Mr. Trinidad III, RADAF Re-visited
Thank you for your extensive response to mine and Mr. Gentry's questions. As with any exchange of intellectual ideas, for each question answered, there are generally 10 new ones that arise. As I posted on Yahoo (Yes, I am the Yahooligan whose post Mr. Link refered you too ) I for one am very glad to se your bearish technical analysis. While I can read charts and am fairly adept at statistical methods and modeling, I am obviously not as well read as you on the technical side. Your postings allowed me the understanding as to why so many were bailing out of RADAF. Your analysis is what I had surmized, but your technical summations made it much clearer. Thank you! Now back to the debate of RADAF, the company and its future!
1) <The technical damage has been rather severe....It makes one wonder.> According to my statistics more than 54% of all issues large, medium and small have felt the same pain (No I am not slick willie). At the same time only about 20% (figure presented on CNBC....sorry) have participated noticeably in this "rebound" leaving about 43% of all issues in the same boat as RADAF. Are they all; also, succeptable to another 75% decrease, as you indicated 3 was the bottom support on RADAF?
2)<But I also take into consideration the reality of the current situation> I guess one persons reality is anothers delusion. My reality, which by your technical analysis is somewhat delusional is, that RADAF with a 4.9 PE and ever decreasing float (due to company buy-backs and buying by largest shareholder Mr. Pickup) and apparently short position vs. ever increasing revenues, production capabilities, deversification, cash position, toy line innovations, lack of debt, leads me to believe from a long position this is a great play.
3)<I've watched it (RADAF) on a technical basis since about October of last year...> At what point did you decide it was a good short and or had severe technical problems? 20...18..16? when, or, did you advise your friends to sell or short the stock? 20...18...16?
4)<I let the financial statements do the talking, and will try and see what I can find from the internet> WOW! We got a BIG problem here Mr. Trinidad! Lets get back to the issue of inventories and life cyles we were discussing. By just looking at the numbers you would be, and I guess were, completely unaware of RADAF's manufacturing capacity expansion and its effects on inventories. Also, by not checking out their new lines of toys yourself (I am assuming you go to Wal-Mart or one of RADAF's retailers occassionally) you have no idea of what they have coming up. Its as if you assume they are stagnant UNTIL they have another hit. By then its too late. I prefer to know BEFORE the product is a hit. Their line of combat toys (Stealth Assault, Tank Assault, Sub Assault) In my opinion, and more importantly in the opinion of BUYERS at the stores I monitor, will be huge successes. Check out the third quarter numbers and notice as fishing games were dropping new lines allowed them to increase revenues (all-be-it not to your technical satisfaction). In other words a new cycle is beginning. I prefer to be in at the beginning rather than the middle or close to the end. Using just numbers can be very mis-leading when you are dealing with a dynamic entity rather than a static one.
5)<Yes, however, the website doesn't appeal to me, nor did the name (http://www.girltech.com)
unfortunately.> I guess we will just have to agree to disagree on this one. I had my 6 year old daughter go through the site and she loves it. Seeing as how this is the target audience, and not us old male foogies, I'll take her word on this one.
6<Yes. I'm wondering, however what relationship a hand-held game manufacturer (and designer/innovater) has to futuristic telecom equipment. It seems like a rather unrelated business line (ever heard of Zapata?) That'll be great if it works> If you would listen to the Conference Calls and do some company research you would know that RADAF's Chairman of the board, Mr. Jon Bengtson, Is also the President of U-Tel. The product they are working with is a switching/metering device for household usage. It has been called in by two unnmamed companies for testing. The link between RADAF and U-Tel is, If, and when, the unit becomes an operational device RADAF will manufacture it for U-tel. By my calculations, Mr. Bengtson and RADAF together own about 2/3 of U-tel, making it more or less a subsidiary. RADAF has more than enough room to expand manufacturing at its facilities in China to meet this demand. I can hear you now saying, (oh how I hate this word) where is the synergy? To that, all I can say is, if you want to investigate a highly diversified company with little or no synergy check out Tyco, International (TYC),
You probably already have, and I'm sure you will agree they are doing quite well. (They are for me long any way). Oh, and I agree, if U-Tel works it will be great!
7)<Yes, that is good. A company with n long-term debt, however, gives up some profits it could earn from borrowing at a lower rate and investing the money at a higher rate. A balance is needed for optimum profits, and the leverage can be safely extended in accordance with its cash flow.> I couldn't agree more. However, management see's its own stock at these prices as its best investment. I don't agree with management on this, but, I don't get a vote( since even as a long I am a minority shareholder). A little borrowing (leveraging) would also serve to get a lot more than the now zero attention it gets from wall street and its investment bankers.
8)<He (Mr. Buffet) would commend me for doing my homework and actually taking the time to examine the financial statements...> I won't even try and speak for WB. As for myself I would give you a 100% grade on the first page of your analysis, unfortunately it was a two page assignment and you left the second page blank. The second page being the research beyond the numbers for this you get a 0%.
Your average 50% (failing). Don't feel belittled by this, I grade myself as failing also as, even though I had the TA abilities about me to fore tell RADAF's fall I choose to ignore them and therefore bought long way to early or to late, well to high anyway, depending on how you look at it. But I like WB and his recent bid for LTC am comfortable sitting on this one through the storm, as I feel comfortable the foundation is adequate to weather it unscathed
Best Wishes,
Swedelo |
