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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Brian Hutcheson who wrote (40840)	11/4/1998 3:54:00 PM
From: Crossy	Read Replies (2) \| Respond to of 1573088

re: PSR analysis Brian, in all those methods I used for deriving vehicles to invest in, the ones I selected myself with PSR analysis I was most succesful. Many question the validity of this type of analysis but in a world of economies of scale and such of scope, where market penetration comes first and profits often after sustaining a period of intense competition, PSR often provides a clue way before many other ratios are indicating any change. I consider it less a "lagging" indicator. For example this spring I invested in a company that did a succesful Chapter 11 reorg, getting right out of bankruptcy. Symbol: DEPCC - the Dep corp trading on Nasdaq. Company quite profitable, no one noticed, trading on the Nasdaq finally. They were one of Walmart's prime suppliers in the haircare field (gels, cremes etc.) Well PSR was 0.11, I got in near $2.5. Well they made good progress, got rid of 1/3 of their debt in less than 1 year. In the end one big chemical player gobbled up that company with alll their brands and debts for $5. Still a steal for PSR of 0.25 <g>. In fact PSR prooved to be a very good valuation ratio for post-Chapter 11 plays. Another good use for PSR are IPO situations. Sales are much more stable than earnings. In fact, one could go even further, even using implied (current quarter annualized) sales in non-saisonal industries (in saisonal situations You have to apply historical weight factors) of course. Anyway, I don't like to tap IPOs but to buy them either on the second day or when everyone's dunmping them. Got into LLL this spring and sold for a double. Those 2 were my only profittable trades last summer. When I do industry analysis studies I like 2 ratios: Price to EBTIDA and Price to Sales. Reason: the possible takeover premium. Price to sales, especially when weighted (e.g. divided) with average industry net margin provides an excellent way of gauging the value of a company FOR AN "EXTERNAL" PURPOSE. An acquire (competitor) could p.e. use his more efficient business conduct on the acquired targe or the joined firm got economies of scale/scope effects that weren't there for the single entities involved. For example in the long distance telecom segment I found STGC and STRX as nice targets with this method, in the telecom equipment sector TLTN. Neither of them are well known right now. But growth rates, PSR and P/EBTIDA ratios are good in all situations. Last but not least AMD fits the same criteria. OK - that's enough of numberz. Firmly I believe that they are only one aspect of the whole puzzle - albeit an important one. Not to forget the even more important mosaic - the "game plan". This is what I value with AMD right now. Their game plan makes sense to me right now. That wasn't always the case in the past. IMHO, competing with INTC makes You really tough <g> My estimates ? Well I derived them from other's inputs. Actually Earnings are not so important to me - sales I value much more. But I know when there are upside earnings surprises, there are normally those nice gaps in the trading pattern - upward gaps I mean <g> So others obviously care about them... best wishes CROSSY