From: owner-canslim-digest@lists.xmission.com (canslim-digest) To: canslim-digest@lists.xmission.com Subject: canslim-digest V2 #2761 Reply-To: canslim Sender: owner-canslim-digest@lists.xmission.com Errors-To: owner-canslim-digest@lists.xmission.com Precedence: bulk Content-Transfer-Encoding: quoted-printable X-No-Archive: yes canslim-digest Thursday, August 8 2002 Volume 02 : Number 2761 In this issue: Re: [CANSLIM] Current Case Study - XRAY Re: [CANSLIM] Current Case Study - XRAY RE: [CANSLIM] Current Case Study - XRAY RE: [CANSLIM] Current Case Study - XRAY Re: [CANSLIM] Stock Screening Re: [CANSLIM] Stock Screening Re: [CANSLIM] Re: CHTT (was: Identifying NEW leaders) ---------------------------------------------------------------------- Date: Thu, 8 Aug 2002 21:20:57 -0500 From: "Katherine Malm" Subject: Re: [CANSLIM] Current Case Study - XRAY This is a multi-part message in MIME format. - ------=_NextPart_000_0A81_01C23F21.7CC681D0 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable Hi Robert, >>Why wouldn't a drop in cash flow from qtr. to qtr. be important, even = cumulatively?<< I want to first be sure we're talking apples and apples. The numbers as = reported on the MSN site are cumulative numbers from one quarter to the = next, so you have to impute the cashflow *per* quarter. See: http://WallStreet-LLC.com/canslim/XRAYCflo.jpg Cash flow from one quarter to the next (say March to June of the same = year) are going to vary according to the activity for that particular = quarter. In the same way that revenues & earnings may have seasonality, = the cashflow will also ebb and flow with business activity. That's why = you really want to look at cashflow over the entire fiscal year vs. the = previous year, or quarter over quarter (e.g., March 01 vs. March 02). >>on the surface increased inventories and receivables would not seem a = good thing, but they did not seem to outpace earnings or revenue growth, = so that seems OK. Agree?<< Absolutely. Increasing inventories could mean sluggish sales, = overproduction, poor inventory management practices, and more. Rising = receivables could mean they may be managing cash poorly, their customers = are having trouble paying, and more. I could go on and on, but I'll just = leave it by saying that this is definitely not a good thing and you'd = want to dig in and find out what is happening in the business that may = be causing it. For example, it may turn out to be the result of an = acquisition in which they have inherited some sludge. Excellent = execution after acquisition would clear this out. You can't find out the = details any other way than to skim the SEC filings and/or Annual = Reports. >>So, looking at this 12.4 million in operating cash flow, am I = comparing it to the trailing 12 months earnings of 120.2 million or am I = misunderstanding how you do this?<< Again, be careful you're comparing apples to apples. The 12.4 million is = total Q1 cashflow (3 months). The 120.4 million is *12* months total = earnings for the prior fiscal year. Best thing to do at any rate is to = look at cash flow *per share* and compare cash flow and earnings per = share for the same fiscal year. You can see cashflow and eps numbers for = the recent year on the DGO charts. However, with some things, I find the = old standard resources are the best. I still like to view an S&P report, = as it shows per share numbers one year to the next over a long period of = time. Most brokerages give you access to this or something similar at no = charge. See it at: http://WallStreet-LLC.com/canslim/XRAYCfloPerShare.jpg Katherine - ----- Original Message -----=20 From: RWElmer@aol.com=20 To: canslim@lists.xmission.com=20 Sent: Thursday, August 08, 2002 8:03 PM Subject: Re: [CANSLIM] Current Case Study - XRAY Hello Katherine,=20 Thanks for responding to this. Opportunity here to fill in some huge = gaps in my education. Why wouldn't a drop in cash flow from qtr. to qtr. = be important, even cumulatively? It would seem to me that you'd want to = see a steady progression. If you have a reference that discusses this = issue, I'd love to read it as this is an area I'm just starting to pay = attention to. In the meantime ... on the surface increased inventories = and receivables would not seem a good thing, but they did not seem to = outpace earnings or revenue growth, so that seems OK. Agree?=20 On a related issue, and I've been wanting to ask you this for a while, = I have seen you say that one should look for cash flow to approximate = earnings, to minimize the possibility that earnings are being = manufactured through creative accounting. So, looking at this 12.4 = million in operating cash flow, am I comparing it to the trailing 12 = months earnings of 120.2 million or am I misunderstanding how you do = this? I use MSN for a good deal of my DD, so it'd be helpful to me to = use the numbers there for our discussion. I was not thrilled with their = Help menu, however, and am therefore hoping you have some better sources = of info that speak to the issues raised. =20 I appreciate your time.=20 Best Wishes,=20 Robert W. Elmer=20 - ------=_NextPart_000_0A81_01C23F21.7CC681D0 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable
Hi Robert,
 
>>Why wouldn't a drop in cash = flow from qtr.=20 to qtr. be important, even cumulatively?<<
 
I want to first be sure we're talking apples and apples. The = numbers as=20 reported on the MSN site are cumulative numbers from one quarter to the = next, so=20 you have to impute the cashflow *per* quarter.
 
See: http://WallStreet= - -LLC.com/canslim/XRAYCflo.jpg
 
Cash flow from one quarter to the next (say March to June of the = same year)=20 are going to vary according to the activity for that particular quarter. = In the=20 same way that revenues & earnings may have seasonality, the cashflow = will=20 also ebb and flow with business activity. That's why you really want to = look at=20 cashflow over the entire fiscal year vs. the previous year, or quarter = over=20 quarter (e.g., March 01 vs. March 02).
 
>>on the surface increased inventories and receivables would = not seem=20 a good thing, but they did not seem to outpace earnings or revenue = growth, so=20 that seems OK. Agree?<<
 
Absolutely. Increasing inventories could mean sluggish sales,=20 overproduction, poor inventory management practices, and more. Rising=20 receivables could mean they may be managing cash poorly, their customers = are=20 having trouble paying, and more. I could go on and on, but I'll just = leave it by=20 saying that this is definitely not a good thing and you'd want to dig in = and=20 find out what is happening in the business that may be causing it. For = example,=20 it may turn out to be the result of an acquisition in which they have = inherited=20 some sludge. Excellent execution after acquisition would clear this out. = You=20 can't find out the details any other way than to skim the SEC filings = and/or=20 Annual Reports.
 
>>So, looking at this 12.4 million in operating cash flow, am = I=20 comparing it to the trailing 12 months earnings of 120.2 million or am I = misunderstanding how you do this?<<
 
Again, be careful you're comparing apples to apples. The 12.4 = million is=20 total Q1 cashflow (3 months). The 120.4 million is *12* months total = earnings=20 for the prior fiscal year. Best thing to do at any rate is to = look at=20 cash flow *per share* and compare cash flow and earnings per = share for=20 the same fiscal year. You can see cashflow and eps numbers for the = recent year=20 on the DGO charts. However, with some things, I find the old standard = resources=20 are the best. I still like to view an S&P report, as it shows = per share=20 numbers one year to the next over a long period of time. Most brokerages = give=20 you access to this or something similar at no charge.
 
See it at:  http://Wa= llStreet-LLC.com/canslim/XRAYCfloPerShare.jpg
 
Katherine
----- Original Message -----
From:=20 RWElmer@aol.com=20
To: canslim@lists.xmission.com=
Sent: Thursday, August 08, 2002 = 8:03=20 PM
Subject: Re: [CANSLIM] Current = Case Study=20 - XRAY

Hello = Katherine,=20

Thanks for responding to this. Opportunity here to fill in = some huge=20 gaps in my education. Why wouldn't a drop in cash flow from qtr. to = qtr. be=20 important, even cumulatively? It would seem to me that you'd want to = see a=20 steady progression. If you have a reference that discusses this issue, = I'd=20 love to read it as this is an area I'm just starting to pay attention = to. In=20 the meantime ... on the surface increased inventories and receivables = would=20 not seem a good thing, but they did not seem to outpace earnings or = revenue=20 growth, so that seems OK. Agree?

On a related issue, and I've = been=20 wanting to ask you this for a while, I have seen you say that one = should look=20 for cash flow to approximate earnings, to minimize the possibility = that=20 earnings are being manufactured through creative accounting. So, = looking at=20 this 12.4 million in operating cash flow, am I comparing it to the = trailing 12=20 months earnings of 120.2 million or am I misunderstanding how you do = this? I=20 use MSN for a good deal of my DD, so it'd be helpful to me to use the = numbers=20 there for our discussion. I was not thrilled with their Help menu, = however,=20 and am therefore hoping you have some better sources of info that = speak to the=20 issues raised.  

I appreciate your time.

Best = Wishes,=20

Robert W. Elmer =
- ------=_NextPart_000_0A81_01C23F21.7CC681D0-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Thu, 8 Aug 2002 22:38:15 EDT From: RWElmer@aol.com Subject: Re: [CANSLIM] Current Case Study - XRAY - --part1_e5.1c0aa853.2a848517_boundary Content-Type: text/plain; charset="US-ASCII" Content-Transfer-Encoding: 7bit Katherine, Wow! Thanks for the links and explanations. That'll really help clarify things in my mind. I don't have access to DGO but do get S&P reports from my Broker's site. Another piece to the puzzle ... Best, Robert W. Elmer - --part1_e5.1c0aa853.2a848517_boundary Content-Type: text/html; charset="US-ASCII" Content-Transfer-Encoding: 7bit Katherine,

Wow! Thanks for the links and explanations. That'll really help clarify things in my mind. I don't have access to DGO but do get S&P reports from my Broker's site. Another piece to the puzzle ...

Best,

Robert W. Elmer
- --part1_e5.1c0aa853.2a848517_boundary-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Thu, 8 Aug 2002 23:07:35 -0400 From: "Duke Miller" Subject: RE: [CANSLIM] Current Case Study - XRAY Hermann: 1. Something superlative. 2. People of the highest social level. [French : cr=E8me, cream + de, of + la, the + cr=E8me, cream.] - ------------------------------------------------------------------------ - -------- - -----Original Message----- From: owner-canslim@lists.xmission.com [mailto:owner-canslim@lists.xmission.com] On Behalf Of Hermann Ertl Sent: Thursday, August 08, 2002 9:20 PM To: canslim@lists.xmission.com Subject: RE: [CANSLIM] Current Case Study - XRAY cr=E8me de la cr=E8me - would you please elaborate. > From: "Duke Miller" > To: > Date: Thu, 8 Aug 2002 16:25:32 -0400 > > e Mike: When it comes to submitting stocks for > consideration, this has got to be, beyond a doubt, the cr=E8me de la > cr=E8me! =20 > > -----Original Message----- > From: owner-canslim@lists.xmission.com=20 > [mailto:owner-canslim@lists.xmission.com] On Behalf Of Mike Gibbons > Sent: Thursday, August 08, 2002 3:27 PM > To: canslim@lists.xmission.com > Subject: [CANSLIM] Current Case Study - XRAY > > In view of the interest in current cases rather than 20-20 > hindsight, and discussions to aid the learning process, I offer > XRAY as an example, which broke out today from a CwH pattern with > short handle Firstly, let me add the disclaimer that I'm a > programmer who was introduced to CANSLIM as a development project, > and I'm 1 year into the 3 yr learning curve, so further comment > by the "experts" is welcomed to improve my own > understanding. Firstly the fundamentals which are very strong, > with the exception that Institutional Ownership is already quite > high. There are differing views on what the level should be, but > somewhere less than 30% would be better. Additional DD would be > required to determine why pre-tax profit margins are decreasing > and if that is cause for concern. (This information is drawn from > yahoo/multex not IBD) =20 > C Current Earnings > Earnings per share > growth of at least 25% in the most recent quarter > > > > Most recent quarter year on year growth. (Published > financial data). > > 35.00 % > Latest three quarters of sales > growth should be a minimum of 25% > Average > year on year growth for last 3 quarters. (Published > financial data). 51.00 % > Sales growth > should be accelerating. > Difference in year > on year growth rates over last 3 quarters. (Published > financial data). 23.00 A Strong > Annual Earnings Growth Annual earnings growth > for the last three years of 25% or greater 3 > year compound EPS growth rate. (Published financial > data). 53.00 % Return on equity should be > at least 17% Published financial data. > 21.00 % Pretax profit margins should > be increasing Profit Margin for most recent > quarter minus profit margin 1 year ago. (Published > financial data). -1.00 size=3D2>N > > New Products, Services or Leadership > If a > company has a dynamic new product or service, or is > capitalizing on new conditions in the economy, this can > have a dramatic impact on the price of a stock. Buy stocks just as > they emerge from a sound "base" pattern and make new price > highs. Not Known =20 > size=3D2>S Supply and Demand Watch the > demand for shares by looking at the percentage change in > volume for each of your stocks. Analyze a stock's daily and > weekly price and volume changes. The up/down volume > ratio measures the ratio of accumulation days to > distribution days over the last 50 days. > 0.90 L Leading Stocks in Leading Industry > Groups Nearly 50% of a stock's price action > is a result of its industry group's performance. Focus on > the top industry groups, and within those groups select > stocks with the best price performance. > Multex Industry Rank ( 0 - 99 ) > (26 week relative performance). > 90 > > Multex Rank within Industry ( 0 - 99 ). Provided for > informational purposes only. > (4 week relative performance) > > 22 > The stock's Relative Price Strength > Rating should be in the 80s or 90s > We > calculate RS daily by ranking all NYSE, AMEX and NASDAQ > stocks. Our RS algorithm is described here. It correlates > well with IBD's. Value. Score pro-rated in range > 60-79. 83 I Institutional > Sponsorship You want at least a few of the > better performing mutual funds owning the stock. They're > the ones who will drive the stock up on a sustained > basis. Institutional Ownership. Value in range 5 > - 30% needed to score 1. 79.00 > % No. of Institutions. Provided for > informational purposes only. 568 > size=3D2>M > Market Direction > You can > buy the best stocks, but if the general market is weak, > most likely your stocks will be weak also. > Because Market Direction is not specific to any one > particular stock, we do not evaluate it on a per stock > basis. Look at the chart below. Note that the handle > is only 3 days long. This is normally insufficient to have shaken > out the potential sellers and WON recommends that a handle should > be at least 1-2 weeks long, otherwise a breakout is prone to > failure. Also the volume in the handle has not dried up. This is > often the case in the early days of handle formation and we would > like to see the volume decrease below the ADV and the price wedge > downwards as the handle progresses. Look at the volume coming > up the right side of the cup - consistently above the 50 ADV > accompanied by big price positive price movements, with only two > days when the stock closed slightly down. It would have been > better if the volume had been below the ADV on those days, in > which case the stock would have earned a higher CQ (Chart > Quality) score. > > Note the RS line. This is quite high at 83, but has advanced > only slightly over the last few days despite significant price > gains in this stock. This indicates that other stocks are doing > at least as well. The 50 day up/down volume is at 0.90. > Values less than 1 mean that the down volume days exceed the up volume > days. However, the trend of the line is upwards, which is a > positive sign. I'll go out on a limb and say my guess > is that todays breakout will not be sustained (although its > holding now - just) and it will continue to form a > handle. I conclude that this is one to watch but not to > buy right now. Aloha, Mike Gibbons > Proactive Technologies, LLC http://www.proactech.com size=3D2>=20 - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: 08 Aug 2002 17:23:49 -1000 From: Mike Gibbons Subject: RE: [CANSLIM] Current Case Study - XRAY Duke, Alors! Tu parle CANSLIM et Francaise aussi? Tu est vraiment quelque chose. A bientot..... On Thu, 2002-08-08 at 17:07, Duke Miller wrote: > Hermann: >=20 > 1. Something superlative. > 2. People of the highest social level. >=20 > [French : cr=E8me, cream + de, of + la, the + cr=E8me, cream.] >=20 >=20 > ------------------------------------------------------------------------ > -------- >=20 > -----Original Message----- > From: owner-canslim@lists.xmission.com > [mailto:owner-canslim@lists.xmission.com] On Behalf Of Hermann Ertl > Sent: Thursday, August 08, 2002 9:20 PM > To: canslim@lists.xmission.com > Subject: RE: [CANSLIM] Current Case Study - XRAY >=20 >=20 > cr=E8me de la cr=E8me - would you please elaborate. >=20 >=20 >=20 > > From: "Duke Miller" > > To: > > Date: Thu, 8 Aug 2002 16:25:32 -0400 > > > > e Mike: When it comes to submitting stocks for > > consideration, this has got to be, beyond a doubt, the cr=E8me de la > > cr=E8me! =20 > > > > -----Original Message----- > > From: owner-canslim@lists.xmission.com=20 > > [mailto:owner-canslim@lists.xmission.com] On Behalf Of Mike Gibbons > > Sent: Thursday, August 08, 2002 3:27 PM > > To: canslim@lists.xmission.com > > Subject: [CANSLIM] Current Case Study - XRAY > > > > In view of the interest in current cases rather than 20-20 > > hindsight, and discussions to aid the learning process, I offer > > XRAY as an example, which broke out today from a CwH pattern with > > short handle Firstly, let me add the disclaimer that I'm a > > programmer who was introduced to CANSLIM as a development project, > > and I'm 1 year into the 3 yr learning curve, so further comment > > by the "experts" is welcomed to improve my own > > understanding. Firstly the fundamentals which are very strong, > > with the exception that Institutional Ownership is already quite > > high. There are differing views on what the level should be, but > > somewhere less than 30% would be better. Additional DD would be > > required to determine why pre-tax profit margins are decreasing > > and if that is cause for concern. (This information is drawn from > > yahoo/multex not IBD) =20 > > C Current Earnings > Earnings per share > > growth of at least 25% in the most recent quarter > > > > > > > Most recent quarter year on year growth. (Published > > financial data). > > > > 35.00 % > Latest three quarters of sales > > growth should be a minimum of 25% > Average > > year on year growth for last 3 quarters. (Published > > financial data). 51.00 % > Sales growth > > should be accelerating. > Difference in year > > on year growth rates over last 3 quarters. (Published > > financial data). 23.00 A Strong > > Annual Earnings Growth Annual earnings growth > > for the last three years of 25% or greater 3 > > year compound EPS growth rate. (Published financial > > data). 53.00 % Return on equity should be > > at least 17% Published financial data. > > 21.00 % Pretax profit margins should > > be increasing Profit Margin for most recent > > quarter minus profit margin 1 year ago. (Published > > financial data). -1.00 size=3D2>N > > > New Products, Services or Leadership > If a > > company has a dynamic new product or service, or is > > capitalizing on new conditions in the economy, this can > > have a dramatic impact on the price of a stock. Buy stocks just as > > they emerge from a sound "base" pattern and make new price > > highs. Not Known =20 > > size=3D2>S Supply and Demand Watch the > > demand for shares by looking at the percentage change in > > volume for each of your stocks. Analyze a stock's daily and > > weekly price and volume changes. The up/down volume > > ratio measures the ratio of accumulation days to > > distribution days over the last 50 days. > > 0.90 L Leading Stocks in Leading Industry > > Groups Nearly 50% of a stock's price action > > is a result of its industry group's performance. Focus on > > the top industry groups, and within those groups select > > stocks with the best price performance. > > Multex Industry Rank ( 0 - 99 ) > > (26 week relative performance). > > 90 > > > > Multex Rank within Industry ( 0 - 99 ). Provided for > > informational purposes only. > > (4 week relative performance) > > > > 22 > The stock's Relative Price Strength > > Rating should be in the 80s or 90s > We > > calculate RS daily by ranking all NYSE, AMEX and NASDAQ > > stocks. Our RS algorithm is described here. It correlates > > well with IBD's. Value. Score pro-rated in range > > 60-79. 83 I Institutional > > Sponsorship You want at least a few of the > > better performing mutual funds owning the stock. They're > > the ones who will drive the stock up on a sustained > > basis. Institutional Ownership. Value in range 5 > > - 30% needed to score 1. 79.00 > > % No. of Institutions. Provided for > > informational purposes only. 568 > > size=3D2>M > Market Direction > You can > > buy the best stocks, but if the general market is weak, > > most likely your stocks will be weak also. > > Because Market Direction is not specific to any one > > particular stock, we do not evaluate it on a per stock > > basis. Look at the chart below. Note that the handle > > is only 3 days long. This is normally insufficient to have shaken > > out the potential sellers and WON recommends that a handle should > > be at least 1-2 weeks long, otherwise a breakout is prone to > > failure. Also the volume in the handle has not dried up. This is > > often the case in the early days of handle formation and we would > > like to see the volume decrease below the ADV and the price wedge > > downwards as the handle progresses. Look at the volume coming > > up the right side of the cup - consistently above the 50 ADV > > accompanied by big price positive price movements, with only two > > days when the stock closed slightly down. It would have been > > better if the volume had been below the ADV on those days, in > > which case the stock would have earned a higher CQ (Chart > > Quality) score. > > > > Note the RS line. This is quite high at 83, but has advanced > > only slightly over the last few days despite significant price > > gains in this stock. This indicates that other stocks are doing > > at least as well. The 50 day up/down volume is at 0.90. > > Values less than 1 mean that the down volume days exceed the up volume >=20 > > days. However, the trend of the line is upwards, which is a > > positive sign. I'll go out on a limb and say my guess > > is that todays breakout will not be sustained (although its > > holding now - just) and it will continue to form a > > handle. I conclude that this is one to watch but not to > > buy right now. Aloha, Mike Gibbons > > Proactive Technologies, LLC http://www.proactech.com size=3D2>=20 >=20 >=20 >=20 > - > -To subscribe/unsubscribe, email "majordomo@xmission.com" > -In the email body, write "subscribe canslim" or > -"unsubscribe canslim". Do not use quotes in your email. - --=20 Aloha, Mike Gibbons Proactive Technologies, LLC http://www.proactech.com - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Fri, 9 Aug 2002 00:05:13 EDT From: KLall1112@aol.com Subject: Re: [CANSLIM] Stock Screening Hi Charley: Please send me the instructions. klall1112@aol.com - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Thu, 08 Aug 2002 23:22:20 -0500 From: Gene Ricci Subject: Re: [CANSLIM] Stock Screening This is a multi-part message in MIME format. - ------=_NextPart_000_0A2B_01C23F32.71965EF0 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable Charley, they can go directly to DGO and the section entitled "Reports = Tips & Tricks" http://www.dailygraphs.com/dgTranscripts/TipsTricks.htm Gene ----- Original Message -----=20 From: Chazmoore@aol.com=20 To: canslim@lists.xmission.com=20 Sent: Thursday, August 08, 2002 5:08 PM Subject: [CANSLIM] Stock Screening Friends: If you are a subscriber to DGO, without the Custom Screen = option, and do not know how to sort the Friday close Daily Graph Company = Index, respond to this memo and I will send you instructions off line. I = cannot share the DGO data, but I can tell you how to get it organized if = you are a subscriber.=20 Charley - ------=_NextPart_000_0A2B_01C23F32.71965EF0 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable
Charley, they can go directly to DGO=20 and the section entitled "Reports Tips & Tricks"
 
http://w= ww.dailygraphs.com/dgTranscripts/TipsTricks.htm
 
Gene
 
 
----- Original Message -----
From:=20 Chazmoore@aol.com
Sent: Thursday, August 08, 2002 = 5:08=20 PM
Subject: [CANSLIM] Stock = Screening

Friends: If = you are a=20 subscriber to DGO, without the Custom Screen option, and do not know = how to=20 sort the Friday close Daily Graph Company Index, respond to this memo = and I=20 will send you instructions off line. I cannot share the DGO data, but = I can=20 tell you how to get it organized if you are a subscriber. =
Charley=20 - ------=_NextPart_000_0A2B_01C23F32.71965EF0-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Thu, 08 Aug 2002 22:08:02 -0700 From: Harvey Brion Subject: Re: [CANSLIM] Re: CHTT (was: Identifying NEW leaders) Katherine, The graphic certainly gives one a warm fuzzy that they're managing debt. From 30:1 to 3.92:1 over 6 years is definitely in the right direction. Just goes to show you that you need to dig a lot deeper than DGO. I need to get more familiar with the moneycentral.msn site. (I found the 10 year summary in table form, but did you generate the graphic yourself?) Thanks again. -Harvey Katherine Malm wrote: > Hi Harvey, > > One more thing that I meant to include last night might help...that is, I > always like to get perspective on something like this. See the attached > graphic showing CHTT's D/E over time... (available at > http://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=Financi > alCondition&Symbol=CHTT ) > > Katherine > > ----- Original Message ----- > From: "Harvey Brion" > To: > Sent: Thursday, August 08, 2002 3:20 PM > Subject: Re: [CANSLIM] Re: CHTT (was: Identifying NEW leaders) > > > Thanks Katherine, I now feel a little better about the debt but it is a > bit > > scary. Normally, I'd expect buybacks when the debt is down and there's a > lot of > > cash lying around, but I guess it makes sense to go into debt to buyback > shares > > if (1) the stock price is considered way undervalued and (2) the cost of > > financing (interest rate) the buyback is exceptionally low. > > > > I calculated from the 10Q that the buybacks over FY99 thru Feb02 were made > at an > > average share value of $12.83 or 38% of the current price so they've made > a > > hefty return on their investment.. Sounds like they're managing their > debt and > > I guess we just have to "have faith." -Harvey > > > > Katherine Malm wrote: > > > > > Hi Harvey, > > > > > > The high Long Term Debt to Equity comes from 2 sources: an aggressive > stock > > > buyback program (reducing equity) and a strategy of financing > acquisitions > > > via debt (increasing debt). The latest deal, for example, was a purchase > of > > > SelsunBlue from Abbott Labs for about $75m, financed with $45m in > > > borrowings. The company seems to be fairly aggressive about using > leverage > > > where possible, and that is not surprising given the mature products > that > > > they take under wing in their portfolio reshaping program. They are also > > > fairly aggressive about managing their debt facilities, most likely to > take > > > advantage of lower interest rates where possible. For example, they > sold > > > Ban in early 2001, then used the proceeds to retire $52m in senior debt. > > > It's not all that uncommon for companies to rejigger their debt to > equity > > > ratios given their chosen business strategies. Interestingly, in June of > > > this year, they announced a proposed primary offering of 1.8m shares, > but > > > withdrew the offering, citing "adverse market conditions." While a D/E > of > > > nearly 400% sounds scary, the more important thing to look for is their > cash > > > flow and ability to cover interest payments. If financing acquisitions > > > through debt also allows them to build a broad product offering and > increase > > > net income as a result, then the interest paid becomes an investment, so > to > > > speak. If they do a lousy job of executing their strategies (sell non > > > performing brands, acquire others, extend existing lines), then the > interest > > > will kill them. So far, so good. > > > > > > Beyond the D/E issue...CHTT was just an example thrown out in the > > > discussion on "consumer stocks." Just as in the discussion of P&G > earlier > > > today, the "N" can come from many sources. Sometimes it's something as > > > simple as leveraging a brand properly, as P&G has done with the Crest > > > spinbrush and Crest Whitening Strips (by the way, about $50 for the box, > > > premium pricing, but still a fraction of what it would cost to have it > done > > > with a special light activated process like Brite Smile's (BSML), or > done > > > "professionally" by a dentist.). > > > > > > Katherine > > > > > > PS > > > Here are some quotes form CHTT's 10Q, which you can see in full at > > > > http://www.edgar-online.com/bin/edgardoc/finSys_main.asp?dcn=0000931763-02-0 > > > 02300 > > > > > > "We have historically financed our operations and acquisitions with a > > > combination of internally generated funds and borrowings. Our principal > uses > > > of cash are working capital, servicing and repayments of long-term debt, > > > acquisitions, repurchases of our common stock and capital expenditures." > > > > > > "In fiscal 1999, our board of directors authorized repurchases of our > common > > > stock of up to $10.0 million in the aggregate. In April 2000, our board > of > > > directors authorized repurchases of up to an additional $10.0 million of > our > > > common stock. Under these authorizations, 172,500 shares at a cost of > $3.9 > > > million were repurchased in fiscal 1999 876,500 shares at a cost of $9.5 > > > million were repurchased in fiscal 2000 and 14,000 shares at a cost of > $0.2 > > > million were repurchased in fiscal 2001. In February 2002, we > repurchased, > > > and returned to unissued, 44,000 shares for $0.6 million. As of May 31, > > > 2002, the remaining amount authorized by our board of directors under > our > > > stock buyback plan was $5.8 million; however, we are limited in our > ability > > > to repurchase shares due to restrictions under the terms of the > indenture > > > for our 8.875% notes and our senior credit facility. > > > > > > We believe that cash provided by operating activities, our cash and cash > > > equivalents balance, the net proceeds that we receive from our currently > > > pending offering of common stock after debt repayment and funds > available > > > under the revolver of our senior credit facility will be sufficient to > fund > > > our capital expenditures, debt service and working capital requirements > for > > > the foreseeable future as our business is currently conducted. Any > > > acquisitions that we make in the future may require us to obtain > additional > > > financing." > > > > > > ----- Original Message ----- > > > From: "Harvey Brion" > > > To: > > > Sent: Wednesday, August 07, 2002 1:13 PM > > > Subject: Re: [CANSLIM] Identifying NEW leaders > > > > > > > These look interesting Katherine. It's hard to get excited about > > > > cosmetics and weight loss products but with the high GRS rating, > they've > > > > obviously been doing well. I see they all have strong EPS estimates > for > > > > this FY. CHTT looks the strongest in cash flow and ROE and I favor > > > > smaller companies anyway so I'd lean toward this one. The chart is > > > > pretty wide and lose, so not classic CANSLIM. Do you have any idea > what > > > > their 389% debt to equity ratio is all about? -Harvey > > > > > > > > Katherine Malm wrote: > > > > > > > > > Here's another view of "consumer" stocks--take a look at stocks like > > > > > NBTY, WTW, CHTT, all of which have pros/cons, but nonetheless > > > > > something unexpected. Who would've thought that HD might've done so > > > > > well simply by consolidating a fragmented industry and redefining > > > > > "home improvement"? Sometimes it's the unexpected which does the > best > > > > > while everybody else is looking to the obvious. Katherine > > > > > > - > > -To subscribe/unsubscribe, email "majordomo@xmission.com" > > -In the email body, write "subscribe canslim" or > > -"unsubscribe canslim". 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