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To: Druss who wrote (204)	8/9/1998 1:47:00 AM
From: Fredman	Read Replies (2) \| Respond to of 253

What the hell is 'after hours trading' and why the hell isn't it illegal ?? OR, how can i get in on it ?? I have ALMOST been shafted a few times by a stock closing on a day at 1.50, but opening the following day at 4.00 How can this be ?? Or, How can I do this ??

To: Druss who wrote (204)	8/10/1998 10:02:00 AM
From: Reginald Middleton	Respond to of 253

<Fred--Market Cap is really a bit misleading. In simple terms a companies market cap is the shares outstanding times the share price.> There are a few misconceptions regarding the term market capitaliation. For one, it should not play much in the investment decision. That is what the core fundamentals are for. Market capitalization is the total amount of money investors have given management to run its business. It is not shares outstanding times the share price (unless you are talking about a purely equity financed company which is VERY rare), and a definition as such spreads misinformation. Large companies such as Intel, IBM and Microsoft are funded with common stock, preferred stock, warrants, straight debt of various maturities, variable debt, convertible debt, convertible preferred, swaps, leases, etc. <PSR is a good number tying the revenue to the market cap.> PSR can be very misleading since it does not take into consideration operating efficieny. For instance, if two hardware companies (say Dell adn Packard Bell) are selling at a PSR disparity of 30%, where Packard Bells PSR is 7 and Dells's PSR is 10, it may be construed that Dell is more expensive than Packard Bell. In reality, Dell's operating efficiency is much greater than Pakard Bell. Assuming Dell has twice the profit margin of Packard Bell (quite possible), then Dell is actually cheaper than Packard Bell, even at a 30% premium in terms of PSR. <In theory a company with a large market cap should be less volatile, have a bigger business and safer. However if the traditional fundamental numbers are badly skewed the large market cap stocks will be the most volatile.> In reality, it is the securities of a company that with a low market capitalization that tend to be volatile due to lack of liquidity. From the perspective of the company, large debt capitalization companies exhibit the most operating volatility since cardinal rule in corporate finance states: the higer the debt, the higher the cash flow volatility (due to less margin for error stemming from debt service). The positives of debt are state and federal tax shields and leverage for equity which tends to amplifiy returns for equity investors. For those who find this type of information interesting, see the various sources at rcmfinancial.com