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

To: sea_biscuit who wrote (4377)	7/6/1998 4:11:00 PM
From: James Clarke	Read Replies (1) \| Respond to of 78740

Penobscot Shoe (PSO) has been looking very very strong. Its at 7 5/8 now, up from 6 two months ago when it first appeared on this thread. I know there are some investors in this one on this thread. What to do with a sudden 25% gain in two months when you would have been happy to make that in a year? I want to be patient, but I don't want to round trip the stock. After much thought, I decided to hold on for now. Here is my reasoning. 1) Net current assets value, adjusted for real estate for sale, is about $8.75. If you add in real estate not for sale, based on a conservative valuation, its more like $9.50. That looks like a buy point, not a sell point. 2) The last quarter was a phenomenal surprise, and the stock is so ignored that it is having a delayed reaction. Sales were up 74%, and the business made good money in what is normally a negative quarter due to seasonality. 3) It broke out to an all time high with virtually no resistance, which tells me it could go much higher. 4) In my experience, these very cheap illiquid stocks generally spike all at once, then fall back hard. I usually take my profits immediately on the big spike. PSO is behaving very differently. It has gone up an eighth here, an eighth there, and then today a half. Nothing extreme so far. The stock is just looking very strong technically, not irrational. My sell signal is irrationality or it hits my price. We're still have a way to go for that. 5) It pays a 3% dividend and has been buying back shares. As for my timing - don't read too much into it - it was pure luck. But there's a world of difference between that "luck" and making 12 points in a day on Amazon, because I don't think I took a penny of risk. I heard an ad on Limbaugh today pitching some option strategy which will double your money every 90 days whether the market goes up or down. I was golfing with a couple retail brokers last week and they told me that all their clients want is Amazon (139 with a 52 week low of 9), Yahoo - up 24 (!) today - (199 with a 52 week low of 22) and AOL (the only one in the group that I think could possibly be worth the same number of digits it trades at). The brokers are trying to short these stocks, but can't get shares. Not that they are screwing their clients. They claim to be advising them "what are you, stupid?" (as you would if you're short the stock), but the clients insist they want to buy it - its a sure thing. So far they've been right. These internet stocks are going to be a major catastrophe as sure as the sun will rise tomorrow morning, but we don't know when, and there are no shares to short anyway. That's another reason why I am so comfortable owning PSO 25% below what its balance sheet is worth. Respectfully, Jim