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

To: Oeconomicus who wrote (7284)	4/19/1998 11:31:00 AM
From: Mama Bear	Respond to of 18691

>>>Barb, I think EGGS may be causing you to give KTEL a bit too much credit. My understanding is that their Web site isn't even supposed to be up until May 1, so they have never sold a thing over the Web before. As far as I know (though I haven't checked this), they do not currently earn revenue from the broad selection of music that they plan to offer. Their existing "successful distribution model", IMO, hardly suggests that this niche music purveyor can compete with those already online.<<< Well, EGGS is in my experience, and a person's experience definitely colors judgement. You are correct that EGGS was producing revenue from their website, but has been a consistent money loser with their business model for a number of years. KTEL however, has been making money with their business. KTEL is valued at 1x sales, going to the web will most certainly increase those sales. EGGS is valued at ~5x sales (assuming your figure of $52 million per year) now, and was at 3 1/2x revenues when they decided to close their stores. Of course EGGS has a huge float next to KTEL. Actually, to be honest, I think it's SIEB that is more influential on my evaluation of KTEL. The low float, the dogged determination that it's a short without regard to market realities (SIEB was a great short, after the squeeze catalyst was finished, i.e. the 4:1 split). When will the 'net mania be over? The reality is that only 900 people holding 1000 shares of KTEL can drive it to the moon. It's not so much a matter of respect for KTEL, as respect for the miniscule float, and the current mania for anything Internet. BTW, I hold no position in KTEL, having decided that it's a gamble either way. I have successfully daytraded it for a few points, but nothing compared to what some folks who "bought and held" accomplished. Of course my profits are safe in cash today. The folks who are holding it are probably worried about the Bearon's effect. Barb