TSRA up 51.34% since October 4th when I suggested I thought it was looking cheap in in the trading thread. Not sure where I'm gonna be willing to sell but I'm not quite there yet. I'll let them report some quarters.

I had been considering take a position in BVSN it was trading significantly under net cash (but was losing $$ each quarter albeit a small amt). For anyone who doesn't know BVSN it was a portal (big back in the day) solutions company which in the hey day of the internet bubble 1.0 was worth $30 Billion!
When it was trading around $8 per share its market cap was $38 million or so. The discount I think is due mainly to the fact that the CEO Dr. Pehong Chen (though old) is ridiculously egotistical (thinks he can bring his company back to his former glory?) and is likely to never sell. Anyways it's interesting b/c the stock seems to have been caught up in some PUmp (and possibly dump) and has soared over the last month or so to $17.

Biesterfield, is it too late for comments about your DELL write-up? If not...

1. I would like to see the math behind your revenue growth numbers and your assumed margins in each of your scenarios (i.e., in your upside case, how will they achieve revenue growth of 3%--will all segments grow at that rate, or will some segments advance by more and others by less, and why? and, in your downside case, why and how exactly will margins contract 100bps? and, what will the absolute level of operating expenses be under each of the scenarios?).

2. I agree with DOOM's comment about adding more competitive analysis.

3. I would prefer to see the same base year EPS used for each of your scenarios.

4. Are you an MBA student who is trying to find a full-time job? I hope so, because I made these comments based on that being true and my history of applying for investment jobs as an MBA student.

BTW: you don't have to post the answers to these here. I just wanted to point out that these are the things I'd ask you if I were interviewing you.

Yes not too late. I pitched Dell verbally in mock interviews twice now and need to analyze the competition more. Also get more info on a catalyst and the math behind my assumptions as you say. Looking into SOTP valution. Yes MBA student.

You should probably adjust your numbers for securitization when doing your ratio analysis.

I would not buy FRD at these levels. If I still owned it id sell now above 12.

Explaining why you would be willing to hold onto something you wouldn't be willing to buy would be helpful.

Please explain.

Feel like rse is a good investment. Opinions?

Not sure if this is the right thread, but feels like it is:

Is there any good argument against Greenblatt's formula? Are there many people who think it's got flaws or anything I should know about?

Don't know much about it, but saw this list. It looks like it picks good stocks to short. Graph the stock prices since the recommendations -- mostly bad news.

http://www.fatpitchfinancials.com/21...magic-formula/

Here's a theory I'm toying with. Please poke holes in it.

The theory is to use PEG ratio on large or mega cap stocks (10 bill+) making money hand over fist to decide on a long.

http://en.wikipedia.org/wiki/PEG_ratio

I've used Yahoo Finance for PEGR, which is measured over 5 years, which is a pretty good range to see company growth. The idea is that mega cap stocks that are making lots of money tend not to be super volatile, which is one of the problems of PEGR. If the megacap stock has been growing over the past five years and their PEGR is between 0 and 1, then they are most likely to be undervalued, and, barring any particular bad news about the company to the contrary, can pretty much be autobought and held until the PEGR approaches 1 again, whereupon it reaches fair value and can be sold.

A caveat that I will add is that stocks that have been hyped up in the news or have displayed ridiculous volatility in the past should be discarded.

A quick glance from that metric provides the following:
AAPL, BMW.DE, BAC, CAT, C, and GOOG to name a few well known examples.

From that list, AAPL and GOOG strike me as being very hyped in the news, so they should be ignored. BAC and C are probably too volatile and violate the "making money hand over fist" rule, so those are discarded.

BMW.DE is interesting, because I don't see anything about them in the news really, good or bad, though they are not particularly making absurd amounts of money. It may be a good long.

CAT strikes me as a very good long based on that metric.

I don't think investing could be this easy, so what is wrong with this?

The only hole that matters is that buying low PEG ratio stocks doesn't outperform the market.

I don't think this statement is true. If you picks stocks based on fundamentals like price to book value, pe, or dividends you will generally beat the market.

It is true. Try running a backtest over multiple time periods using good data. No fair just looking at recent data. No fair just looking at data that doesn't include companies that have gone busto.

p/b worked a few decades ago in relative performance.

p/e never worked (except for short periods) in relative performance.

Dividend yield worked for decades at a time and didn't work for decades at a time. Has done wonders recently in relative performance.

Price to sales was super awesome a while back in relative performance.

I little late but Jeremy Siegel did a backtest of sp500 stocks from 1957 to December 2006. Those in the lowest 20% in p/e ratio outperformed the market by 3.2%. 2nd lowest 2.4%. Graham said if you continually buy stocks with p/e greater than 16 you will lose money.

been looking at RAI (yeah, i kind of feel like a doucher). its been trading in a very narrow range the last 2 months (~40-42). its at the bottom of that range now and seems like there is strong support at 39.75-40. dont think there is tons of value here, but R/R seems pretty good. solid dividend, too.

any opinions?

NTDOY...so juicy

Nice run up from GRVY lately. Open beta test is Feb 22 with commercial launch (hopefully) set for March now.

Blind picking low PEG ratio stocks will not. But what about using it to handicap large and megacap stocks as a predictor of them being undervalued, as I noted?

Yep, can't wait to see how everything turns out. Hoping for a nice multi bagger from the current price.

It definitely works sometimes.

You are depending on the growth continuing, which 5 years of past growth won't tell you.

IF you can figure out why no one else believes the growth will continue (the real reason why low PEG ratio stocks occur), and you can figure out why they are wrong, you have a reasonable bet that you will outperform.

The problem of limiting yourself to large and megacaps, you are trying to out-think a ton of people. Most of your competition will have read about PEG ratios...

I hope DWA gets a chunk cheaper, I'm getting a little itchy to increase my position in it.

feel like pitching why you think DWA is a good buy other than you think it is cheap? What is everyone else missing?

They make films that make franchises.

In 2010 they had 1 TV show (Penguins of Madagascar). In 2011 they had 2 (Penguins of Madagascar and Kung Fu Panda: Legends of Awesomeness). This year they will have 3 when their How to Train Your Dragon show starts airing on Cartoon Network.

Their film library's value, which is substantial, isn't anywhere on the balance sheet.

The things that are depressing the stock are declining US box office #s, rapidly declining DVD business, and the uncertainty of their distribution.

The US box office market isn't quite as robust as it has been in year's past but overseas numbers are getting better and non-US countries is quite a big market.

A while ago VHS numbers declined but people then bought movies on DVD. Although DVDs aren't selling like they used to, companies still want to watch to distribute the content and people still want to view it. Less people are buying DVDs of their movies than they used to, but more are buying them on iTunes, renting them on a roku, or trying to stream them through netflix (which they will be able to soon).

I don't know how the situation will play out with them having to find a new distributor or distributing the films themselves, but I don't think it's a big enough problem to make their current valuation reasonable.

Hey Xaston,

Interesting analysis. What is your target for a 'chunk cheaper'?

If the market cap hits 1.2 billion I'll buy some more, most likely.