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Strategies & Market Trends : STOCKS WITH ATTITUDE TEAM - FA/TA AND EVERYTHING ELSE -- Ignore unavailable to you. Want to Upgrade?

To: Doug R who wrote (2101)	2/1/1998 9:56:00 AM
From: Sergio H	Read Replies (1) \| Respond to of 2377

Doug, when you first mentioned GTAX you said that JTAX is a good reference. Earnings are due for GTAX later this month and the comparison to JTAX comes to mind. Take a look at a recent Motley Fool write-up on JTAX: The biggest winner of the year, hands down, is Jackson Hewitt (Nasdaq:JTAX - news) . The second-largest tax preparation company in the world, Jackson Hewitt had the distinct advantage of starting out its incredible 1527.44% increase from a low valuation. At the beginning of calender 1997, Jackson Hewitt traded at $4 3/4, which was 0.85 times sales and 9.7 times trailing earnings. To put this in perspective, at that time the S&P 500 Index was trading at about 2.5 times sales and 20 times trailing earnings. There appeared to be nothing funky as far as the quality of earnings that company was generating. A look at the statement of cash flows, given that Jackson Hewitt is a franchise business that has very little in the way of fixed costs to consume the earnings dollars, confirmed that the earnings dollars were not being consumed behind the scenes on spending for plant, property and equipment. Finally, the balance sheet had more cash than debt and the company had positive working capital. Now, it is not as if Jackson Hewitt was the proverbial no-brainer. Certainly the company did not necessarily present the best picture on the first trading day of the year as far as the underlying business went. The prospects of tax reform destroying its business were only just fading into the background. The liquidity crunch that hit the company in late 1995 that caused it to be in technical default on short-term credit facilities had disappeared, but there was no real indication that the problem would not return. Sales growth was fine, but there were still enough question marks to make investors discount a heck of a lot of risk into Jackson Hewitt's share price, pushing the valuation to the low levels described above. Although there were some business risks present at the beginning of 1997, they were the cause of the excess returns. The 1527.44% gain Jackson Hewitt gave to investors came as a result of the picture changing while the stock had a very low valuation on an absolute basis. If Jackson Hewitt had started out at a higher valuation, it would have diminished the returns by that much. Had Jackson Hewitt been trading at the same level of the S&P 500 going into the year, for instance, the 1527.44% gain would have been at least cut in half. Surprising though it may seem, very few companies with ultra-low valuations come without some degree of business risk. It is the perceived business risk that causes investors to push down stock valuations down to compensate. In doing this, investors remove the other big risk inherent in buying a stock -- the risk of paying too much. In fact, as the valuation gets lower and lower, you actually see the valuation risk disappear and find yourself in a situation where the downside is minimal but the upside may in fact be amazing. In the case of Jackson Hewitt, continuing to grow revenues and doing a secondary offering to end liquidity concerns forever convinced investors to re-evaluate the business and slap a higher valuation on it. Those who bought the stock while the valuation was low were the ones who made the most money. <><><><><><><><><><><><><><><><><><><><><><><><><><> Also take a look at the charts for H.R. BLOCK quote.yahoo.com and HD VEST quote.yahoo.com Any opinions on the HD Vest chart? Sergio

To: Doug R who wrote (2101)	2/1/1998 11:21:00 AM
From: Redhead	Read Replies (1) \| Respond to of 2377

Doug, If I could take a moment of your time on a Sunday morning, I have been seeing this IL indicator mentioned a number of times. Could you please explain what that means? I would greatly appreciate it. I really am getting a grasp on the technicals now from reading what has been posted on these various threads. A lot goes over my head, but some of it is sticking. The more I read, the more I know I must learn. Thank you all for sharing your knowledge with me. It is making me a smarter and more informed investor. Knowledge is power. Smile Redhead