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Microcap & Penny Stocks : Globalstar Telecommunications Limited GSAT -- Ignore unavailable to you. Want to Upgrade?

To: David Wiggins who wrote (2783)	2/5/1999 3:28:00 AM
From: Maurice Winn	Read Replies (2) \| Respond to of 29987

Capital cost versus current value Welcome David, true enough as you say. The important issue for a prospective shareholder is to value the situation right now, which is to figure out the future stream of profits. What the capital cost was to get the stream of profits is of academic interest only. My point though is the long term success of the system will depend on the capital employed to gain a particular profit stream. So a system which cost $10bn to build, but will only return 10% per year on that capital, won't compete with a system which costs only $2bn to build and returns 30% on that capital. Even so, the rotten returning one could be a better buy for a new shareholder if its market capitalisation has been dropped to near zero because of fear, poor analysis, a surplus of sellers or whatever. The one returning 30% on capital invested would be a rotten buy for a prospective new shareholder if its market capitalisation is through the roof because everyone has heard it is going to take over from all the Internet stocks and Microsoft and Intel too and they have bid the price to insane levels. In that case, a new shareholder in the good system would lose their shirt whereas a new shareholder in the rotten system would make big profits! When it comes time to replace the systems, the first will not be replaced but will be left to die and the shareholders will all have banked a decent profit. The second will be replaced and will gain customers and continue to produce miserable profits for the over enthusiastic new shareholders. Of course the original shareholders in the good system will have made great steaming heaps of money whereas the original shareholders in the rotten system will have made only an okay return. My point is a warning to new shareholders not to just buy a stock because "Wow! They are going to take over the world". Maybe they will, but at what price. So when I rave about Globalstar being way better than Iridium, bear in mind I only paid $3 per share and to pay $30 a share for Globalstar might not be as good as paying $30 for Iridium. I haven't valued Iridium so don't know whether it's a better buy at whatever price it happens to be for a new shareholder. I suppose I should, but it seems like a lot of hard work and I don't try to outguess market movements in share prices. I prefer to just back what I see as competitive advantage. So I agree with you, but there is more to it than that. Hope you enjoy SI and get lots out of it. You get more the more you put in! Maurice