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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: B.D. who wrote (4282)	6/16/1998 10:01:00 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78744

re PPOD. Well it certainly is scaring me off too. If it's not an internet stock, then it must be a grocery stock. Competing with Albertsons and Wal Mart and/or Price/Costco. Ha. Going to be a lot easier for these grocery/warehouse companies to get up on the net and home deliver than it will be for little PPOD (200 employees)to compete in their biz. That would happen to PPOD maybe the first time one of these giants sees PPOD make a profit. PPOD's PSR, P/BV look mediocre to me. Only two years history I can find. Sure there's a margin of safety with $3 cash. And I see that sales are growing. But with their losses ... they could burn through that $3 fast. No way do I see this stock at $15 === 'course I've been wrong many, many times before. You see value here at near $5 and a triple. And you want to buy more. This is the best value stock you can find??? I think you fell in love. Here's what I sometimes do when I get like that. Sell the position. If you read the Crimi post here, the world is coming to an end anyway, or the market will collapse at best. So just wait it out for two weeks. Just stay out of the position for two weeks. Then, if you still think PPOD is a value, you haven't found anything better, buy it all back. It's amazing that when you ask people if they could divorce their spouse with no consequence and remarry 'em again (also with no consequence) how many people say they'd divorce 'em alright, but never remarry 'em. -g-. JMO, Paul Senior

To: B.D. who wrote (4282)	6/16/1998 10:09:00 PM
From: Mike 2.0	Read Replies (1) \| Respond to of 78744

I have watched PPOD, but you won't like what I have to say...I almost bought puts strike @ 5 when K-Tel frenzy lifted all net stocks, and PPOD was over 10. Why do you think PPOD will be at $15-20 in 18 months? Do you think PPOD will be profitable then? Revenue line is irrelevant because the company's margin on grocery delivery is deli-sliced-extra-thin (near 0%!!). PPOD's business plan defies logic: sending people into grocery stores to fill orders at retail. Their website is user-unfriendly, requiring users to download software unlike every other on-line store. We're hardly talking value here. Now PPOD is switching to a warehouse-based system. This will simply burn cash faster; the business plan simply doesn't and won't add up to profitability ever. The stock actually should sell at liquidation value (cash per share + nominal additional for assets). Please don't take as a flame, it's not. My .02, sell, and if you are looking for a grocery value stock, consider Albertson's on NYSE.

To: B.D. who wrote (4282)	6/16/1998 10:44:00 PM
From: James Clarke	Respond to of 78744

FWIW, I find Peapod very interesting. I'm putting some time into it, with a lot of questions to answer. Certainly not a classic value investment, but not one to dismiss out of hand either. The potential upside if anything went right is very high (I'm not talking about it becoming the next Microsoft, I'm talking a two-cent surprise one quarter driving it up $5. The problem is getting a handle on the downside. Most of the share price is indeed cash on the balance sheet, but I agree with Paul that they could burn through that in a couple of quarters. Nowhere near a conclusion yet, but I think its worth the work. Neat business too. Thanks for the idea. And yes, Paul, I am skeptical. I am always skeptical. Jim

To: B.D. who wrote (4282)	6/17/1998 12:26:00 AM
From: James Clarke	Respond to of 78744

You comments on Peapod got me interested enough to spend about two hours scouring the financials. It is interesting. The business model makes sense, and the balance sheet is just as you say. More than 2/3 of the share price is cash, with no debt. I don't care if its an internet stock or not, its a business and if I can understand the economics, which I think I can, I can evaluate it intelligently. I would pass, for the following reasons. 1. Although I like the balance sheet, the business plan is going to burn through the cash long before they generate positive earnings. 2. The Wall Street research is simply funny. Membership has been growing at 50-70%, and for any young growth company, you would assume that would decline. But the Wall Street models assume 50% growth in 1998 and 1999, then 100% growth in 2000 and 2001. All this with minimal dilution from new equity financing, even though the company will be HUGELY cash flow negative throughout that forecast. (If you are looking at an analyst's forecasts for a growth company, and there is no balance sheet, be VERY skeptical!) IF THIS ROSY SCENARIO COMES TRUE, you get a profit of $1.00 per share in 2001. Keep my critique in perspective, you wouldn't need $1.00 a share three years out to make a $5 stock a winner if you held it until then, but thats not the kind of bet I make. Especially when I understand the reckless assumptions needed to even get to that number. 3. At first glance, I thought I saw a barrier to entry in that they can sign exclusives with grocers in their local market. But on further review I see that they link up with one grocer in each market. Which means that IF it works, a competitor comes along and links up with a competitive grocer. The technology is not a barrier to entry - that can be copied - There is no barrier to entry in this business. The moment it looks like it might become profitable, these guys have a lot of new friends. The business model has severe flaws. Not to say it couldn't triple if they beat a quarter by a couple pennies. Its an internet stock, and these are all "valued" on these highly speculative assumptions. By that logic, it probably should trade higher. But that's not my game. I see no reasonable margin of safety here. It was an interesting exercise to study the business, since we are going to see more and more of these (and a lot of them are going to bust) in the next few years. And several of them are going to be phenomenally profitable investments. So thanks for the idea. Hope my comments are helpful to you too. Bottom line, I agree with Paul. You're looking for value in a place you are very unlikely to find it. Value meaning a reasonable margin of safety. Wait a year or two, and I think there will be plenty of busted internet stocks at very interesting valuations, just as they start generating some real earnings. Jim Clarke