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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: CalculatedRisk who wrote (4389)	3/7/1998 8:41:00 PM
From: Roger A. Babb	Read Replies (1) \| Respond to of 18691

Bill, those shorting Zitel must be prepared to ride out some losses or miss the boat. There will be no shares available to short near its peak or on the first gap down. You must short on the way up and ride it out. Therefore a Zitel short should NOT be a large percentage of ones portfolio.

To: CalculatedRisk who wrote (4389)	3/8/1998 10:16:00 PM
From: Tuan Phan	Respond to of 18691

SEIC is a great short! Why? Here is my Story: I have spent sometime looking at the fundamentals of SEIC. The data indicated that SEIC is significantly overvalued. The company sports a P/E of 42.2, P/S of 3.9, P/BV of 18.9, and P/CF of 30.5. The company EPS growth rate long-term is projected to between 25 and 30%. The current PEG is 2.19. NI growth rate is 21.9%, with sales growth also in the low 20's%. Overall to the Investment services industry, SEIC ranks on the bottom of fair valuation with respect to P/S, P/E, and P/BV. Industry P/E is 15.3, P/S is 1.1, P/BV is 2.4, and P/CF is 11.3. Industry long-term growth rate is 12%. All indications implied that the stock is overvalued. However, I am puzzled by its price momentum and the current analysts' rating of 1 (strong buy). Let us assume that some other company is interested in acquiring SEIC. Imagine the substantial premium the buying company has to pay to acquire SEIC on top of its current valuation (average acquisition premium is about 30% of current market price). The stock has already appreciated almost 250% from a year or so ago. One other thing, the current company's market cap is over $1B. How many $1B companies can continually and sustainably grow earnings at 30%+ rate? Not a whole lot! The current price level for SEIC is totally unjustified. Analysts are too bullish on this stock and they should change their tunes now. This stock is poised for a nose dive. I SAY SHORT THIS STOCK...Fair value is around $40.