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Strategies & Market Trends : Z Best Place to Talk Stocks -- Ignore unavailable to you. Want to Upgrade?

To: tom pope who wrote (17464)	11/24/1998 8:29:00 PM
From: Ron McKinnon	Read Replies (1) \| Respond to of 53068

Tom maybe this will help from:Briefing You Must Understand the Rules of the Game. Take Computer Literacy as an example. This stock IPO'ed today at $10. There are two kinds of people buying this stock today: daytraders, and long-term investors buying a piece of what they think is the "next Amazon." If you don't understand that the rules for each segment are very different, you are looking for trouble. Daytraders, have at it, this is your type of stock, for today, maybe tomorrow, certainly when the next press release comes out. Investors: approach with extreme caution, the suspect is armed and should be considered dangerous. Here's what we mean. As a long term investment, Computer Literacy, which sells technical books to computer professionals over the Internet, carries a higher Price/Sales valuation than Amazon.com. It may not look like it at first glance, because total revenues are $17.7 million (TTM), but only part of that is from online book sales. With 10.6 million shares outstanding, the total market cap, at $15 a share, is $159 million, for a P/S of 9. Considering Amazon's P/S is 20, it might look like a cheap online book stock. But since only $6.626 million of the revenues are online, and retail book sales usually get valued at a P/S of 1.0, CMPL's online business carries a P/S ratio of 23 at a price of $15. At $23, the online portion of revenues carries a P/S of 35! This makes it just incredibly expensive as an investment, even before considering that losses have risen every quarter, while gross margin has declined every quarter. But as a trading vehicle, it could be another hot one. Valuations don't matter, just volume and momentum. In a trading environment, where quick run-ups and quick run-downs are the arena, it is mostly a game of hot potato. ############ Last one holding the stock when the momentum runs out is the loser.