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Strategies & Market Trends : Three Amigos Stock Thread -- Ignore unavailable to you. Want to Upgrade?

To: Ken W who wrote (8142)	9/1/1998 9:25:00 PM
From: lizard lick	Read Replies (1) \| Respond to of 29382

Heres some more info from the boys at motley fool Enjoy Message-id: <1998083121254600.RAA04592@ladder01.news.aol.com> After an obviously dreadful August (where the Edible Eight tanked 22.5%, even worse than the 19.9% Nasdaq slide) I can honestly say I have never been as excited about the fundamental valuation of the new batch for next month! Sugarcoating the abysmal? No, August was atrocious. Should've kept the usual Coke (NYSE: KO) or Starbucks (Nasdaq: SBUX) that would have been quite convenient -- but we went all-long for August, and despite the stings, will do so again. This time, I bring you, numbers. Lots of numbers. Here are the 1998 P/E, Expected earnings growth rate for next year, 1999 P/E, and the 5 year annualized growth rate. You tell me if this is bear bottom value due for a springback or not. . . 1. RAIN 10.7 37% 8.0 34% 2. LDRY 6.8 15% 5.9 27% 3. ZAP 14.5 13% 12.9 15% 4. DANB 15.3 30% 11.8 33% 5. CAKE 21.5 28% 16.9 27% 6. STAR 8.7 19% 7.3 17% 7. UNMG 9.3 66% 5.6 N/A 8. GRLL 8.8 27% 6.9 29% Take some time to look them over, all of them have lower P/E's than their year-ahead and 5-year growth rates, except, barely, for Zapata, but I'll explain why on that one later. For now the average of these eight picks are pretty amazing. Average 1998 P/E of 11.9. They are expected to grow earnings 29% next year. They are selling for 9.4 times 1999 earnings. Their expected 5-year growth rate is 26%. In a fair world these stocks should be trading for 2, maybe 3 times the present price tags. Oh, Zapata. The numbers look pretty good. Slow, steady, but the real story there is quite different. Zapata has $5 a share in cash, $1 a share in stock of Envirodyne, and $6 a share in stock of Omega -- that $12 is more than the stock is trading for right now. And these are liquid assets (in the sense that the $120 million in cash, the 5.9 million shares of Envirodyne, and 14.5 shares of Omega are in the bank or publicly traded). Beyond the food packaging and fish oil holdings, Zapata also owns the zap.com website, where it has bought 31 different online content sites. Check the site out to see what I mean. This is a wannabe portal, a poor man's Yahoo!, but basically selling for less than free given the food and cash assets mentioned. Interesting story there for sure. New this coming month you will find Dave & Buster's, finally cheap again, and Roadhouse Grill, which has stunned analyst estimates over the last two quarters. Heck, the company has earned $0.31 a share over just the past six month, so even the earning estimates are way too low going forward (and should be revised upward, and soon). Well, check out the numbers again. Except for Cheesecake Factory, which is the most solid performer in the industry in terms of perpetual same store sales increases, the most expensive stock is selling at 15 times earnings. Half of them have single-digit P/E's for THIS YEAR. Value pricing on growth stocks -- a good thing, and it's why I am very excited about next month! Then again, after August, how much worse can things get (Famous last words, I know). Until next month, Digest Foolishly, Rick