuation basis (I have excluded other balance sheet items for the sake of tiime; I need to sleep tonight too). Next, Land's End (LE): 1. P/E ratio of 21.8, and is expected to grow earnings for the next five quarters by 16.4% (compounded), for a PE/G ratio of 1.32. 2. Price to book ratio of 5.0 <=== getting a bit higher... 3. Price to cash flow of 17.5 4. Price to sales ratio of 1.0 <=== just right Damark Int'l (DMRK) 1. Price/Earnings ratio of 13.2, yet is expected to grow earnings by 46% (compounded) for the next 5 quarters, for a PE/G ratio of 0.29, a phenomenal number. 2. Price to book ratio of 1.4 <=== also good 3. Price to cash flow of 6.9 <=== remember, < 10 is good!! 4. Price to sales ratio of 0.16 <=== can it get cheaper?? And finally, we come to your pick, Coldwater Creek (CWTR): 1. Price/Earnings ratio of 41.2, and is expected to grow earnings by 30.7% (compounded) for the next six quarters, for a PE/G ratio of 1.34, the highest in the group (a negative), though by just a tad bit. 2. Price to book ratio of 8.1 <=== This means that if you broke this company down and liquidated it, you would get $0.13 out of every dollar you paid for this stock. 3. Price to cash flow of 32.5 <=== certainly outdistances its competitors... 4. Price to sales ratio of 1.68, also the highest for the group. Technically, I've got bearish signals all across the board: MACD turned bearish, RSI is in negative territory, stochastics still haven't reversed from its sell signal, a Bearish Engulfing accompanied by high volume, and the Omega Research Expert Analyst indicator is bearish (has been for 3 days now). Prior to the selloff, there was a bearish Hanging Man at 35 (obviously, 35 is a very critical resistance point for this stock). I am amazed at how this has managed to defy gravity, but it looks like both the technical and fundamental characteristics of this stock are now pointing to a potentially lower valuation level as its equilibrium price, IMO. I would look for a target of $25, short term, but be careful of a potential bounce from the trendline support (not evident here, but can be seen from a closing-price chart). Should the issue rise enough, an initiation of a short position from $32.50 would appear to provide you with very a favorable reward to risk ratio. Regards, Rainier

To: ftth who wrote (89)	3/29/1998 11:07:00 AM
From: HeyRainier	Read Replies (2) \| Respond to of 1720

[ Coldwater Creek: CWTR ] Hi Dave, Remember this one? It sure was a painful one for a shortseller...at least until recently. It managed to defy gravity for quite a while since that post of mine in mid/late December: exchange2000.com Well, the $25 target was hit, but it also ran up to $40 from the hypothitical short sale entry point, so I've added absolutely no value here ($8 up and $8 down...might as well just flip a coin). What was learned from this? Trend-fighting is tough...and can be painful for those who opt to short a strong stock, or go long on a weak issue. Timing truly is everything. Plus, indicators I've developed and implemented since that time have helped me to better filter through some potentially harmful trades (that December 19 observation wouldn't have been so bent on shorting this; that would have waited until March 12). I had a nice serving of Humble Pie for this one, but I'm glad to see that an evolvement of skills has continued, and is evident when I looked back at my prior trade rationale from as early as this December. Any lessons from past blunders you (or any lurker here on the thread) can share with us? Mistakes make us all better! Regards, Rainier