3SOF

First here's the initial analysis performed on MSI:

http://video.google.com/googleplayer.swf?docId=7722375774132999249&hl=en

So, the interesting part is the reverse merger with Fredericks of Hollywood, that's the factor moving the stock. On the issue we have the two following press releases:

Tue, Nov 14, 2006
• Movie Star, Inc., Reports Fiscal 2007 First-Quarter Financial Results (http://biz.yahoo.com/bw/061114/20061114006373.html?.v=1)
Business Wire (Tue, Nov 14)

• Frederick's of Hollywood and Movie Star, Inc. to Merge in Stock Transaction (http://biz.yahoo.com/bw/061219/20061219005500.html?.v=1)
Business Wire (Tue, Dec 19)

Michael Tokarz owns 22.4% of MSI's outstanding shares and owns 100% of Fredericks of Hollywood. So the deal is to merge the two companies.

The merger details are as follows:

- «Frederick's shareholders will receive approximately 23.7 million shares of newly issued Movie Star common stock.»

At yesterday's closing price, these 23.7 million shares are worth $44.56 M.

- «In connection with the merger transaction, Movie Star has agreed to issue to its shareholders non-transferable rights to purchase an aggregate of $20 million of new shares of Movie Star common stock.»

The company is asking for $20 M of investments from existing shareholders (that can be us if we buy the stock), but if existing shareholders don't buy the $20 M, Michael Tokarz and Fursa Alternative Strategies LLC will do it.

The current share price represents:

- 15.8 million MSI shares outstanding*$1.88 = $29.7 M;
- 23.7 million new shares to be issued to Fredericks*$1.88 = $44.56 M;
- $20 M of rights

So, $1.88, as I see it, is worth $94.26 M.

- «Frederick's generated approximately $139 million in revenues for its fiscal year ended July 29, 2006. For the fiscal year ended June 30, 2006, Movie Star had revenues of approximately $51 million.»

So, combined sales for the two companies were $190 M in fiscal 2006.

If we apply the average sales multiple of the Textile - Apparel Clothing industry  of 0.66, we get a value for the combined company of $125.4 M.

The current share price implies a value of $94.26 M.

But there are other issues. Is Fredericks of Hollywood a profitable business? How's its revenue and earnings history?

I'll have to dig more, but their website, I don't know if it's just the girls, but it looks awesome:

www.fredericks.com ;D

Do I want this business?

Now MSI represents Movie Star and Fredericks of Hollywood. Moviestar's website is http://www.moviestarinc.com/. Frederick's of Hollywood website is http://www.fredericks.com/Default.asp?cookie%5Ftest=1 (just in case the other link doesn't work).

I found this on the company's website:

«A new era
Although Frederick's filed for Chapter 11 bankruptcy protection in June 2001, during that period it turned once again to its innovation and creative spirit, poising itself for significant growth and a turnaround of the brand. In true Frederick's style, the company has experienced positive sales and brand development since emerging from bankruptcy protection in December 2002.

Frederick's innovation, plus its 175 retail stores, highly successful catalog and Internet sales channels, have led the company to become one of the 25 most recognized brand names in the world.»

175 retail stores for $94 M?

Michael told me probably Frederick's is losing money from operations, he has that feeling.

This play is quite similar to BFLY, but with a physical presence too, not just online. But I enjoy the online business pretty much, as they can sell their products all over the world, to wanna be "Hollywood stars" :)

(check the products of their seduction line (http://www.fredericks.com/category.asp?catalog%5Fname=Holiday2002&category%5Fname=New-Details%20of%20Seduction&Page=1))

So, $94 M for $190 M in revenues. In BFLY I'm paying $159 M for about $78 M in yearly revenues and I love it !

MSI shares look very attractive to me. It's impossible to know all the information necessary to invest.

Next the phase 4, the trading plan.

The stock has been up a lot lately, but for a good reason. Today the futures are down some, so perhaps we'll get a lower open on ... you know what?

I don't care about the short term timing, that's unpredictable. The stock can open unchanged and go 10% higher or open unchanged and go 10% lower.

I don't know, but the trend is up and I see fundamental value on the company, more value than the share price implies.

Therefore I'm recommending MSI shares for the Stocks on Fire Portfolio, between ... now that I see the intraday chart, that upper shadow might be an error, look here: http://money.cnn.com/quote/quote.html?symb=MSI

The trading plan is:

Buy MSI between $1.85 and $1.95 today, 6.66% of capital as usual.

Valuable links of interest to better understand MSI's play:

http://www.bankruptcydata.com/fredericks.htm

http://www.findarticles.com/p/articles/mi_m3870/is_11_17/ai_78805323

http://www.lingerie-uncovered.com/labels/fredericks-of-hollywood.htm

http://www.tei.net/presidentsforum/2005/0223/LindaLoRe.asp

David, thanks very much the fundamental analysis for MSI ;)

and what a great way to start of the new year. I throughly enjoyed the reading provided and learned more about why this is a great stock to own.

I just checked out fredericks.com and I have to say I love it to. :o ;D

Buying shares of MSI now is almost like buying Frederick of Hollywood shares before its IPO.

I've listened to the CEO's presentation (http://www.tei.net/presidentsforum/2005/0223/LindaLoRe.asp) in February 2005 and here are some highlights:

- They had 146 stores in February 2006, but as we've read on the recent press releases, they have 175 stores now, so the company is expanding;
- www.fredericks.com had 22 million unique visitors to its website in 2004 alone;
- 70% of their direct sales in 2004 were already through fredericks.com (I believe she means "catalog" and "internet" as direct sales). I bet the internet business is even larger now;
- They had to file for Chapter 11 in 2002. She explains it was a painful and expensive journey, but they re-emerged from chapter 11, I guess in late 2003 or early 2004. I like to invest in companies that were able to come out of chapter 11, because usually they come out clean of debt.

The presentation has many more points of interest, but not much talk about the future. Anyway, we're almost 2 years from the date of that presentation, so perhaps the company changed a lot, I guess to the better, over this 2 year period.

So, what do we have here? We have a 60 years old company, a pioneer in sexy lingerie, making its IPO through a reverse merger. It is trading quite below the industry revenue multiple average. And the prospects seem appealing to me.

My brother lived in China (Macao) for about a year, and when I talked to him about my play on MSI and Fredericks of Hollywood, and I showed him www.fredericks.com, he said: "Wait a minute, there were stores in China with that kind of look but a slight different name, say Fred's lingerie".

Now, with the internet and www.fredericks.com selling throughout the world, people will be able to buy the "Original Sex Symbol", not just a cheap imitation. And now they have money to do it.

This MSI play resembles BFLY, I even saw someone comparing the two companies on the Yahoo board. You know I'm a big fan of BFLY.

If MSI were to be valued at the same revenue multiple as BFLY, it would be a $190 M revenues*2.1 (BFLY's revenue multiple) = $399.5 M company.

At today's close of $2.04, the share price represents 39.5 million*$2.04 + $20 M = $100.5 M market cap.

The stock would need to go up to ($399.5 M/$100.5 M)*$2.04 = $8.11 to have the same revenue multiple as BFLY.

Is this possible? Why not?

I'll keep on holding MSI.

(The previous post was corrected, there were some basic math and English errors there :-[ You might want to read it again)

I've sent this e-mail to the company, let's see what they reply:

«Hello, I've been buying shares of MSI because I love Frederick's of Hollywood as a long term investment.

I'm Portuguese and made my wife browse your website and she wants to buy some stuff you have for sale. My question is: do you sell across the world from www.fredericks.com or just to the US market?

Thank you !
Cesar Borja

(a suggestion: Video on the web is getting very hot now, you should make some videos of your models wearing your sexy lingerie, not just pictures - people would probably start sharing those videos through their friends, creating a free chain advertising model)»

http://www.fredericks.com/services/help.asp?63


"International Shipping

International:We currently only ship products to the U.S., U.S. territories, and Canada. If you have any additional questions, you may call Customer Service at 1-602-760-2111, or use our Feedback Form."

Quote from: Dracull on January 05, 2007, 07:24:57 AM
http://www.fredericks.com/services/help.asp?63

"International Shipping

International:We currently only ship products to the U.S., U.S. territories, and Canada. If you have any additional questions, you may call Customer Service at 1-602-760-2111, or use our Feedback Form."

Thanks for the info Dracull :)

I also received this e-mail from Fredericks:

«Dear Customer,
Thank you for your inquiry.
Due to new shipping restrictions and regulations, we can no longer ship to International destinations.

In our continuing effort to give our customers world class customer service, Frederick's of Hollywood feels that we can no longer provide the level of service our International customers deserve.

We can ship your orders to Canadian or USA addresses.

Thank you for choosing Frederick's of Hollywood.

David Hilderbrandt
Email Associate
Frederick's of Hollywood
1-866-729-3232
1-602-760-2111»

So, just selling to the US and Canada and they had $139 M in revenues in the year to June 2006? (MSI had $51 M).

That's ok. Probably they'll go international again after the "IPO".

I maintain that their business is similar to BFLY's (but also with a physical presence), yet BFLY's trades at 2.04 times revenues (and I buy it) and MSI+Frederick's trades at  0.52 times revenues. For MSI to trade at the same revenue multiple as BFLY the share price would need to rise to (2.04/0.52)*$2.01 = $7.88.

Frederick's of Hollywood has a past trading on the NYSE. I want to investigate about that past, for example, how much was the company worth when it was operating normally, about ten years ago?

I'll try to get that information, but probably it won't be easy. Anything you can find is welcome.

Over the short term there can be some consolidation, but the motives that took this share price so high (relative to the recent lows) will probably take it much, much higher, we just need strong hands to hold for the big push up.

I'll continue holding MSI.

I searched for old information about Frederick's of Hollywood shares, but until now just got the following two articles, one from 1997 and the other from 1990 (still didn't get the "normal" market cap in the old days):

- FREDERICK'S OF HOLLYWOOD: OOH LA-LA (http://www.businessweek.com/1996/27/b348257.htm) (June 1997)

-  Frederick's of Hollywood Inc. reports earnings for Qtr to Dec 2 (http://query.nytimes.com/gst/fullpage.html?res=9D05E7D6143AF935A25752C0A966958260) (January 1990)

I'll keep searching and holding MSI.

Here's an interesting article, dated December 2000, about Frederick's of Hollywood in general and www.fredericks.com in particular:

Lingerie Heating Up Online Sales. (http://www.allbusiness.com/technology/technology-services/686721-1.html)

A few highlights:

- «While online ventures are notorious money-losers and long-established brick-and-mortar operations are solid, the Internet site for Frederick's of Hollywood has been profitable since its first day, even as the retailer is struggling to emerge from Chapter 11 bankruptcy protection.»

- «After a year and a half of selling through Yahoo, Frederick's launched its own Web site at the end of 1998 but continues to be linked through Yahoo. Since then Fredericks.com has soared. Its sales more than tripled from $3 million in 1998 to $10 million in 1999, according to the New Generation Research Inc.'s bankruptcy profile on the firm.»

- «By contrast, Fredericks.com has been exceptionally profitable. Landry declined to provide current figures but said revenue, after more than tripling in 1999, has doubled again so far this year.»

So, we're talking about revenues for www.fredericks.com of $3 M in 98, $10 M in 99 and about $20 M in 2000. How much for 2006?

Well, Frederick's of Hollywood in general (counting on its 130 brick and mortar stores), sold $139 M for the 12 months through June 2006. Probably more than 50% of this number were internet sales ... let's say www.fredericks.com sold $70 M over the last 12 month period:

Average annual growth since 2000 would have been 23%. Perfectly possible.

Fredericks of Hollywood can now be a profitable company due to its online presence. And I feel this is only the beginning of a global powerhouse.

Why? I agree with this:

«Zrike said e-commerce is very efficient for interacting and selling a known brand to consumers but falls short as a tool for building brand recognition.

"Frederick's of Hollywood has built a strong brand platform for themselves through catalogue and brick-and-mortar that has helped them with e-commerce offering," Zrike explained.»

I'll continue studying and holding MSI.

Nice!! ;)

The rationale on MSI's trade is simple. MSI share price represents:

- 15.8 million MSI shares outstanding*$2.49 = $39.3 M;
- 23.7 million new shares to be issued to Fredericks*$2.49 = $59 M;
- $20 M of rights

So, $2.49 is worth $118.3 M.

The things we've been finding about Frederick's of Hollywood tell me this is a profitable company. They reduced the number of brick and mortar stores and www.fredericks.com probably saw its revenues surge over the last 6 years, since e-commerce has been growing at a 30% average annual rate.

www.fredericks.com already sold $20 M in 2000, if those sales grew 30% a year through 2006, this year sales were something like $96 M. And this has been a profitable operation since the beginning in 1998.

Also, Frederick's came out of Chapter 11 reorganization recently, so probably it is completely clean of debt.

MSI + Frederick's of Hollywood can trade at two times revenues, and that would mean MSI's share price would be:

($380 M/$118 M)*2.49 = $8.02.

I don't have to say I'll continue holding MSI with strong hands. I already have a 29% profit on this stock, but I don't care at all about my entry price, the market doesn't care either.

I got burned trying to get a better entry price on this one like I did on syx, and it did a fly by on me with no entry at all.  Dang it.  What a great call David.  MSI seems to have missed the memo that stocks do pull back sometimes. ;D

Quote from: oicpecnoc on January 11, 2007, 11:03:42 AM
I got burned trying to get a better entry price on this one like I did on syx, and it did a fly by on me with no entry at all.  Dang it.  What a great call David.  MSI seems to have missed the memo that stocks do pull back sometimes. ;D

You're not alone oicpecnoc, I know of other people that loved the story on MSI but still couldn't buy it, because it was up so much over the short term. Guess what, it is up 44% since my buying point :)

The way to go over the difficulty of buying high, is to study and trust the fundamentals. Who cares if you're buying at $2, up from $1, if the perceived fundamental value is $8?

Trying to save a few ticks makes people lose huge moves. That's why when I want to buy, I make sure I buy, without any care for the short term price I'm paying. Why should I pay attention to short term timing, if that is highly unpredictable and my reasoning is long term?

Anyway, it looks like MSI will face heavy resistance now. I can see it pullback 10% or more from today's close without trembling a bit. Because my bullish case is fundamentally sound, and people selling are weak hands, I guess they don't know what they're doing. Moreover I know of people that are eager for a pullback to load the truck with MSI shares, because they love the story but can't chase the price higher, they prefer to buy on dips.

And what if, instead of pulling back now because of the $2.75 long term resistance level that you see below, MSI continues to run and goes to $4 or more without stopping? Well, that's the trend, and the trend is your friend.

I'll continue holding MSI, I don't care if it does pullback or not, I can't predict that, I just think the stock is worth about $8.

David, I agree with your analysis on the online revenue amount. I was wondering how come 175 stores only have up to $50 million revenue. But I just found out that their stores are pretty small. The one I saw only have about 400sqft. A store like that can make money if it can sale 250k a year.

I think the big question mark is the debt situation. how much and what term it is. my guess it is at least managible. otherwise they would use the public money to pay the debt, in stead of openning new stores.

Fredericks of Hollywood was bought for $70 million in 1997. ten years later, it is a much better company and should worth at least $100 million. MSI was about $13 -$16 million before the merger news broke out. that puts the company at $113 and $116 level.  This translates to the price of about 2.40 for MSI. So the downside is limited.

I can think of two things to spoil this valuation, high amount of debt and dilution by the number of convertable shares. I haven't read MSI's 10Q so i don't know if they have any convertable shares. The debt situation is unkown, but by  how the company has opened stores and plan to open them, it shouldn't be an issue.

Thanks for your analysis zibeaster :)

QuoteDavid, I agree with your analysis on the online revenue amount.

So, you agree with $70 M coming from www.fredericks.com.

QuoteI was wondering how come 175 stores only have up to $50 million revenue.

The latest store count indicates 130 stores, not 175, as you can read on the merger agreement between Movie Star and Frederick's of Hollywood, published in December 19, 2006:

• Frederick's of Hollywood and Movie Star, Inc. to Merge in Stock Transaction (http://biz.yahoo.com/bw/061219/20061219005500.html?.v=1)
Business Wire (Tue, Dec 19)

Also, since Frederick's of Hollywood had $139 M in sales for the 12 months through June 2006, and we estimate www.fredericks.com sales at $70 M, the stores sales estimate must be something near $69 M, or do you think the catalog business is worth $19 M? Well, it's possible.

QuoteBut I just found out that their stores are pretty small. The one I saw only have about 400sqft. A store like that can make money if it can sale 250k a year.

Humm, 400sqft, I wonder how much that is since I use the metric system (sorry). Let me see the conversion on Google ... ok, you're talking about 37.16 square meters. Yes, a small size store to sell sexy lingerie. I wouldn't expect them to be big stores.

$250,000 a year for one store to be profitable?

So, let's see, keeping that interesting number in mind, we have 130 stores selling about $60 M a year, so each store sells $461,538 on average. If these calculus are correct, Frederick's of Hollywood stores are very profitable.

QuoteI think the big question mark is the debt situation. how much and what term it is. my guess it is at least managible. otherwise they would use the public money to pay the debt, in stead of openning new stores.

I don't think they're opening new stores zibeaster, since they have just 130 stores now. Their plan is to open 50 new stores over the next 36 months, though. But I also don't think they have much debt, since they recently came out of chapter 11.

QuoteFredericks of Hollywood was bought for $70 million in 1997. ten years later, it is a much better company and should worth at least $100 million.

I think it should be worth much more than $100 M now, because in 1997 www.fredericks.com, a very profitable sales channel, didn't exist, and now it accounts for $70 - $90 M of revenues (I saw your $90 M estimate on Yahoo ;D).

QuoteMSI was about $13 -$16 million before the merger news broke out. that puts the company at $113 and $116 level.  This translates to the price of about 2.40 for MSI. So the downside is limited.

If the value were to be $113 M to $116 M the downside would be limited, but also, where's the upside?

Just considering www.fredericks.com and using your $90 M revenue estimate for the website, the company should be worth $90 M*1.96 (BFLY's revenue multiple) = $176.4 M. Now add Frederick's stores & catalog business (worth $69 M) and MSI (worth $14.5 M) and get a company worth $260 M, which translates into a share price of $6.08.

(the calculus uses 39.5 million shares outstanding - 15.8 million from MSI + 23.7 million to be issued to Frederick's shareholders and $20 M of a rights offering)

QuoteI can think of two things to spoil this valuation, high amount of debt and dilution by the number of convertable shares. I haven't read MSI's 10Q so i don't know if they have any convertable shares.

I've read MSI's Q3 10-Q and found nothing related to convertible debentures or convertible notes. But for the following updates I'll read the 10-K, which usually has more information about risk factors. 

QuoteThe debt situation is unkown, but by  how the company has opened stores and plan to open them, it shouldn't be an issue.

Yes, the debt situation is unknown, but I believe they closed stores over the last few years, where did you get the 175 store count? I see 130 stores over the latest press release (http://biz.yahoo.com/bw/061219/20061219005500.html?.v=1) on the profile of Frederick's of Hollywood on the bottom of the page:

«About Frederick's of Hollywood

FREDERICK'S OF HOLLYWOOD has been recognized as one of the world's most well-known brands, with more than 130 specialty retail stores nationwide, a world-famous catalog and online shop at www.fredericks.com.»

(well, now I see they say "more than 130", but certainly not 175)

Debt is important, but my play here is www.fredericks.com can continue to grow 30% for the next 10 years, especially if they start operations internationally. If this happens, www.fredericks.com will be selling $1.24 B in 2016, apply a revenue multiple of 2 and get a $2.48 B company (just considering www.fredericks.com).

Since the current share price of $2.7 implies a $126.5 M value, MSI share price can grow 34.64% a year for the next 10 years, which is quite compelling.

Of course, if the market gives me $6 - $8 a share between now and mid Q2, I'll take it, but I'll be buying on dips (given that nothing fundamentally changes), because I'm a believer in joining a well known brand, an exotic and glamorous product and e-commerce.

Zibeaster, if you have the time and the willing, please keep up contributing to 3 Stocks on this and other threads of your interest (as you've been doing lately, thanks :)), I feel your participations enrich the website's content.

I'll keep on holding MSI.

David, I have not done nearly enough homework on MSI so my numbers are just rough guesses. I like to post here and hopfuly not to make too much fool of myself:)

As for store number, I remeber I read somewhere but I think you are right. they probably just have 130+ now. In this link (http://www.usatoday.com/money/industries/retail/2006-12-19-fredericks_x.htm?csp=34), it  does say they will open 50 new stores in next 3 years. it also said they seek to refinance Fredericks' term debt.

The 400 sqft store I saw is in an upscale mall. it is small but very well presented. Today however, I went to see the other store in my area (Washington DC), this one is also in a shopping mall. But it is bigger, about 800-1000 sqft selling space, this store seems to be older and presented differently, may be because of space shape difference. In both stores, they have 2 sales associates. This is on the weekend so they may have extra help. This is probably the typical of their stores. But I think they have some bigger ones. The orginal store in Hollywood might be a big one.

In terms of store sales and profitbility. My guess is the rent/tax/insurance/water/electricity cost about 20k to 30k a year if the lease is signed recently in my area. The labor cost may be 40k to 60k. A 50% gross (they probably can do 60% gross) means the annual sale of 180K to break even. That means $490 a day, which they should be able to do.

I agree that they have 10 years to close non profitable stores, I think they also found the profitable store formats, otherwise they won't have the confidence to open new ones.

I agree with you that they will grow and they are ready to grow. while their online revenue is growing, my guess is they were also shrinking the store size to make it profitable in the past 10 years. They are now ready to get some public money to help them grow faster.

Thanks for the great info zibeaster :)

Since I live in Portugal (actually, I've never been in the United States, what a shame :-[ - I'm planning to go there, but my children are still so small that I'm afraid they won't deal well with the plane. Over the next 12 months I'll make a trip to the US for sure), I find in locco information very useful.

Yesterday was a perfect washout day, with the stock reacting to the fact that it wasn't able to breakout above the $2.75 resistance level right away. Volume picked up and, after touching the 10 days simple moving average, the stock rebounded, leaving what I perceive to be a bullish candlestick on the chart.

Fredericks was sold for $70 M in 1997, when www.fredericks.com didn't exist. I believe Frederick's of Hollywood is worth at least triple that now, ten years after, because www.fredericks.com is certainly a very profitable sales channel.

I was a bit nervous by them not changing the website so often, but look at the new and refreshing lady on the homepage: http://www.fredericks.com/

The website is still not selling internationally, but that's just a matter of time in my opinion.

Despite yesterday's fall, my confidence is higher than ever on MSI.

Some people like to compare Frederick's of Hollywood and Victoria's Secret. Well, they're certainly competitors. I like this comparison, because Limited Brands (LTD), the owner of Victoria's Secret, is a $11 B company, and Frederick's of Hollywood is currently valued by the market at roughly $0.1 B.

Check both websites:

www.fredericks.com
www.victoriassecret.com

I hope that some of you that didn't have the chance to buy when I initially recommended MSI have bought on this dip, because MSI is getting ready to take off again:

I see MSI's chart as building the base for a strong upward move. If the stock is able to close above $2.75 there's no telling to how high it can go.

Fundamentally, at least for the part of fundamentals that I know of, I really like it, as you can read on the rest of this thread.

I'll keep holding, expecting a new bullish leg to unfold anytime soon.

I wasn't expecting MSI to be down 4.4% on Friday, but that's life. There wasn't any technical damage to the chart.

At $2.39, MSI is worth:

- 15.8 million MSI shares outstanding*$2.39 = $37.7 M;
- 23.7 million new shares to be issued to Fredericks*$2.39 = $56.64 M;
- $20 M of rights

So, at $2.39 Movie Start + Frederick's of Hollywood is worth $114 M.

Frederick's of Hollywood was taken private in 1997 for $70 M. Back then the company had big financial problems and www.fredericks.com didn't exist. Now it probably represents more than half of the company's sales.

Perhaps we'll need more news on the MSI + FOH merger to put the stock rockin again. But I can't, and I won't sell for a 23% profit when I see at least 100% profit. If I were to sell, and the stock to rally, where would I be then? Lost in the market ...

I'll continue holding MSI.

I like this pick as well, David.  Just waiting for my entry point.  The trading range is tightening, so I think MSI is just about ready to restart the treck above $3.

Quote from: buddjas1 on January 21, 2007, 03:16:27 PM
I like this pick as well, David.  Just waiting for my entry point.  The trading range is tightening, so I think MSI is just about ready to restart the treck above $3.

I hope you got your entry on MSI buddjas1, because this stock should stop falling right now ! (it should, since I'm holding it ;D)

This is strange, on my chart and other websites I have MSI's close at $2.30, but on the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php) it shows $2.28 as close. I'll talk to Ramsburg about this.

With the stock closing at $2.30 we have a doji on volume above average, which might be indicative of a short term trend change, from bearish to bullish.

The medium term trend is absolutely bullish as we know.

We'll see about the short term developments, but whatever happens, I'll keep holding MSI, as I see Frederick's of Hollywood underlying valuation as ridiculous. Look at their website again: www.fredericks.com. Once they start shipping internationally it can't fail.

"I hope you got your entry on MSI buddjas1, because this stock should stop falling right now !"

I took my first position at 2.34, this morning.

Thanks David...I buy enough Fredricks apparel for my wife I should be a major stockholder  ;)

Quote from: buddjas1 on January 23, 2007, 10:08:19 AM
"I hope you got your entry on MSI buddjas1, because this stock should stop falling right now !"

I took my first position at 2.34, this morning.

Cool, you're already in the green buddjas1 :)

Quote from: Buyhigh? on January 23, 2007, 08:28:34 PM
Thanks David...I buy enough Fredricks apparel for my wife I should be a major stockholder  ;)

Yes, according to Peter Lynch (author of "One up on Wall Street"), you should pay attention to stocks of companies which products you usually buy. If you buy the product, why not at least consider buying the stock?

Well, MSI isn't Frederick's of Hollywood, at least not yet, but if everything goes well with the merger between the two companies (http://biz.yahoo.com/bw/061219/20061219005500.html?.v=1), it will be.

The transaction is expected to close on the second quarter of 2007. When we approach that date I expect to get more and more details about Frederick's of Hollywood and I'll study every news release very closely.

In the meantime, unless the market gives me something north of $6 a share, I'll hold.

Volume wasn't as big as a momentum trader would like, but momentum traders probably will only see MSI when it closes above $3 ;D

Perhaps the consolidation phase isn't over yet, and MSI will come back down a bit again, but the fundamental value of the Movie Star + Frederick's of Hollywood combination seems much superior to me.

As I said, without further details on the merger or other fundamental news, I'm not willing to sell MSI below $6, whatever happens to the chart. Because, with the current publicly available information (which isn't a lot), I perceive MSI value per share as something around $8, so how could I sell it here at $2.5?

The reasoning is explained back on this thread. I'll keep holding MSI with strong hands, taking advantage of already having a 30% profit on the stock.

I feel something is about to come out on the Movie Start + Frederick's of Hollywood merger. Perhaps some more financial details on FOH?

I really like www.fredericks.com as a sales channel, as we've discussed previously.

Volume is picking up steam. If MSI pushes through $3 it will probably make a very quick move towards $4.

Anyway, as I've said, with the current public information on the two companies, I see MSI's value around $8, so, unless the market gives me at least $6, I won't consider selling.

Besides being the "original sex symbol", Frederick's of Hollywood is "too hot to handle": www.fredericks.com ;D

But not a whole lot of fire on MSI's shares on Friday. It doesn't matter, I have the necessary patience to wait for the big move above $3.

I'll keep waiting and holding MSI.

I know it has been said on these threads before that if a stock looks like it is going negative and maybe a cause of concern do we sell or buy more because fundamentally it should still do well. I may have gotten the words wrong a little here but hopefully I made sense. I believe in this stock and own it as well so....would a prudent investor take a look at this and buy on the dips assuming it will cross $3? It's down 10% today and I would think a great buying point but certainly do not wish to chase after a stock that will continue falling as that would be good money after bad.

I have the same profit right now as the Main Portfolio so I am still in the money but want to be more in the money.

Any advise on this? I have patience as well but wish to be more than rewarded for that patience if I can.

I would buy here.  MSI looks to be forming a symmetrical triangle, with 2.17 forming the bottom.  I wish I had more cash to buy here.

Quote from: lancefur on January 29, 2007, 11:50:19 AM
I know it has been said on these threads before that if a stock looks like it is going negative and maybe a cause of concern do we sell or buy more because fundamentally it should still do well. I may have gotten the words wrong a little here but hopefully I made sense. I believe in this stock and own it as well so....would a prudent investor take a look at this and buy on the dips assuming it will cross $3? It's down 10% today and I would think a great buying point but certainly do not wish to chase after a stock that will continue falling as that would be good money after bad.

I have the same profit right now as the Main Portfolio so I am still in the money but want to be more in the money.

Any advise on this? I have patience as well but wish to be more than rewarded for that patience if I can.

The problem with buying more is that your hands will probably get weaker. You'll get more nervous if you're holding a bigger than average position on one single stock.

Anyway, I'm positive that MSI's value is much superior than the current share price implies, but of course, I/we don't know everything there is to know about the company.

The worst thing that could happen was if they terminated the merger with Frederick's of Hollywood, that would really make an ugly sell off, but ... so far there's no indication to that, I sure hope that's not the case, as I'm seeing a 40% or so profit turn into just 15% as I write >:(

Quote from: David Randolph on January 29, 2007, 02:22:35 PM
The problem with buying more is that your hands will probably get weaker. You'll get more nervous if you're holding a bigger than average position on one single stock.

Anyway, I'm positive that MSI's value is much superior than the current share price implies, but of course, I/we don't know everything there is to know about the company.

The worst thing that could happen was if they terminated the merger with Frederick's of Hollywood, that would really make an ugly sell off, but ... so far there's no indication to that, I sure hope that's not the case, as I'm seeing a 40% or so profit turn into just 15% as I write >:(

This was my fear as well but I hate not taking advantage of big dips and not huge rebounds. This is a risk but I am trusting in the fundamentals and techical reads. I am by no means an expert but I did purchase another 5000 shares with only holding 8000 shares now. I just hope it doesn't tank! I hope not as I saw the same profit drop too.   8) But I remain cool and patient.

Two things might be happening on MSI:

1) The stock is still in the process of consolidating the 250% gains it made over the November 14, 2006 - January 11, 2007 period, which would be perfectly natural;

2) There are negative news pending on the background, not yet public, but to be known soon. The worst news could be if they terminated the merger agreement with Frederick's of Hollywood. Another possible news is, for example, financials for FOH coming out and showing a lot of debt or historical net income losses.

For now I'll go with the first hypothesis, because that's the one that makes more sense to me. But I'll consider the second hypothesis too.

If MSI is on scenario 1, the reward of this trade can be something like 200% over the next 3 or 4 months. If MSI is on scenario 2 it will go back down to $1 or so.

I want to be in for the big bullish move of scenario 1, but I don't want to risk losing 66% or so of my money on this position if we're on scenario 2. In fact, having been up more than 40% on this trade, it could be psychologically damaging to lose money on it.

So, the trading plan for MSI is:

HOLD for as long as the stock trades above $1.93. Bail out if it prints $1.93.

Never let a meaningful profit turn into a loss. 

I am looking at insider trading for msi. 56k may not be important but funny thing is
on the same day one guy buys 56,666 shares and other sells exact 56,666 shares.
I say.....YO!!just throw those certificates across the desks  ;D

From etrade.

Insider Sentiment

"
COLE PETER G became the first insider to ever purchase MSI stock with a buy of 56,666 shares on January 18, 2007."

"1) The stock is still in the process of consolidating the 250% gains it made over the November 14, 2006 - January 11, 2007 period, which would be perfectly natural;"

I see this as pure consolidation.  Nice symmetrical triangle forming after a run up.  See chart below.

"2) There are negative news pending on the background, not yet public, but to be known soon. The worst news could be if they terminated the merger agreement with Frederick's of Hollywood. Another possible news is, for example, financials for FOH coming out and showing a lot of debt or historical net income losses."

That is a scary scenario, but I do not believe it.  Movie Star's Board of Directors already performed due diligence before the merger agreement.  As stated in the 8K:

The Board of Directors of Movie Star unanimously approved the Merger
Agreement and the transactions contemplated thereby on the unanimous
recommendation of a Special Committee comprised entirely of independent
directors (the "Special Committee"). The Special Committee engaged Chanin
Capital, LLC ("Chanin") to serve as its financial advisor. On December 18, 2006, Chanin delivered an opinion to the Special Committee on which Movie Star's Board of Directors was entitled to rely, stating that, as of the date of the opinion, the Merger Consideration to be paid by Movie Star to the holders of FOH Common Stock is fair to the holders of Movie Star Common Stock from a financial point of view.

Then what the heck is wrong with this stock? Just a massive consolidation from the massive run-up? I hope so because I would love this to take off again with the position I have at a low cost basis.

Quote from: lancefur on January 30, 2007, 09:44:25 PM
Then what the heck is wrong with this stock? Just a massive consolidation from the massive run-up? I hope so because I would love this to take off again with the position I have at a low cost basis.

Ok, I guess that selling pressure is explained by today's form 8-k filed with the SEC:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=32582;image)

This is a relief.

QuoteThat is a scary scenario, but I do not believe it.  Movie Star's Board of Directors already performed due diligence before the merger agreement.

My worries were on the part of Frederick's of Hollywood terminating the merger agreement, not on Movie Star's part, because I think the merger agreement is more favorable to MSI than to FOH.

Anyway, that's not to be expected, some minor negative news were just out, but not significant, so probably today's sellers will be the last around current levels.

I'm changing my trading plan on MSI again, to HOLD whatever happens to the share price. I don't want to lose Frederick's business just because some people decided they had too much profit and wanted to sell.

MSI actually rose 1.32% on the day after restating cash flow numbers. That is a positive sign. Volume picked up too. As I wrote:

QuoteAnyway, that's not to be expected, some minor negative news were just out, but not significant, so probably today's sellers will be the last around current levels.

I expect MSI shares to start a new bullish leg that will take it above $3 anytime soon.

Not a bad day for MSI, im going to try to enter a position tomorrow.

Quote from: nullzero on February 01, 2007, 04:06:34 PM
Not a bad day for MSI, im going to try to enter a position tomorrow.

Cool nullzero, I think it's a good choice. Moving up after a piece of what is usually perceived as bad news (restatement of cash flow numbers imposed by the SEC) is a good sign.

Let's check one of the main reasons for this investment: www.fredericks.com ... yep, too hot to handle.

Technically the stock is ready to make its second bull wave (Elliot theorists would call it "wave 3"), that can take MSI towards $5.

As I've been writing on this thread, I'm not willing to let go of MSI below $6 (unless the merger agreement between MSI and Frederick's of Hollywood doesn't come to fruition). I was a bit shaky when the stock started going down, but I was relieved by the bad news out, probably that was the cause for the technical weakness. I was worried it could be something worse. Not anymore.

I'll keep holding MSI with strong hands.

Good time to get into MSI? Whats your take david

Why not add SILC to the main? Looks like a powerful long term stock.

Quote from: nullzero on February 02, 2007, 01:28:46 PM
Good time to get into MSI? Whats your take david

Anytime is a good time to buy MSI. I won't sell it below $6.

Quote from: prodigykid6 on February 02, 2007, 02:16:27 PM
Why not add SILC to the main? Looks like a powerful long term stock.

You're right prodigykid6. I should have bought it for the Main. Perhaps I will, I need to make some more studies on it.

Thanks, have a nice weekend :)

MSI is really getting ready to breakout above $2.75, just look at the chart on the bottom of this post. That technical breakout will probably take it towards $4 - $5.

Fundamentals certainly warrant that, as you can check on previous posts on this thread. Let me check again the main reason for this investment: www.fredericks.com

hmmm nothing changed, but attractive as usual ;D. I wonder when will they start selling internationally again.

Yesterday spent $50 at the Fredericks for the Valentine's day. They got nice stuff. Although I live in the US I am from the Eastern Europe originally. Women do not flaunt in the US as they do in the European countries and we used to buy much better lingerie in France, Holland and Germany than in the US. Americans are more conservative and less imaginative in that respect. Fredericks' imports many items from their collection, I presume from Europe. Hence it may be wiser for them to open a distribution chain internationally rather than ship overseas. This way they can also adapt their collections to please local tastes. One thing  for sure, they are a worthy competition to Victoria Secters.
In MSI at $2.5. Thanks, David.

Quote from: berloga on February 05, 2007, 09:02:19 AM

Yesterday spent $50 at the Fredericks for the Valentine's day. They got nice stuff. Although I live in the US I am from the Eastern Europe originally. Women do not flaunt in the US as they do in the European countries and we used to buy much better lingerie in France, Holland and Germany than in the US. Americans are more conservative and less imaginative in that respect. Fredericks' imports many items from their collection, I presume from Europe. Hence it may be wiser for them to open a distribution chain internationally rather than ship overseas. This way they can also adapt their collections to please local tastes. One thing  for sure, they are a worthy competition to Victoria Secters.
In MSI at $2.5. Thanks, David.

Good idea and information berloga, probably that's why they're not shipping from www.fredericks.com to international destinies anymore (just Canada), they might be in the process of opening a new distribution/production center, perhaps in Europe.

On an interview with the CEO (you can find it somewhere on this thread, no time to look for it now), I heard that she had plans to expand internationally, and perhaps that will be the way.

As for the stock, perhaps the market needs some more information about Frederick's of Hollywood before moving MSI shares sharply higher, but I think risk is quite limited at current levels.

I'll keep holding MSI.

Nothing new on MSI, as the market is waiting for more information about Fredericks of Hollywood. The merger between Movie Star and Frederick's is expected to close over the second quarter, 2007, so between now and then, news will be out.

I'll patiently wait for those news as I keep on holding the stock.

Someone on Yahoo posted that earnings will be out next week for MSI and he's right. That's great, probably we'll hear more things about the merger with Frederick's of Hollywood and perhaps some more details about it on the conference call.

I'll continue holding MSI.

Nothing new on MSI yesterday, low volume and no news out. I'll continue holding MSI.

Investors are waiting for news or more information about Frederick's of Hollywood before pushing MSI shares higher than current levels. I'll also patiently wait for the news as I keep holding MSI.

MSI's consolidation/accumulation phase continues, roughly between $2.3 and $2.60. A close above $2.60 would be very bullish, even more so if it is above $2.75.

I have nothing to do with this stock but to check www.fredericks.com as we approach Valentine's day (the busiest season for Frederick's) and keep holding it.

Q2 FY07 10-Q filed.

http://www.sec.gov/Archives/edgar/data/93631/000095013607000861/file1.htm

$0.04 fully diluted net income per share on slightly lower q-to-q revenue and net income.  On the positive side, margins seem to be increasing and management foresees a better second half of the fiscal year because of a "strong open order position" of $25mm compared to $17mm last year.

No news on the merger, except for this tidbit: "Further, we are excited about the recently announced plan to merge with Frederick's of Hollywood. The combined company will have sales approaching $200,000,000, better efficiencies and a powerful brand portfolio."

http://biz.yahoo.com/bw/070213/20070213006424.html?.v=1

David, how does the $200mm revenue projection fit with your model?

Thanks for posting the news and making the right questions buddjas1 :)

• Movie Star, Inc., Reports Fiscal 2007 Second-Quarter and First-Half Financial Results (http://biz.yahoo.com/bw/070213/20070213006424.html?.v=1)
Business Wire (Tue 4:21pm)

At yesterday's close of $2.53, MSI shares represent:

- 16,410,196 MSI shares outstanding*$2.53 = $41.518 M;
- 23.7 million new shares to be issued to Fredericks*$2.53 = $59.96 M;
- $20 M of rights

Sum it up and get $121.5 M, so the price to sales ratio of the combined company is just 0.61.

I've been focusing on Frederick's of Hollywood, but Movie Star also has been improving its own fundamentals as one can read on the press release.

We had the following special events affecting Q3 results:

«The fiscal 2007 second quarter included a $496,000 gain on the sale of property, plant and equipment and an $803,000 expense for merger related fees associated with the Company's previously announced merger with Frederick's of Hollywood. The Company recorded net income of $578,000, or $0.04 per diluted share, for the fiscal 2007 second quarter, as compared to $610,000, or $0.04 per diluted share, for the second quarter of fiscal 2006.»

Without these special events, net income would have been $578,000 + $803,000 - $496,000 = $885,000. If we multiply this number by four quarters, we get $3,540,000 in net income.

If we put the remote scenario that the merger between MSI and FOH isn't completed, we see that the current $2.53 share price represents a market cap of just 16,410,196 MSI shares outstanding*$2.53 = $41.518 M, so the estimated earnings multiple would then be $41.518 M/$3.54 M = 11.73.

MSI looks cheap. But it looks even more cheap when we put FOH into the picture, because I think FOH is worth much more than $80 M (the difference between the $121.5 M total value and the $41.518 M attributed to MSI alone). The company was taken private for $70 M in 1997, and that was before www.fredericks.com even existed.

As I said previously, I'm not willing to let go of MSI below $6 a share.

Let's see if yesterday's results and press release are enough of a catalyst for MSI to breakout above $2.60 and $2.75 resistance levels. I think so.

Is it not interesting that MSI's PR did not disclose more of FOH's financial information, except for revenue, which does not really matter?  Why would MSI not disclose FOH's numbers, if they were good, in order to make the mediocre FY07 Q2 numbers seem less important?

Quote from: buddjas1 on February 14, 2007, 12:27:08 PM
Is it not interesting that MSI's PR did not disclose more of FOH's financial information, except for revenue, which does not really matter?  Why would MSI not disclose FOH's numbers, if they were good, in order to make the mediocre FY07 Q2 numbers seem less important?

Do you think the numbers were mediocre? I think they were nice.

I guess they didn't disclose more information about FOH because they're not entitled to do it. It's not the time yet. But that was what the market was looking for, unfortunately it didn't even care to analyze MSI's numbers because the only thing that matters now is information about FOH.

As I see it, MSI shares are valuing FOH at less than $80 M, and that's way below what it should be.

My take is patience will reward MSI current shareholders like you and me.

"Do you think the numbers were mediocre? I think they were nice."

I was hoping for some growth, so the decline in revenue and income q-to-q disappointed me.

"I guess they didn't disclose more information about FOH because they're not entitled to do it. It's not the time yet."

That is where I disagree.  Why post FOH's revenue and leave out the income?  FOH was obligated to deliver full audited financial information to MSI, I believe on January 22.  So, MSI had the information available.   

"As I see it, MSI shares are valuing FOH at less than $80 M, and that's way below what it should be."

I guess it depends on whether FOH is profitable.  Time will tell, I was just surprised that MSI did not disclose that information in the 10-Q. 

QuoteI was hoping for some growth, so the decline in revenue and income q-to-q disappointed me.

Ok. My take is the company had enough sales already. I was worried about losses, so I enjoyed the fact that they expanded profit margins.

QuoteThat is where I disagree.  Why post FOH's revenue and leave out the income? FOH was obligated to deliver full audited financial information to MSI, I believe on January 22.  So, MSI had the information available.

No doubt MSI has all the info about FOH. But that doesn't mean it is allowed (or interested) to make it public. Frederick's will, when the time comes, disclose the information.

QuoteI guess it depends on whether FOH is profitable.  Time will tell, I was just surprised that MSI did not disclose that information in the 10-Q.

I was also hoping for more information. Perhaps FOH is not profitable, but I still see it as worth a lot more than $80 M, because I'm sure it will be very profitable somewhere down the road, because www.fredericks.com will gain traction across the world in my opinion.

I think volume was abnormally low yesterday. Really strange, given that results were out. Anyway, I see $2.20 - $2.40 as the minimum possible price over the next three or four months as we wait for news of the merger and more details about FOH, and the upside is more than $6.

I'll continue holding MSI.

The market absolutely doesn't care about Movie Star, all eyes and ears are on information about Frederick's of Hollywood. The problem is the latest press release only said the following about FOH:

«Further, we are excited about the recently announced plan to merge with Frederick's of Hollywood. The combined company will have sales approaching $200,000,000, better efficiencies and a powerful brand portfolio."»

The market currently values FOH at:

23.7 million newly issued shares*$2.42 = $57.35 M + 60% of the $20 M rights offering = $57.35 M + $12 M = $69.35 M.

Well, that is less than the price paid to take the company private in 1997, which was $70 M, as you can read here: http://www.bankruptcydata.com/fredericks.htm

I know the company filed for bankruptcy in 2000, but it reemerged from Chapter 11 in 2002 and I think www.fredericks.com has made the company more profitable since 1999 (www.fredericks.com had revenues of $3 M in 1998, $10 M in 1999 and $20 M in 2000. Perhaps $70 M in 2007? That is about half of the company's revenues - the difference being that selling online means less costs than selling through physical stores, so I expect the company to be more profitable now than what it was in 1997).

I believe www.fredericks.com has a bright future, even more so when it starts shipping internationally, or else opens operations in Europe and Asia.

All in all I maintain that MSI shares are a great opportunity at the current market price and I'll keep holding it. 

Nothing new at MSI. I see www.fredericks.com personnel has been more active lately, they keep changing the website's homepage (I think that dynamism helps boost sales - by the way, 3 Stocks needs to change its homepage ;D)

I'll continue holding MSI.

Nice pick up in volume, as the stock refuses to go down (it also refuses to go up). I believe I've studied every piece of information there's outthere about MSI and my take is it will rise above $6 during 2007. Now I just have to sit tight and patiently wait for the news to come out.

God forbid saying this on a long term portfolio stock, but this has been a traders dream between 2.36 and 2.50. 

Bought into MSI between 2.45-2.48. Cant wait till more details of the fredericks merger come out. I bought this from fredericks website for my girl friend just 2 days ago its on its way in the mail
http://www.fredericks.com/product.asp?catalog%5Fname=Holiday2002&category%5Fname=New-Spring&product%5Fid=90818

I decided to try them out since I was getting into MSI. Shopping and checkout was fast and easy. Status of my order was sent to my email promptly. The only complaint I have is they need more interactive viewer for the clothes. (Something like bluefly where you can zoom in more and also add a color changer into it.)

Quote from: oicpecnoc on February 22, 2007, 08:49:43 AM
God forbid saying this on a long term portfolio stock, but this has been a traders dream between 2.36 and 2.50. 

Yep, one could have done that trade 6 times over the last month and a half, if he knew that was going to be the pattern. Unfortunately, nobody knew or had the tools to predict that. It's always easier to trade on the left part of the chart ;D

Quote from: nullzero on February 23, 2007, 03:32:00 AM
Bought into MSI between 2.45-2.48. Cant wait till more details of the fredericks merger come out. I bought this from fredericks website for my girl friend just 2 days ago its on its way in the mail
http://www.fredericks.com/product.asp?catalog%5Fname=Holiday2002&category%5Fname=New-Spring&product%5Fid=90818

I decided to try them out since I was getting into MSI. Shopping and checkout was fast and easy. Status of my order was sent to my email promptly. The only complaint I have is they need more interactive viewer for the clothes. (Something like bluefly where you can zoom in more and also add a color changer into it.)

Thanks for your report nullzero, and great "charmeuse and lace babydoll" :)

I wanted to buy some stuff for my wife too, but they don't ship internationally, yet.

The chart and the fundamentals tell me this stock will breakout above $3 towards a much higher price. I've been patiently waiting for that and I'll continue to do so.

on FIRE today  >:D >:D >:D
3.05$ new 52 weeks high

  You're an Oracle, David!! Bansai! That's because I bought 2 fantastic seduction pieces for my wife 2 weeks ago, now that they processed my payment the revenue projection just sky-rocketed.  :D

  By the way, David, if you want to buy something from Fredericks, just have it mailed to my address in the US and I will send it to you to Portugal for free (I am making enough money now in MSI  :))

Berloga.

Added 3k more shares today at 3.34. Im averaged now around 2.85  ;D.

Nice close on MSI closed @ 3.35 :).

David, as you expected, MSI closed @ 3.35 on Friday. Nice chart and strong bullish signal via MACD, but do you think how long MSI will continue to rally since it is overbought. I often experienced dips not long after overbought, that's why I have sold almost half of my MSI shares on Friday.

So many stocks have continued to run even after being extremely overbought. MSI might be one of these cases, the market acts in its own manner and you can never know exactly when a runup will lead to a sell off or a sell off will lead to a rebound. Thats why I decided to average up some shares @ 3.35. With any fredericks announcement this stock can run up some more.

You are quite right nullzero, MACD overbought doesn't mean that the stock will go south soon, it all depends of the overall scenario of the market. Usually on a bearish market it will go south faster, but in a bullish market (which is the case), the stock can remain overbought for a long long time frame before it shows signs of weakness.

I'm a believer of holding MSI at least until the merger announcement....than one must decide to sell at the news or hold it with two strong hands.

Cheers to all from Portugal.

MSI pushed the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php) to a new all time high on Friday, as the stock rose 30.88% on the session. It is now the portfolio's second biggest gainer, with a 73.58% return.

I've held MSI for seven weeks now, waiting for this bullish breakout to happen. It was very well worth it.

Quote from: berloga on February 23, 2007, 10:41:17 AM
You're an Oracle, David!! Bansai! That's because I bought 2 fantastic seduction pieces for my wife 2 weeks ago, now that they processed my payment the revenue projection just sky-rocketed.  :D

By the way, David, if you want to buy something from Fredericks, just have it mailed to my address in the US and I will send it to you to Portugal for free (I am making enough money now in MSI  :))

Berloga.

Lol, thanks berloga, but I prefer to keep pressuring www.fredericks.com so they start selling internationally. As I wrote in a previous update, my brother was in China and saw stores imitating Frederick's of Hollywood. Why buy an imitation when you can buy the "original sex symbol"? Frederick's is about to expand all over the world (but maybe, instead of shipping internationally, they will open operations in Europe and Asia, it would probably cost less due to shipping costs).

Quote from: nullzero on February 23, 2007, 01:49:14 PM
Added 3k more shares today at 3.34. Im averaged now around 2.85  ;D.

Nice move nullzero, but I'm a bit worried your hands will be weaker because you're holding too many shares (I don't know if that's the case). You could have been more confident in the fundamental background and bought all your position between $2.40 and $2.6. Anyway, great trade, congrats :)

Quote from: gix330 on February 24, 2007, 08:31:34 PM
David, as you expected, MSI closed @ 3.35 on Friday. Nice chart and strong bullish signal via MACD, but do you think how long MSI will continue to rally since it is overbought. I often experienced dips not long after overbought, that's why I have sold almost half of my MSI shares on Friday.

Yes, the stock can have temporary corrections and pullbacks, but I see its fundamental value between $6 - $8 per share, and if you try to sell to buy back lower on a correction, the thing that might happen to you is that you lose most of the ride.

Let me share Jesse Livermore's remarks on selling to buyback lower:

«I made up my mind to be wise and play carefully, conservatively. Everybody knew that the way to do that was to take profits and buy back your stocks on reactions. And that is precisely what I did, or rather what I tried to do; for I often took profits and waited for a reaction that never came. And I saw my stock go kiting up ten points more and I sitting there with my four-point profit safe in my conservative pocket. They say you never grow poor taking profits. No you don't. But neither do you grow rich taking a four-point profit in a bull market.

Where I should have made twenty thousand dollars I made two thousand. That was what my conservatism did for me. »

My advice is for you to forget about "overbought"/"oversold" conditions. Those are mental stratagems that people use when fighting the trend, and the trend, as you know or will find out, is your best friend in the market.

I guess MSI's internal fundamentals and legitimate expectations about Frederick's financial health propelled the stock higher. At the current share price, MSI shares represent:

- 16,410,196*$3.35 = $54,974,156 attributable to MSI;
- 23,700,000*$3.35 = $79,395,000 attributable to Frederick's of Hollywood;
- $20,000,000 in a rights offering.

That means a compound value of $134,389,156, for a combined company with estimated 2006 revenues of around $200 million, with something between 35 and 50% of it coming from a very profitable sales channel: www.fredericks.com.

I'll continue holding MSI.

Nice AH action for MSI today.

http://www.nasdaq.com/aspxcontent/ExtendedTradingTrades.aspx?mode=frameset&kind=&symbol=msi&symbol=&symbol=&symbol=&symbol=&symbol=&symbol=&symbol=&symbol=&symbol=&selected=msi&FormType=&mkttype=AFTER&pathname=&page=afterhours

31,000 shrs traded AH avg. around 3.55.

Thanks for the info nullzero :)

A guy on Yahoo is talking about a www.briefing.com article on MSI being the catalyst for the recent breakout. Do you know of any article? I searched www.briefing.com and couldn't find anything.

Anyway, I know why I'm holding MSI (and everybody that read this thread knows it too) and I'll keep holding.

I need my 58% profit in MSI to compensate for losses elsewhere. Still love www.fredericks.com, though, and will be on spot of all developments, but I will demand an even more attractive valuation to invest. Instead of say, 15 times earnings, I want 7 times earnings.

Even if there is an economic recession in the US, people won't stop buying $20 lingerie. Moreover, my MSI play is on the expectation of it expanding its operations, going global, to places like Europe, Asia and South America.

I sold MSI at $3.05 and the stock closed on Friday at $2.91. That isn't much of a difference, but I feel I want this business for the long term, regardless of what happens to the short term business cycle.

MSI's share price represents a $137 M value. I believe just www.fredericks.com is worth more than that.

The trading plan is:

Buy 6.66% of capital in MSI.

Hehe, I guess some of you guys started buying and I ended up getting a price a bit higher than my previous selling price, not that I care about that.

I see now that www.fredericks.com has a new design and functionalities. I hope it helps driving revenues up.

As one can find from reading this thread, there's not much public information about Frederick's of Hollywood, since the company was taken private 10 years ago and only now it is becoming public again through a merger with Movie Star (MSI).

All we have is estimates and expectations. I'm also glad to notice that MSI's specific business has been improving too, further legitimating this investment.

Longer term I believe selling quality and sexy lingerie is a great business, especially considering the very profitable sales channel: www.fredericks.com.

We have plenty of time to study MSI's business as I plan to hold the stock for the long term whatever happens to the general market.

Everybody is waiting for more details about the MSI + Frederick's of Hollywood merger, which is expected to close in Q2 2007. We know the combined company's revenue for 2006 was something like $200 M and the current MSI share price implies a value of:

- 16.41 million MSI shares*$3.13 = $51.36 M
- 23.7 million shares issued for Frederick's shareholders*$3.13 = $74.18 M
- $20 M rights offering

$51.36 M + $74.18 M + $20 M = $145.54 M, so the price to sales ratio is 0.73.

I feel comfortable holding MSI shares for the long term and believe there's a great long term business opportunity in expanding Frederick's products around the world (check those products at www.fredericks.com).

Nothing new on MSI, I'll continue holding the stock.

You know information about Frederick's of Hollywood is scarce, since it is still a private company, but I found this little piece of information that is an indication that things are going well with the company:

«The business was started by Frederick Mellinger (inventor of the push-up bra) in 1946. The original flagship store was a landmark on Hollywood Boulevard in Hollywood, California. In September 2005, after 59 years, the store moved to a larger, more modern, and tastefully designed space a few blocks away, near the corner of Hollywood Boulevard and Highland Avenue.»

If you have the time, look on this link for much more information about Frederick's of Hollywood, although nothing about the recent profit or loss numbers:

Frederick's of Hollywood information (http://www.google.pt/search?hl=pt-PT&q=fredericks+of+hollywood+information&btnG=Pesquisa+Google&meta=)

I'll continue holding MSI.

Yesterday I spent some time watching the site, and it is really great. Compared with the competitors, it's much more appealing, the only one that one can compare with, in terms of fashion and sexy looks, it's Victoria Secrets...I can't wait until Frederick goes international.

Quote from: Dracull on March 14, 2007, 07:09:06 AM
Yesterday I spent some time watching the site, and it is really great. Compared with the competitors, it's much more appealing, the only one that one can compare with, in terms of fashion and sexy looks, it's Victoria Secrets...I can't wait until Frederick goes international.

Thanks for your nice review of www.fredericks.com Dracull :)

We had a nice 3.95% upside day yesterday. It seems the stock is entering another two month period of consolidation between $3 and $3.5 before another leg up towards $4 - $4.5. Anyway, I see the fundamental value, with the information I got (which isn't plenty), at $6 plus.

I'll continue holding MSI.

MSI is a low volume stock, so daily moves up or down 6% are normal. Fundamentally nothing changed, as we continue to wait for more information on the MSI + Frederick's of Hollywood merger, specifically, more information about how FOH is doing from a financial standpoint.

I'll continue holding MSI, ignoring the short term fluctuations.

This stock is all over the place.  Somebody let shares go at 2.69 today.  Sucker.

Quote from: buddjas1 on March 16, 2007, 01:12:49 PM
This stock is all over the place.  Somebody let shares go at 2.69 today.  Sucker.

Yep, some people just got tired and sold all the way down to support at $2.75, prior record close. I believe MSI will keep floating around current levels until we know more information about Frederick's of Hollywood. That is scheduled to happen in Q2 2007.

I'll patiently continue holding MSI.

Just 45,700 shares traded on MSI, as the stock recovered a bit of ground from last week's losses. Everybody is waiting for details on Frederick's to move the stock sharply higher in my opinion, as I'm confident Frederick's is a great business.

Let's check www.fredericks.com today. Looking good as always!

Nothing else to do but to keep holding and waiting on MSI.

Today was a non event for MSI, since there wasn't any news out and no technical developments on a 23,100 volume day. I'm eager to know more about Frederick's but I need to be patient and wait for the news as I keep holding the stock, since I believe it is a great long term investment.

MSI rose 3% yesterday on a bit higher volume of 80,500 shares traded. Still, no news out. Let's check www.fredericks.com. All right.

I'll continue holding MSI.

There's no motive to move MSI higher or lower at this point in time, as everybody is expecting news about Frederick's. But you know that when the news hits the wires MSI can jump 30 to 50% in short notice, like it happened in 02-23-07 (in that day the stock didn't need news).

We know the merger between MSI and Frederick's is scheduled to close in Q2 2007 and we need to patiently wait for it, as buddjas1 says in another thread.

I'll keep holding MSI.

I called MSI's investor relations regarding the Frederick's merger.  He said that MSI has prepared the proxy, which will go to the shareholder for a vote.  He said that MSI has submitted the proxy to the SEC, which is reviewing it.  Unfortunately the SEC is "swamped" right now with IPO and is taking a lot of time to review it. 

I pressed IR regarding whether Frederick's was profitable and he would not tell me.  I still am suspicious why MSI would disclose Frederick's revenue but not Frederick's net income (if any). 

IR suggested that MSI would be in position to submit the proxy to the shareholders in April, which would disclose Frederick's income statement and other financial information.  At least we will not have to wait until the deal closes at the end of Q2 to know whether this was a good investment.

Question for David:  What if Frederick's is not profitable?

Quote from: buddjas1 on March 24, 2007, 03:31:09 PM
I called MSI's investor relations regarding the Frederick's merger.  He said that MSI has prepared the proxy, which will go to the shareholder for a vote.  He said that MSI has submitted the proxy to the SEC, which is reviewing it.  Unfortunately the SEC is "swamped" right now with IPO and is taking a lot of time to review it. 

I pressed IR regarding whether Frederick's was profitable and he would not tell me.  I still am suspicious why MSI would disclose Frederick's revenue but not Frederick's net income (if any). 

IR suggested that MSI would be in position to submit the proxy to the shareholders in April, which would disclose Frederick's income statement and other financial information.  At least we will not have to wait until the deal closes at the end of Q2 to know whether this was a good investment.

Question for David:  What if Frederick's is not profitable?

Before answering the question buddjas1, I want to thank and applaud this great contribution of yours :)

It's good to know we'll know Frederick's numbers in April.

Yes, it is  quite possible that Frederick's isn't profitable, as, for example, BFLY is also not profitable. I believe the valuation of the company, trading at $133 M market cap for $200 M in combined annual sales already reflects that negative scenario.

We need to remember that FOH was taken private, 10 years ago, for $70 M. At that time www.fredericks.com didn't exist, so I believe FOH is much more valuable now. If we consider this $70 M as a minimum value, with the $46.4 M currently attributed to MSI alone, the combined company would then be worth $116.4 M and that means a price per share of $2.46.

I believe this is the maximum risk, the combined company is worth $2.46 per share (a 12.5% downside potential). As for the upside potential, for example if we were to consider MSI+FOH would trade at a similar revenue multiple as BFLY, it would then be a 1.73*$200 M = $346 M, or $7.31 stock.

I believe the potential outweighs the risk and I'll keep holding MSI (thanks again buddjas1).

I do not know if you have found these numbers yet, but it appears:

FY00 - "Internet sales for the fiscal year ended July 31 totaled $10 million and are projected to increase 50 percent this year, LoRe said. Catalog sales, which totaled $35 million in fiscal 2000, are projected to increase 15 percent this year despite two out of eight catalog mailings being canceled last summer due to the reorganization. Store sales were $100 million in fiscal 2000, and have been relatively flat so far this year. "

http://www.encyclopedia.com/doc/1G1-71841029.html

Bankruptcy in June 2001

FY01 - "For fiscal 2001, we turned in our best performance in the past five years. We have seen the fourth-largest gain in profits in the last 15 years. Revenues were right around $150 million. And that is from really three distinct channels of distribution. We have retail stores, we have catalog and the Internet. And the Internet had a triple digit increase."

http://www.allbusiness.com/north-america/united-states-california-metro-areas/838310-1.html

FY02, FY03 - "Although the company closed 58 stores during its 30-month stay in Chapter 11 (it still has 156), sales for fiscal 2003, ended July 31, were $140 million, flat with the previous year. ***The company's earnings for fiscal 2003, meanwhile, beat internal projections by 20%. Profit for the direct division increased 47%. And for the first six months of fiscal 2004, profit tracked 60% higher than for the comparable period of the previous year. Comparable-store sales — a year-over-year comparison and an indicator of a retailer's health — for December increased 11%."

http://multichannelmerchant.com/news/marketing_fredericks_hollywood_redux/

"Frederick's 156 stores, mostly in malls, generated about half the company's estimated 2002 annual revenue of $150 million"

http://retailtrafficmag.com/design/interiors/retail_fredericks_suburbia/

FY04 - The President/CEO mentions that, as of then, Frederick's numbers were "70% better" than the bankruptcy plan

http://www.tei.net/presidentsforum/2005/0223/LindaLoRe.asp

FY05 - "Frederick's generated approximately $139 million in revenue for its fiscal year ended July 29, 2006.***   Frederick's new store designs—the company plans to open approximately 50 more Frederick's of Hollywood stores during the next three years--are expected to drive top-line growth. New York-based Movie Star's sourcing capabilities are expected to help increase gross margins and improve operational efficiencies. "

http://multichannelmerchant.com/news/Fredericks_Movie_Star_12202006/

FY06 - "Fredericks has posted 43 consecutive weeks in positive weekly year-over-year sales. The company's catalog and Internet business has been posting mid-double digit growth  , the company said, declining to offer any revenue or profit growth.  Frederick's has fewer stores than it did at the outset of bankruptcy, 134 compared to 207, but the stores have more revenue per square foot, said Denise Marsicano, senior vice president of real estate and store planning. We got rid of the dead weight, the stores that were in undesirable locations, and got into better places," she said. Now Marsicano's goal is to be in only "A" malls, of which there are about 400 in the country. The new stores in Westfield Century City and Westfield Topanga malls are a prime example of the shift, she said. Now she's focused on not just the right mall, but the right placement in the right mall.  She's going to stay busy. LoRe is expecting to open up to 50 stores within the next 24 to 36 months."

http://www.encyclopedia.com/doc/1G1-157098819.html

Here's some more important reading:

http://www.answers.com/topic/frederick-s-of-hollywood-inc

From these articles, I think it is safe to assume that FOH's revenues are around $160-170 for the last fiscal year but growing.  I also think is safe to assume that FOH is not just profitable but increasing profitability q-to-q.  The President/CEO has removed the unprofitable parts from the company and has expanded into the most profitable areas.  I am more confident than ever that MSI is a great buy. 

Apparently, a director of MSI has agreed, purchasing $100,000 worth on Jan. 18, 2007, not long after the merger was announced.

http://www.secform4.com/93631-000109489107000037.htm

The merger is taking place just when FOH is really coming into its own.  I think your $7.31 target is a valid target.

Excellent research, buddjas1 ! Applaud!
It'd be hard to imagine that whilst Victoria's Secrets is
profitable, FOH is not. Thank you  :)

buddjas1 already made an awesome work on FOH, discovering several issues that I didn't know of, increasing our confidence in this investment.

MSI stock continues to be all over the place as investors can't wait for confirmation of the merger between MSI and FOH and financial details on FOH.

I believe we have the edge and know more than the average investor about this wonderful investment opportunity. Let me check www.fredericks.com again (probably responsible for $70 M or more of FOH's $150 M in annual sales) and say that I'll continue ignoring short term volatility and will keep holding MSI.

Again, let me pick up one of the excellent articles buddjas1 left for us, this one:

Frederick's shift from fantasy to fashion pushes up sales: less-racy lingerie draws more female customers. (http://www.encyclopedia.com/doc/1G1-157098819.html)
From: Los Angeles Business Journal  |  Date: 12/18/2006  |  Author: York, Emily Bryson

The article is just 4 months old and it looks like Frederick's is in terrific shape.

I'll keep holding MSI.

Another article from Dec. '06.

http://www.podcasternews.com/programs/152/fashiontribes-daily/3371/va-va-voom-fredericks-of-hollywood-merges-with-movie-star/

Not sure if I like this one.  DeRoe states:

"That will be the biggest opportunity for us: access to the capital market and a publicly traded company. It will give us the resources to enable us to open 50 additional stores in the next 24 to 36 months…This strategy allows us to partner with landlords at shopping malls and open up stores we've had our eye on for a while."

Dilution??? 

My strategy now is to sell on the release of the FOH financial information and, perhaps, buy back after what I assume will be a private placement after the close of the merger.

Wow, MSI fell off a cliff there toward the end of the session, though it bounced just a little, anyone know what happened?  Or was it just noise?

I think I am also of the mind that selling the merger might be best if the market continues this way and energy prices rise etc.  Retail gets hurt pretty bad in the kind of environments we seem to be setting up for now.  The retail expert Jeff Macke was talking about this last night.

Technically, MSI fell below its support today and exited the triangle. But volume was a bummer. I think some short term trader closed his position due to the technical breakdown, i.e. this is the noise tokyopua is mentioning. It is a bit unnerving waiting for the news though, I agree.

Quote from: tokyopua on March 28, 2007, 04:12:50 PM
Wow, MSI fell off a cliff there toward the end of the session, though it bounced just a little, anyone know what happened?  Or was it just noise?

I think I am also of the mind that selling the merger might be best if the market continues this way and energy prices rise etc.  Retail gets hurt pretty bad in the kind of environments we seem to be setting up for now.  The retail expert Jeff Macke was talking about this last night.

Thanks for that macro view Tokyopua, which may be accurate, but I prefer to use a micro, case by case, analysis. I believe a small company's destiny lies more in its management hands than on the general economy strength. I also say this because I live in a country that is living in a deep economic depression for about 6 years, and yet, some very well managed companies are thriving.

Quote from: berloga on March 28, 2007, 04:42:03 PM
Technically, MSI fell below its support today and exited the triangle. But volume was a bummer. I think some short term trader closed his position due to the technical breakdown, i.e. this is the noise tokyopua is mentioning. It is a bit unnerving waiting for the news though, I agree.

I agree with your assessment of reality berloga.

The chart shows an ugly breakdown, which I believe it was possible only because of the low liquidity of the stock, because there wasn't any fundamental reason (at least that I can see) for the break.

Trendlines and moving averages are fancy things to put on a chart, but, above all, support and resistance levels are memory phenomenons. What was the previous resistance level, the one that put a ceiling on the stock for several weeks as we waited for a bullish breakout? It was $2.6, remember?

$2.6 was the most important prior resistance, now acting as a support level. I don't think the stock will close meaningfully below that level (say 3% below), without any additional fundamental information, and when that comes, from what we've been studying here, I expect it to be positive.

MSI + FOH is now valued by the market at $128 M, for $200 M in annual sales. I think its cheap, and I'll keep holding it.

David, what do you think about the possibility of dilution after the merger, in accordance with DeRoe's statement (above), to pay for the expansion of dozens of stores?

I'm not liking this selling yesterday and today.  Is this just TA gone wild or is there more behind the selling?

Big time drop again. Yuck!  I am wondering also if there is something going on MSI isn't saying. IS there a rumor out there or something?

Well, the gains from million share day of Feb. 23 has been eliminated.  That 10,000 share bid at 2.40 looks awfully tempting now.

Quote from: buddjas1 on March 29, 2007, 08:58:16 AM
David, what do you think about the possibility of dilution after the merger, in accordance with DeRoe's statement (above), to pay for the expansion of dozens of stores?

Well, MSI will be issuing 23.7 million new shares for FOH, I guess later they can use part of those shares, selling them to institutional investors to finance that expansion. There's also the $20 M rights offering. No need for dilution after the merger.

Quote
I'm not liking this selling yesterday and today.  Is this just TA gone wild or is there more behind the selling?

I know as much as you do buddjas1. But if we recall correctly, the big white marubozu in February the 23rd was in itself a technical thing. There wasn't any new financial information, yet the stock rallied like crazy that day, as it broke out above the $2.75 resistance level. Now it is back to the previous range, as nothing changed from a fundamental standpoint, we're still waiting for FOH's financial details.

Quote from: lancefur on March 29, 2007, 02:06:16 PM
Big time drop again. Yuck!  I am wondering also if there is something going on MSI isn't saying. IS there a rumor out there or something?

No rumor that I know of lancefur. My take is, as the stock rallied without any fundamental motive in February 23rd, now it is also going down without any motive.

Next month we'll know more about FOH and the merger. Then the stock will have a solid motive to make its move. My take is it is worth north of $6 a share and I'll keep holding MSI through the ups and downs as I wait for the decisive information.

Quote from: buddjas1 on March 29, 2007, 02:27:31 PM
Well, the gains from million share day of Feb. 23 has been eliminated.  That 10,000 share bid at 2.40 looks awfully tempting now.

Buddjas1, you made a marvelous work on MSI. Don't let volatility kill your wise fundamental assessment.

Nobody likes to take a 10.4% punch in one single day. But, unless one gives up investing in stocks, these days always happen, they're inevitable. As I review my original motives for this investment I see they remain in place and I'll keep holding MSI.

The more I read about Frederick's of Hollywood, the more I like it. Please read this article:

How Frederick's Found Its True Customer (http://hbswk.hbs.edu/archive/4130.html)

FOH was take private for $70 M in 1997. The bid price was revised higher three times before the board of directors accepted the buyout:

«FREDERICK'S OF HOLLYWOOD (NYSE: FOH.A) lost $2 7/16 to $7 13/16 after an investment group announced on Monday that it has sweetened its bid for the purveyor of lingerie. Investors who were hoping for a better bid are apparently disappointed, as the board at Frederick's accepted this offer of $7.75 per share. This is the second time that Knightsbridge Capital has raised its offer for Frederick's, this time from $6.90 per share, and the time before that, to $6.90 from $6.14. Principal shareholders controlling the company agreed to the second and third offers, which was published in company press releases, but other offers have not been made public. Quite possibly, a unnamed suitor dropped out of the bidding today, leaving those looking for a higher offer high and dry.»

(also, check an 11 year old FOH balance sheet here (http://www.secinfo.com/d15ur.9c.htm#1uy))

Now the market, through MSI, is valuing FOH at 23.7 million*$2.36 = $56 M. This is outrageous to me, as everything points to a much more valuable company now than in 1997.

Since I've studied thousands of long term charts I know the recent share price weakness is meaningless for the final outcome of this investment. The stock can go down another 20% and I can still make several bags of profit if I'm right on my prognosis. And I believe I am. I'll keep holding MSI with strong hands.

Every indication I look at shows an healthy picture for Frederick's of Hollywood, look how they're hiring:

Frederick's of Hollywood Job Opportunities (http://www.fredericks.com/services/hr.asp)

Also, here's a nice review of www.fredericks.com, written last Tuesday:

Frederick's: The Original On- Line Sex Symbol (http://www.epinions.com/content_339846139524)

I have no doubts FOH is worth a lot more than 23.7 million*$2.29 = $54.3 M. This valuation is ridiculous. Unless the merger between MSI and FOH is terminated (which there's no indication of happening), people selling MSI are plain suckers, as this stock will be at $7 plus by year's end.

I'll keep holding MSI.

MSI needs a big buyer at this level (2.15).  Otherwise, I see 1.50 or less happening real fast.

This -5% per day stuff is getting old.

If it breaks 2.10,  next relevant resistance is 1.50

From where we stand now (2.15) this stock needs to go up
45% to return to 3.12   :( :'(

Quote from: buddjas1 on April 03, 2007, 01:25:19 PM
MSI needs a big buyer at this level (2.15).  Otherwise, I see 1.50 or less happening real fast.

Hmmmm.... I am probably not the big buyer you are looking for but I have bought MSI today.

I think the merger is a done deal. After all the main shareholder is the same in both companies.

Let me quote from David's initial analysis:

Quote from: David Randolph on January 04, 2007, 07:11:38 AM
Michael Tokarz owns 22.4% of MSI's outstanding shares and owns 100% of Fredericks of Hollywood. So the deal is to merge the two companies.

...................

«Frederick's generated approximately $139 million in revenues for its fiscal year ended July 29, 2006. For the fiscal year ended June 30, 2006, Movie Star had revenues of approximately $51 million.»

So, combined sales for the two companies were $190 M in fiscal 2006.

If we apply the average sales multiple of the Textile - Apparel Clothing industry  of 0.66, we get a value for the combined company of $125.4 M.

The combined value of the two companies is 120 million at today's share price. The stock could continue to fall but I am willing to put my money on the table here.

When the merger is announced all the momentum players will come back in and drive the stock price much higher. I can wait for that and I might even keep the stock after the initial run up. David is not the only one who is in love with Fredericks  ;)

Well, all I can say is someone wants 60000 shares @ 2.12 on Schwab level 2 and is patiently buying it up.

I too joined this raft today.  Good luck to us all.

did the sell off come to an end ??

I think so  ;D

There can be some more turbulence, but I guess the final washout of the weak hands on MSI was made. Volume picked up a bit and the candlestick left on the chart is a bullish reversal candle.

It is reassuring to have Michael on board, welcome my friend :) I know he was waiting for this opportunity for some months now, and finally he's in.

My take is the drop to a low of $2.01 was only possible due to the lack of liquidity of the stock, not the lack of value of the companies involved (Movie Star & Frederick's of Hollywood). All this volatility doesn't change the long term fundamental outlook that I have that tells me MSI is worth something between $6-$8 a share, not considering future growth, as one can read on the rest of this thread.

Of course, I'm not satisfied with my trading performance on this holding, since I bought it at $1.93, sold at $3.01, bought back higher at $3.12, and now I'm losing 26% on this trade. It would have been painful too if I staid all along with the initial position, as I would have seen a potential 81% profit turn into just a 4% gain at today's low of the session :P

One thing I must say about this holding, which is the biggest loser of the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php), is that it wasn't possible to make one of those in depth video analysis for it. I deviated from the main strategy to buy this stock, and I'm paying the price, at least over the short term. But it is also somewhat comforting, to see the "sound picks" performing very well, and the more speculative ones doing poorly. It is another proof that the recent path is correct.

buddjas1 spoke with MSI's investor's relations and they said details about FOH will be made public in April. This is April. One just needs to be patient and have strong hands now. Technically the stock reacted positively to the $2.17 support on the chart below.

I'll keep holding MSI.

Nice to see some pre-market interest in MSI.  Up $0.10 on 1,600 shares.  Maybe MSI has bottomed.

Hey David, congrats on a really great day yesterday. I have to say, your hard work is really paying off ($$$) and we are really benefiting (thanks). Your analysis are always getting better and better. Looking forward to the fundamentals course.

Thanks again

uc.

intraday bull pennant from yesterday is closing.  ask at 2.30 is drying up.  Do I see a recovery starting?

Quote from: buddjas1 on April 04, 2007, 08:53:31 AM
Nice to see some pre-market interest in MSI.  Up $0.10 on 1,600 shares.  Maybe MSI has bottomed.

Quote from: buddjas1 on April 04, 2007, 02:38:24 PM
intraday bull pennant from yesterday is closing.  ask at 2.30 is drying up.  Do I see a recovery starting?

You're a bit nervous on MSI, aren't you buddjas1? Perhaps you're overweighted the stock ...

I guess not many people know very well what to do on MSI, as most people didn't dig enough for details on FOH as you and I did. I guess the equilibrium price is about $2.6 - $2.8, given what the public knows about the situation now. Below this level we have fear, and above that there's too much optimism.

Only the objective information can take us significantly higher or lower. I believe that, from what we've studied on this thread, MSI + FOH is worth at least $200 M, the value of one year of revenues of the combined company.

To reflect a $200 M valuation, MSI would need to trade at:

$200 M - $20 million rights offering = $180 M/(23.7 million shares for FOH + 16.5 million MSI shares) = 180,000,000/40,200,000 = $4.48 per share.

This represents a 95.6% increase from current levels (but just 44% from my buying price). But it isn't considering the growth potential, just a mere Price to Sales Ratio of 1.

I must say that given what I know today, which is a bit more than what I knew when I bought MSI, I probably wouldn't buy this stock. It doesn't fit my model, there's a lot of speculation involved because we don't know the real numbers in terms of profitability or the balance sheet for that matter for FOH.

But now I have the stock and I believe it is trading at a discount. And there's the possibility of strong growth and margin expansion (from what level, we don't know), due to synergies coming from the merger.

We'll know more details this month. I'll keep holding MSI.

Quote from: usedcasting on April 04, 2007, 09:00:27 AM
Hey David, congrats on a really great day yesterday. I have to say, your hard work is really paying off ($$$) and we are really benefiting (thanks). Your analysis are always getting better and better. Looking forward to the fundamentals course.

Thanks again
uc.

Thanks for your kind words uc., I believe I've learned more over the last 6 months or so than ever before in my 11 years trading career, and that's thanks to you guys help too.

Having a lot of fun doing this job 8)

Quote from: David Randolph on April 05, 2007, 05:18:20 AM
You're a bit nervous on MSI, aren't you buddjas1? Perhaps you're overweighted the stock ...

No, I'm diversified.  I just don't like being down 30%.  I thought cheerleading would help.

http://www.sec.gov/Archives/edgar/data/93631/000109489107000170/xslF345X02/edgar.xml

1,130 shares compensation to a Director.  At least he's not selling.

MSI is recovering from lows  :D

Quote from: buddjas1 on April 05, 2007, 09:16:44 AM

Quote from: David Randolph on April 05, 2007, 05:18:20 AM
You're a bit nervous on MSI, aren't you buddjas1? Perhaps you're overweighted the stock ...

No, I'm diversified.  I just don't like being down 30%.  I thought cheerleading would help.

Yeah, I don't like it either. Down 24% on MSI now. Still waiting for FOH's details to hopefully derive some long term estimates that show us the value. In the meantime I'll keep holding MSI. Let's just check www.fredericks.com today.

Slowly but surely MSI is coming back to its equilibrium point, which I believe is around $2.6 - $2.8.

But the expected FOH details, to be known this month, can change everything. I believe FOH has a better financial situation than what the market is pricing and MSI will shoot to new highs above $3.5 after the news is out.

Hopefully the news will be specific enough for me to apply the new valuation model to the combined company. We'll see about that.

I'll keep holding MSI.

Not sure if this means anything or not, but an insider just bought some shares @ $2.36 on April 7th

http://finance.yahoo.com/q/it?s=MSI

http://biz.yahoo.com/bw/070410/20070410006065.html?.v=1

Looks like merger is still in the works, except closing later than I initially thought:

"Mr. Cole also has agreed to serve as the Executive Chairman of the combined company, subject to approval by the Movie Star shareholders of the transactions contemplated by the merger agreement and the closing of the merger in accordance with its terms, which is expected to occur in the third calendar quarter of 2007."

Quote from: buddjas1 on April 10, 2007, 04:09:49 PM
http://biz.yahoo.com/bw/070410/20070410006065.html?.v=1

Looks like merger is still in the works, except closing later than I initially thought:

"Mr. Cole also has agreed to serve as the Executive Chairman of the combined company, subject to approval by the Movie Star shareholders of the transactions contemplated by the merger agreement and the closing of the merger in accordance with its terms, which is expected to occur in the third calendar quarter of 2007."

Is that why the stock closed down?

Quote from: dragonamg on April 10, 2007, 04:27:02 PM
Is that why the stock closed down?

Better not be, as the press release was not issued until after 4pm. 

I think that MSI is just acting like MSI; all over the place.

Quote from: buddjas1 on April 10, 2007, 04:31:35 PM

Quote from: dragonamg on April 10, 2007, 04:27:02 PM
Is that why the stock closed down?

Better not be, as the press release was not issued until after 4pm. 

I think that MSI is just acting like MSI; all over the place.

The stock is up 7% after hours as I check on Yahoo now, so if nothing else there doesnt seem to be a negative reaction to the news. 

2.30     54700    AMX 17:03:45
2.461   300        NDD 16:13:20

That's a lot of shares at 2.30, after hours. 

Quote from: buddjas1 on April 10, 2007, 05:57:20 PM
2.30     54700    AMX 17:03:45
2.461   300        NDD 16:13:20

That's a lot of shares at 2.30, after hours. 

Where do you find that information?  forgive my ignorance... I'm new to this stuff.

Quote from: dragonamg on April 10, 2007, 01:37:48 AM
Not sure if this means anything or not, but an insider just bought some shares @ $2.36 on April 7th

http://finance.yahoo.com/q/it?s=MSI

Good find, though unfortunately its a small buy and I have more shares than that buy lol.  The 3SOF position is probably 10 times that buy too.

fyi (continue to hold  ;) cheers Oliver):
Movie Star Director to Lead Merger
Tuesday April 10, 6:27 pm ET
Movie Star Director Peter Cole to Lead Company in Merger With Frederick's of Hollywood

NEW YORK (AP) -- Lingerie manufacturer and distributor Movie Star Inc. said Tuesday that one of its directors, Peter Cole, will lead the company as it completes a merger with Frederick's of Hollywood and work as executive chairman after the deal is finished.

Cole's appointment is subject to stockholder approval of the deal, which the company expects to close in the third quarter. The companies said in December they were merging in a deal that would give Frederick's shareholders 60 percent of the shares of the combined company.

The change means Cole will no longer be an independent director for the company, and will tip the board's balance so that it does not have an independent majority. American Stock Exchange rules stipulate that the majority of a listed company's board members must be independent and that only independent directors can serve on its committees.

To keep the balance, the company's chief operating officer, Saul Pomerantz and its chief financial officer, Thomas Rende, resigned their board positions effective immediately.

Movie Star shares lost 19 cents, or 7.6 percent, to close at $2.30 on the American Stock Exchange. In after-hours trading, the stock gained 16 cents to $2.46.

Quote from: dragonamg on April 10, 2007, 01:37:48 AM
Not sure if this means anything or not, but an insider just bought some shares @ $2.36 on April 7th

http://finance.yahoo.com/q/it?s=MSI

He didn't buy those shares, they were granted to him:

«1. Shares issued under the Company's Non-Employee Director Compensation Plan as compensation for services rendered to the Company during the fiscal quarter ended March 31, 2007 and based upon the closing price of the Company's common stock on March 30, 2007»

There were some news yesterday, but let's make it clear, this isn't the news we've been waiting for:

• Movie Star, Inc. Announces Peter Cole as Lead Director to Facilitate Closing of Frederick's of Hollywood Merger and to Become Executive Chairman of Combined Company Following Merger (http://biz.yahoo.com/bw/070410/20070410006065.html?.v=1)
Business Wire (Tue 4:01pm)

This press release will just have the impact of reassuring everybody that the merger will indeed happen, as they're making all the necessary changes and appointments. The press release also delays the merger from Q2 to Q3. This may have a bit of a negative impact due to impatient investors.

The news we've been looking for are current financial details of FOH. We don't know when will they be released, there were some indications it could be this month, but maybe it will take some more time.

No problem for me, as I have patient to wait for a big winner.

Let's check www.fredericks.com today. I'll keep holding MSI.

As usually MSI has been all over the place yesterday, reflecting the two opposing feelings I thought would happen:

1) People buying because they now have more confidence the merger will go through. Also some people buying because yesterday was the first time they heard MSI+FOH story;
2) People selling because they got impatient due to the news of a delay in the merger's calendar, from Q2 to Q3.

But, maybe if we look at the volume traded of just 44,200 shares, we'll get to the conclusion that yesterday's news was pretty much irrelevant.

I'll have to keep waiting for FOH's financial details, expecting to profit from the more in depth study that I, buddjas1, la-onda and Michael, between others, made. My hope is FOH has a more or less clean and predictable financial picture, so we can derive long term estimates for the combined company.

I'll keep holding MSI.

I can't apply my new valuation model on MSI, due to the lack of financial details regarding Frederick's of Hollywood, its merger partner.

Probably this explains why I'm losing 21.8% on this position (even though I made a 58% profitable trade on MSI in the recent past, so, still making good money on balance in this stock).

In this thread we can find valuable information that tell us this stock is undervalued, but we don't have the financial statements to prove it. We'll have to keep waiting for them to be made public.

I'll patiently keep holding MSI, mainly because I enjoy www.fredericks.com business and the clues I get from qualitative information on MSI and FOH.

http://www.sec.gov/Archives/edgar/data/93631/000095013607002459/0000950136-07-002459-index.htm

The rich get richer at shareholder expense.

QuoteThe rich get richer at shareholder expense.

I agree with you buddjas1, I dislike this idea of issuing shares for employee compensation and to pay for consulting services:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35591;image)

Buffet has been talking about this issue over the last few years, saying many times management has no respect for shareholders. I'm not against employees receiving shares as a performance bonus, but the company should buy these shares at the open market and then give them to employees. It shouldn't dilute shareholder's value to increase employees pay, that's a shame.

Well, at least on the shareholder's perspective ;D

Management might think "we create all the value, investors holding shares not bought at the IPO are just speculating the share price will rise, not really benefiting the company's operations". Damn communists >:D

I count 475,000 newly issued shares to Mr. Cole alone, which would be, let me see, about a 1% stake on the combined company. I hope we don't get many more "option compensation plans", and "shares as compensation for services" and stuff like that, or the dilution factor will be really high. This isn't a good start to the merging process.

Anyway, the stock probably won't go down from current levels, and I expect decent upside when FOH's financial details are revealed, I'll keep on holding MSI. 

There wasn't any new fundamental information for MSI yesterday and the stock went down 6.15%. It is possible that the stock and the 200 days simple moving average meet in the future, and that would have to be considered "normal" from a technical standpoint.

As for fundamentals, it's hard to know, because there's no fundamental data for FOH. We'll probably know more financial facts of FOH over the next couple of months.

Anyway, at the current market price, FOH is valued by the market at 23.7 million*$2.29 = $54.3 M, and the company was taken private 10 years ago for $70 M. I have no doubts that FOH is worth a lot more today than what it was worth in 1997, so I'll patiently keep on holding MSI.

However, it is funny or relevant to see that MSI is the only stock in the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php) where I can't apply my new valuation model, and it is the only loser of the Portfolio. In the future I'll avoid any stocks where I don't have sufficient information to apply the valuation model.

MSI touched the $2.17 support near the end of the session and quickly rebounded towards a close at $2.28. There's no new fundamental information about MSI or FOH. Let's just check how www.fredericks.com is doing. It's doing ok.

I'll patiently keep on holding MSI, since I believe the stock is way undervalued at current market prices.

I read this thread all over again and made an effort to get some estimates on the table so we can build the valuation model for MSI, knowing that reality can be a lot different from what I'm estimating here:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=35815;image)

Let me explain how I got to each line of the model:

1) Initial Share Price = $2.25, no doubts here;

2) Initial Share Count (M) = 49.09

Here we have 16.5 million MSI shares, 23.7 million shares attributable to FOH's shareholders and a $20 M rights offering that at $2.25 represents 8,888,888 shares. So 16.5 + 23.7 + 8.8888888 = 49,088,888 shares issued and outstanding after MSI+FOH merger.

3) Dilution factor = 1.03

When I don't have much information I throw in 3% at this, which seems to be the average dilution rate of the companies I've been studying.

4) Final Share Count (M) = 53.64

It's just the result of 49.09*(Dilution Factor^3) = 49.09*(1.03^3) = 53.64

5) Initial Revenue (M) = 200

We get this number from recent press releases, that the combined company has $200 M in revenues now.

6) Revenue CAGR = 1.15

I read in an article published on this thread that FOH's sales are growing 15% a year. Perhaps I'm being optimistic in expecting revenue growth of 15% for the combined company going forward.

7) Final revenue = 304.2

Final revenue = initial revenue*(1.15^3) = 304.2

8) Initial net profit margin estimate = 5

5% is my best estimate, again, perhaps I'm being optimistic here, maybe FOH isn't profitable. We don't know.

9) Final Net Profit Margin = 5

I kept it at 5% because the initial estimate is optimistic.

10) Final net income estimate (M) = 15.21

This is just final net profit margin estimate*final revenue = 0.05*304.2 = 15.21

11) EPS Estimate ($) = 0.28

EPS estimate = Final net income estimate/Final share count = 15.21/53.64 = 0.28

12) EPS multiple estimate = 21.13

21.13 is the Textile - Apparel Clothing industry average earnings multiple (http://finance.yahoo.com/q/co?s=msi).

13) Final estimated share price ($) = 5.99

This is the EPS multiple estimate*EPS multiple estimate = 0.28*21.13 = 5.99

14) Share price CAGR (%) = 38.60%

Share price CAGR = (Final estimated share price/Initial share price)^(1/3) -1
= (5.99/2.25)^(1/3) - 1 = 38.60

15) Optimal selling price ($) = 3.84

Optimal selling price = Final estimated share price/(1.16^3) = 3.84

I was expecting more from MSI, but I feel I can't push estimates even more upward, in fact maybe I was overly optimistic here, we'll have to wait for FOH's numbers to find out.

I always said MSI + FOH was worth something between $6 - $8, but using my new valuation model the stock should be sold at $3.84, given my optimistic estimates. So, probably if I can get out of MSI not losing much I'll be happy.

I'll keep holding MSI for now, hopefully when FOH's details are revealed the stock will get a nice boost.

MSI's volume is drying completely, just 7,700 shares traded today. Better not to trade than to go down as we expect FOH's news. But this was clearly a trading mistake, similar to DIET's, never again I should buy a stock based on a future catalyst before that catalyst actually happens!

I'll keep holding MSI, because my trade is based on FOH's numbers being better than the market is discounting, and I expect to make money/not lose as much as I'm losing now when the news comes out.

I think breaking even with MSI is a good goal.  That's 3.15 for me.  Will we get there?

Quote from: buddjas1 on April 20, 2007, 10:02:09 AM
I think breaking even with MSI is a good goal.  That's 3.15 for me.  Will we get there?

I think so buddjas1, when FOH's financial details are revealed and the merger agreement is finally closed, I believe MSI will be worth at least $148.5 M, which is what $3.15 a share means.

My valuation model says $3.84 is the optimal selling price (http://www.3stocksonfire.org/fundamental.model.php?ticker=MSI&portfolio=main), but perhaps I'm being too optimistic when calling for 15% revenue CAGR and a 5% net profit margin for the combined company.

We'll have to wait for the news to find out what the reality is, but the clues I'm getting from reading articles about FOH is that the company is in good shape now.

I'll keep holding MSI.

MSI seems to be trending down bouncing off its 9EMA. The only reason we are holding the stock is the hope of good financials of FOH, isn't it? For instance, I see both CIMT and MSI are trading at low volums, but whereas with CIMT we have a good fundamental pictures, with MSI we can have a panic sell off if the FOH numbers disappoint one or two primary investors...

Quote from: berloga on April 23, 2007, 10:59:47 AM
MSI seems to be trending down bouncing off its 9EMA. The only reason we are holding the stock is the hope of good financials of FOH, isn't it? For instance, I see both CIMT and MSI are trading at low volums, but whereas with CIMT we have a good fundamental pictures, with MSI we can have a panic sell off if the FOH numbers disappoint one or two primary investors...

Really big investors probably already know most of FOH's financial details and this is why technical analysis can sometimes be useful. My current take is Movie Star and Frederick's of Hollywood aren't terrific businesses (selling lingerie and general women clothes), but they're not worth just $110 M either, which is what $2.25  a share implies. 

My first shot would be a $200 M valuation, since this would mean a revenue multiple of 1, which is the long term general market average. But just common sense tells me FOH needs to be worth a good deal more today than when it was taken private in 1997 for $70 M, all articles in this thread point to that.

I also enjoy www.fredericks.com and the value and recognition of the Frederick's of Hollywood trademark.

The stock may jump around all it wants, with high or low volume, but nothing will get me out of this idea that the combined company is worth more than $110 M, perhaps it is worth double of that amount. If I wait a couple of more months maybe I'll be able to get out of this position still with a nice profit (I would prefer to hold it for the long term, we'll see if fundamentals justify that when we know them more deeply), and, what is the risk from this point?

Not more than 10%, I would say.

I'll keep holding MSI, perhaps today was the final shake out day and the stock will start trending higher from this point.

MSI closed just a touch below the $2.17 support level, on insignificant volume of 17,200 shares. No news out.

I'll keep waiting for the news with FOH's financial details, MSI looks undervalued to me. I'll hold MSI.

Hello David, did you eliminate the -30% rule in your strategy?

A video clip regarding LTD brands and Victoria Secret that might have some bearing on what can happen to MSI stock price based on the FOH merger:

http://cosmos.bcst.yahoo.com/up/finance?ch=1316259&cl=2500477&lang=en

Quote from: Terliso on April 25, 2007, 07:22:02 PM
Hello David, did you eliminate the -30% rule in your strategy?

It's more like 33%. No, didn't eliminate, but no automatic stop losses either. Let's just say that when at a 30% plus loss I'll be more inclined to admit I was wrong when buying that stock and will probably assume the mistake by taking the loss.

But, my initial buy of MSI was $1.93, I'm still ahead on this stock.

Quote from: tokyopua on April 26, 2007, 12:03:24 AM
A video clip regarding LTD brands and Victoria Secret that might have some bearing on what can happen to MSI stock price based on the FOH merger:

http://cosmos.bcst.yahoo.com/up/finance?ch=1316259&cl=2500477&lang=en

Thanks for the video clip tokyopua. We don't know if Victoria's Secret sales are going down because of competition or because of a general market slowdown. I'm more focused on the specifics of each company than the sector they're in.

Technically there was nothing new yesterday. No news out either. I'll continue holding MSI.

Quote from: David Randolph on April 26, 2007, 05:36:58 AM

Quote from: tokyopua on April 26, 2007, 12:03:24 AM
A video clip regarding LTD brands and Victoria Secret that might have some bearing on what can happen to MSI stock price based on the FOH merger:

http://cosmos.bcst.yahoo.com/up/finance?ch=1316259&cl=2500477&lang=en

Thanks for the video clip tokyopua. We don't know if Victoria's Secret sales are going down because of competition or because of a general market slowdown. I'm more focused on the specifics of each company than the sector they're in.

Technically there was nothing new yesterday. No news out either. I'll continue holding MSI.

I wasnt sure how to interpret the news, as there is actually a positive in it all in that they are saying the see lots of potential in lingerie which is why they are trying to shed some non-essential businesses and concentrate on VS.

QuoteI wasnt sure how to interpret the news, as there is actually a positive in it all in that they are saying the see lots of potential in lingerie which is why they are trying to shed some non-essential businesses and concentrate on VS.

I also wasn't sure about how to interpret that video.

I found an article that explains Frederick's of Hollywood history since its foundation in 1946 until 2003: http://www.answers.com/topic/frederick-s-of-hollywood-inc

It has been a roller coaster ride. But all articles in this thread point to a company at the best it has ever been.

I'll have to keep waiting and holding. Fortunately the stock climbed a bit out of the -30% embarrassing zone (in terms of money management rules).

Hi David,
MSI seems doing the old trick, down 1 or 2% each day for the next couple weeks. And it is still trading under lower volume. Take a look at today's chart. It makes more nervous about this stock. I'd like to hear more from you about this stock. Thank you.

MSI just touched 2.17 support. So how do you think of it, David? :-\

I talked with IR again yesterday and he had nothing encouraging to say; only delay delay delay.  Q3 is still the goal. 

Quote from: gix330 on April 27, 2007, 02:56:14 PM
Hi David,
MSI seems doing the old trick, down 1 or 2% each day for the next couple weeks. And it is still trading under lower volume. Take a look at today's chart. It makes more nervous about this stock. I'd like to hear more from you about this stock. Thank you.

Quote from: gix330 on April 27, 2007, 03:02:53 PM
MSI just touched 2.17 support. So how do you think of it, David? :-\

gix30, I always say something about a Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php) holding in each trading day (of course, Friday's update may come throughout the weekend).

Quote from: buddjas1 on April 27, 2007, 06:16:05 PM
I talked with IR again yesterday and he had nothing encouraging to say; only delay delay delay.  Q3 is still the goal. 

What a pity buddjas1, the last time you spoke to them they said something would be out in April. Well, they must say something when they report Q1 results, probably at May 15. I actually enjoyed their latest quarter, when they made 4 cents EPS, even though they had an $803,000 expense for merger related fees associated with the merger with Frederick's of Hollywood (also a $496,000 one time gain on a sale of property).

What I think about MSI? Well, I bought it at $1.93, sold at $3.05, and I'm sorry that I bought it back again at $3.12. Currently the stock seems undervalued to me, since it is valuing FOH at $51.4 M and the company was taken private for $70 M in 1997. I think that, from the information I get in several articles in this thread, FOH is worth a lot more than what it was worth in 1997, so my take is the stock will rise when FOH's financial details are disclosed.

I'll keep holding MSI.

If anyone is desparate to sell, now's your chance.  44,000 bid at 2.19.

Quote from: buddjas1 on April 30, 2007, 02:16:18 PM
If anyone is desparate to sell, now's your chance.  44,000 bid at 2.19.

Thanks, but no thanks buddjas1, no despair here :)

The value of the combined company seems superior to me. Sure, anybody can do lingerie these days, but not with Frederick's style or brand. I believe Frederick's could increase prices and margins and sales wouldn't decline much, because its products seem somewhat unique to me: www.fredericks.com

Interesting, I thought they had discontinued their fragrance products, but no, look here (http://www.fredericks.com/category.asp?catalog%5Fname=Holiday2002&category%5Fname=Gifts%2DFragrance&Page=1).

I'll patiently wait for FOH's financial and merger details and will keep holding MSI (interesting how the February 23rd one day powerful rally meant nothing in fundamental terms).

Man, I would sure like to see some support here.  Otherwise, the next stop is $1.50 in a hurry.  MSI is testing the patience of the stockholders by refusing to disclose FOH financials. 

I agree....
My portfolio is hurtin pretty bad.
Thankfully,  I am controlling my mind and not letting my mind contol me.
We'll see how long that lasts....

Quote from: buddjas1 on May 01, 2007, 03:32:23 PM
Man, I would sure like to see some support here.  Otherwise, the next stop is $1.50 in a hurry.  MSI is testing the patience of the stockholders by refusing to disclose FOH financials. 

Yes, taking it on the chin on MSI. I guess MSI can't disclose FOH's financial details because the merger isn't completed yet. The stock is falling due to low liquidity and lack of interest, since 20 days have past without any news.

Anyway, MSI's current share price values FOH at 23.7*$2.07 = $49 M, which I believe is totally inadequate. The combined company has $200 M in annual revenues and current valuation is $103 M.

Unless FOH is running on huge losses (I don't think so, articles don't point to that), this stock has to be cheap. Yes, probably there will be some more pain (possibly Q2 results won't be good - nobody knows, not even the market), but over the long term I still want this business.

I'll keep holding MSI.

Quote from: wxmang on May 01, 2007, 03:59:28 PM
I agree....
My portfolio is hurtin pretty bad.
Thankfully,  I am controlling my mind and not letting my mind contol me.
We'll see how long that lasts....

How much did your portfolio went down today wxmang? 0.5%? 1%? 2%? If this hurts you pretty bad probably you're too risk averse and should consider more safe investments, like bonds or a bank deposit (but that will be bad for you over the long term). Or else you're operating on a "can't lose" basis, which always puts an investor under intense stress.

Either way, you have a friend here that has lived through many, many stock market experiences, and who has made and lost small fortunes and knows a thing or two about financial pressure. Just in case you want to talk.

Hey David,

My problem is that I keep beating myself up, because I had a 6% gain on the year and within a month I have a loss on the year while the DOW sets new highs. THAT STOPS RIGHT NOW!
The problem for me was that I bought the 3stocksonfire portfolio at the Top. Ouch!
Stupid me even read on the message board that you (David) thought a correction might come for the portfolio. Did I listen? Hee Hee
I keep thinking to myself that I am diversified. I am diversified.
I know it takes mental toughness to be a long term trader.
I really am trying to work on being strong and think forward and not backwards.
Ever since I was a kid,  I expected to win and never ran a business that I thought I could lose money.
I am very aggressive in everything I do.
I have to slap myself sometimes, because I really have to expect to lose sometimes.

Sorry for my venting and boring story, but I feel better now :)

I compared you to the biggest money managers in the world!
And you are absolutely killing them with your investment strategy!
Don't take it from me, you will crap your pants when you see this site:
http://www.gurufocus.com/score_board.php
You are beating the pants off of Warren Buffet and many others..
I placed many of the above portfolios in Yahoo Finance and your main portfolio beats 90%+  of these guys.

I am going to reprogram my mind to:
Look forward to the future and not sweat the short term :)

Any thoughts or opinions would be appreciated :)

Wxmang

I am in the same boat as you. Its hard to look at your gains go away but you have also confirmed that David has it right.

What gives me strength to overcome the pains of losing and not to sell on a momentarily fluctuations is David's resolve. He is very firm in his decisions but flexible in his mind. I am too
busy to run my own comprehensive analyses, so David's work is much appreciated.

QuoteI compared you to the biggest money managers in the world!
And you are absolutely killing them with your investment strategy!
Don't take it from me, you will crap your pants when you see this site:
http://www.gurufocus.com/score_board.php
You are beating the pants off of Warren Buffet and many others..

Thanks a lot for the link wxmang :)

Indeed, over the last 6 months, the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php) is up 27.5%, better than all the guys you have on that "guru list". However, probably those guys huge size makes it more difficult for them to have very high returns. What I know is that I love financial markets as much or even more than those star investors do, and I work as hard or even harder than they do to achieve superior results. Not to say that I will ever be as big as they are, but I thrive to be as good.

QuoteEver since I was a kid,  I expected to win and never ran a business that I thought I could lose money.
I am very aggressive in everything I do.
I have to slap myself sometimes, because I really have to expect to lose sometimes.

Sorry for my venting and boring story, but I feel better now :)

Thanks for this story wxmang, you know there will always be short term setbacks, you cannot eliminate them, they're part of a long term winning strategy. Check results on a monthly or quarterly basis, not weekly or daily. If you stick around I know you'll be a winner.

Quote from: pinoleropuro on May 01, 2007, 08:59:55 PM
I am in the same boat as you. Its hard to look at your gains go away but you have also confirmed that David has it right.

Quote from: berloga on May 02, 2007, 10:27:19 AM
What gives me strength to overcome the pains of losing and not to sell on a momentarily fluctuations is David's resolve. He is very firm in his decisions but flexible in his mind. I am too
busy to run my own comprehensive analyses, so David's work is much appreciated.

Thanks for your nice feedback pinoleropuro and berloga :)

We had a bit of a bounce on MSI today, but there were no news out or technical developments. It would be nice to see the stock back up above $2.17. Let's check www.fredericks.com today. Let's also check www.moviestarinc.com website. Nothing new here.

I'll keep holding MSI, as I wait for FOH's financial details.

I wonder why I see many more views on this thread than on other threads. Please don't buy this stock just because it is the biggest loser of the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php). If I'm losing it means I was probably wrong when I bought the stock and probably it is wrong for me to keep holding it, so why are you buying this loser instead of the winners?

Anyway, I've been here before, remember DIET? I waited for months and months for a catalyst, but sold the stock before the catalyst because of a general market worry, and finally a couple of weeks later that catalyst was out and the stock rallied.

It's not going to happen again. For the better or worst, I'm not going to sell MSI before I know about FOH's financial details. I'll keep holding MSI.

I think everyone who owns the stock is waiting until May 15th.
I really have to assume that MSI would mention at least something about how the merger will affect the company in some way or another.
I think if they don't alot of folks are gonna bale out.
Maybe MSI wants the stock to drift lower so the insiders can buy some more stock and cheap before the merger. Kind of crappy if you ask me. But, that is how the game is played, I guess.

Check out the Insider Buys here:
http://www.secform4.com/insider-trading/93631.htm

Quote from: wxmang on May 03, 2007, 06:55:22 PM
I really have to assume that MSI would mention at least something about how the merger will affect the company in some way or another.

MSI is pretending that it cannot reveal FOH financials until the SEC finishes a review of the shareholder vote proxy.  MSI is wrong (I do believe), but, in any event, that is the story.

QuoteI think everyone who owns the stock is waiting until May 15th.
I really have to assume that MSI would mention at least something about how the merger will affect the company in some way or another.
I think if they don't a lot of folks are gonna bale out.

Yes, they have to say something. Maybe not what we want to hear (FOH's financial details), but definitely something.

QuoteMaybe MSI wants the stock to drift lower so the insiders can buy some more stock and cheap before the merger. Kind of crappy if you ask me. But, that is how the game is played, I guess.

Nah, if insiders want shares they just issue new ones or grant themselves options. I used to think that possibility could happen, but I've never seen it in real life, never seen a corporate official talk bearish about his company because he wanted to buy shares.

QuoteCheck out the Insider Buys here:
http://www.secform4.com/insider-trading/93631.htm

See, those stocks were not really bought, they were awarded.

QuoteMSI is pretending that it cannot reveal FOH financials until the SEC finishes a review of the shareholder vote proxy.  MSI is wrong (I do believe), but, in any event, that is the story.

Not a bad excuse. Perhaps the SEC told them that disclosing FOH's financial details would have a significant and material impact on MSI's stock price, so they can't do it while the merger isn't closed.

Nothing changed on MSI today, I'll keep holding the stock.

Still nothing about FOH's financial details, but we got ourselves a bit of a bounce on MSI. Not enough to make anyone happy, but maybe just a bit more hopeful that we'll get out of the hole in this stock. As I've explained throughout this thread, the stock seems very undervalued to me, but we'll only be sure when those financial details are published, because, even though there's no indication of it (quite the opposite), Frederick's of Hollywood can be in terrible shape.

Let's check www.fredericks.com today. We wish the business fundamentals are as beautiful as these ladies. We'll perhaps get some clues over the Q1 results presentation, which will probably happen near the May 16th deadline.

I'll keep on holding MSI.

Again, no news out today. Also no technical developments. I'll keep holding and waiting.

I searched Google for something new on Frederick's of Hollywood, but found nothing. The stock closed unchanged on just 11,200 shares traded. There are no news out since April 13. 1st quarter results will be published over the next seven days. I'll keep holding MSI.

There have been a couple of new institutional buyers in the past quarter who seem to agree with David about this stocks potential.   ;D


ROYCE & ASSOCIATES  3/31/2007  1,012,300  1,012,300  New
DIMENSIONAL FUND ADVISORS  3/31/2007  218,423  218,423  New 
APTUS CAPITAL LLC  3/31/2007  44,000  44,000  New

Quote from: rud56789 on May 10, 2007, 03:23:08 PM
There have been a couple of new institutional buyers in the past quarter who seem to agree with David about this stocks potential. ;D

ROYCE & ASSOCIATES  3/31/2007  1,012,300  1,012,300  New
DIMENSIONAL FUND ADVISORS  3/31/2007  218,423  218,423  New 
APTUS CAPITAL LLC  3/31/2007  44,000  44,000  New

That's an interesting information that hasn't been previously discussed on this thread rud56789, thanks :)

What is your source for it? I find it strange that Royce & Associates didn't file a form SC13D disclosing ownership with the SEC, since according to your numbers they own about 6% of the outstanding shares.

There's no incentive to push MSI up or down until there's some more information about FOH's financial details. As you can read in this thread, I believe the stock is undervalued at this point. I think it is worth something like $3.5, but only after knowing FOH's financial picture I can be sure of that.

Without anything better to do, let's check www.fredericks.com today. Not a bad sight.

I'll continue holding MSI.

This just in on MSI:

http://biz.yahoo.com/e/070510/msi10-q.html

Wxmang

Form 10-Q for MOVIE STAR INC /NY/
10-May-2007

http://biz.yahoo.com/e/070510/msi10-q.html (http://biz.yahoo.com/e/070510/msi10-q.html)


The proposed merger is not expected to be completed until the fourth calendar quarter of 2007. The later than anticipated timing relates to a delay in the preparation of Frederick's audited financial statements for the fiscal years ended July 29, 2006 and July 30, 2005....

Movie Star, Inc., Reports Fiscal 2007 Third-Quarter and Nine-Month Financial Results
Thursday May 10, 5:56 pm ET


http://biz.yahoo.com/bw/070510/20070510006327.html?.v=1 (http://biz.yahoo.com/bw/070510/20070510006327.html?.v=1)

Thanks for posting the news, it seems I need to make a new update on MSI before tomorrow's open, but now it is too late here and I'm too sleepy to get into it. I'll do it tomorrow before the open and send it with the daily newsletter.

Quote from: David Randolph on May 10, 2007, 05:21:43 PM

Quote from: rud56789 on May 10, 2007, 03:23:08 PM
There have been a couple of new institutional buyers in the past quarter who seem to agree with David about this stocks potential. ;D

ROYCE & ASSOCIATES  3/31/2007  1,012,300  1,012,300  New
DIMENSIONAL FUND ADVISORS  3/31/2007  218,423  218,423  New 
APTUS CAPITAL LLC  3/31/2007  44,000  44,000  New

That's an interesting information that hasn't been previously discussed on this thread rud56789, thanks :)

What is your source for it? I find it strange that Royce & Associates didn't file a form SC13D disclosing ownership with the SEC, since according to your numbers they own about 6% of the outstanding shares.

The new institutional ownership is listed on Nadaq.com:

http://www.nasdaq.com/reference/ownership.stm

Well, looks like it will be a long summer (and fall).  The cash position of $82,000 really scares me.  I hope that MSI will not need to raise cash.  We all know what that means.  Revenue growth looks ok, but expenditures are out of control.  Even subtracting the merger related fees, the company still lost money for the quarter.  Dilution was pretty high, with 600,000 shares issued over the ttm.    Per the 10Q, the bank holds substantially all of MSI's assets as collateral for a $30,000,000 line of credit.  MSI is much worse off financially than it ever led on and now I understand the real reason for the "merger."  Without FOH, MSI is clearly a sub-$1.00 stock.

The delay of the merger until Q4 is really disappointing.  Despite what MSI says, there is no excuse.  Mergers of much much larger companies do not take that long.  What is more disappointing is that IR lied to me about the reason for the delay.  Now we know that the delay has nothing to do with the SEC (always easy to blame the government) but, rather, FOH's inability to maintain an accounting.  IR should just provide no comment rather than lying to shareholders.  Unfortunately, I hear more lies from IR (not just MSI's IR--all IR) than I do the truth.  I guess I will have to start audio-recording my calls with them.

I will continue holding until the merger is complete, but only because I have too.  I am holding a large loss and I have a rule that I cannot sell for a loss unless there is no chance for recovery.  I predict a sharp sell-off over the next month to just over $1.00 (I hope I am wrong).  MSI tested the patience of shareholders this long and I don't think any shareholders still holding for a gain will want to sit and wait another six months.  There is still a lot of profits left to be locked in.

On a happier note... I got my Fredericks of Hollywood catalog in and let me tell you it looks good :). Its comparable to a victoria's secret catalog and a lot of catchy things in there with good looking models  >:D very professional looking definately looks like it can go head to head with Victoria's Secret with the right management team. Here is the link to the catalog I recieved http://www.fredericks.com/shopCatalog/summer2007/

There are two separate issues on today's update. The first is the merger news with FOH and the second are MSI's financial results for the quarter.

1) Merger with Frederick's of Hollywood

• MOVIE STAR INC /NY/ Files SEC form 10-Q, Quarterly Report (http://biz.yahoo.com/e/070510/msi10-q.html)
EDGAR Online (Thu 5:14pm)

There are two things that are new to me here:

a) The delay of the closing of the merger, from Q3 to Q4, and the justification for that:

«The proposed merger is not expected to be completed until the fourth calendar quarter of 2007. The later than anticipated timing relates to a delay in the preparation of Frederick's audited financial statements for the fiscal years ended July 29, 2006 and July 30, 2005. Because Frederick's will be considered the acquirer for accounting purposes in the proposed merger, its historical financial statements for fiscal 2005 and 2006 must comply with accounting rules applicable to publicly-traded companies even though Frederick's is a private company. The application of these rules to the historical financial statements of Frederick's, specifically the application of ''push down'' or ''purchase'' accounting rules due to a change of control of Frederick's effective March 3, 2005, has taken significantly longer than originally expected. Since Fredericks has not delivered its audited financial statements by the date provided for in the Merger Agreement, we have the right to terminate the Merger Agreement, however, we presently do not intend to exercise this right.»

I think it's better to have a justification that not, and this explains why MSI doesn't reveal FOH's financial details, they don't have authorization to do so because the financial statements are not (yet) in compliance with SEC rules.

b) «b) authorize the issuance of up to 5,000,000 shares of preferred stock» Preferred stock? For what? Why? Disgusting. But, ok, many companies have the authorization to issue preferred stock but they don't do it, so let's hope MSI follows that path too.

So, not good news, but not terrible news either. At least they're keeping us informed of the merger process.

2) As for the quarterly results, not that they are of major importance to the outcome of this investment:

• Movie Star, Inc., Reports Fiscal 2007 Third-Quarter and Nine-Month Financial Results (http://biz.yahoo.com/bw/070510/20070510006327.html?.v=1)
Business Wire (Thu 5:56pm)

- The company's market cap is 16,372,000*$2.16 = $35.36 M;
- Revenues for the last 9 month period were $50 M;
- If we take out the merger related costs ($1.952 M) and the gain on the sale of the Pennsylvania distribution center ($0.496 M), we get to Income from operations of $2.831 M. Taking out $0.526 M of interest costs and applying a tax rate of 40%, I get to net income of $1.383 M for the nine months, if it weren't these special benefits and costs. Annualizing this I get $1.844 M in net income for a full year, which translates to $0.11 EPS.
- The stock closed yesterday at $2.16, so it is trading at 19 times trailing earnings (when special and one time effects are not considered). The Textile - Apparel Clothing industry average is trading at 21.5 times earnings (http://finance.yahoo.com/q/co?s=MSI), so MSI doesn't look overvalued to me.

buddjas1, as always, raised some valid concerns on MSI. I'm also concerned, but I see no reason to sell, I'm encouraged by MSI's revenue growth, I wonder if FOH's revenues are also growing 15% a year.

I realize there can be more pain down the road, but I'm confident that one year from now I'll be ahead on this investment, and I enjoy the business, I'll continue holding MSI.

MSI went down 5% on Friday after those disappointing news. Basically there wasn't anything new, just that we'll have to wait longer for FOH's financial details and the closing of the merger. But the merger doesn't seem to be at risk, since MSI could cancel it right away but it didn't.

On my valuation model for MSI I have a 1.03 dilution factor and a 1.15 revenue CAGR (http://www.3stocksonfire.org/fundamental.model.php?ticker=MSI&portfolio=main), and these estimates were confirmed by Q1 results (at least for MSI alone, it's a start). I can't say the same about the 5% net profit margin ... but I wonder, is FOH profitable or not? The articles on this thread tell me it is profitable, but by how much? I don't know, I'll have to wait for the financial statements, that need to be put in accordance with the SEC rules.

I'll keep holding MSI.

MSI continues to bleed slowly, and I'm now losing 35% on this stock, which exceeds my money management rule of never losing more than 2% of total equity in one single trade. Just by a bit, but it exceeds, and that hurts (I honestly don't care about the money, but disobeying a money management rule that has been so valuable to me over the years, that is troublesome).

I wonder if I shouldn't just let go and forget, should I? Don't worry, I'm not asking you, I'm just thinking loud ...

I'm thinking, I now have just 3.9% of total equity in this stock (because of too effects, the first is the stock declined and the second is the main portfolio rose anyway, therefore MSI's weight in the portfolio declined), so the percentage of total capital at risk is lower now. Fundamentally I can't imagine much further downside, because, at current prices, the market is valuing FOH at about $48 M, and since I know the company was taken private in 1997 for $70 M (after a bidding war, there were higher competing offers, but due to regulation issues they took the $70 M), this seems outrageously low. Also because I truly enjoy www.fredericks.com, and the website not even existed in 2007, and probably now accounts for half or more of FOH's sales.

There are many reasons to justify that I keep holding MSI, but no reason should be enough for me to disrespect a money management rule. On the other hand I promised to hold MSI whatever happens until FOH's financial details are publicly known.

Ok, here's what I'll do. I'll keep holding MSI.

I know volume was very low, with just 12,400 shares changing hands, but I feel better about MSI now, since the stock is closer to getting back to the "less than 2% loss of total equity in one single trade" zone. I really dislike to be losing more than 30% in one single stock (since I invest 6.66% of capital in each new stock, when I'm losing 30% that means 2% of total equity).

I didn't sell MSI today, I sure ain't going to sell it tomorrow.

Having made the decision of waiting for FOH's financial details whatever happens to MSI's share price, I wouldn't mind to see the stock sleeping around current levels as we wait for the numbers. The 200 days SMA is slowly but surely catching up and it can also provide some support (today at $1.66).

Let me check www.fredericks.com, one of the causes of all this wait. Perhaps a bit too aggressive today, but they have to make something different, or else there wouldn't be any difference to what one can find at Wal Mart, for example.

I'll continue holding MSI. 

Curiously enough MSI's volume has been above average over the last couple of days, as the stock refuses to break $2 on the downside. As I see it the stock is too cheap to handle at current levels.

Let's just check MSI's market cap today (considering the merger with FOH will indeed happen):

- We have 16,423,326 MSI shares outstanding, valued at $34.98 M;
- 23.7 million shares attributable to FOH, valued at $50,48 M;
- $20 M rights offering.

Putting it all together we get a $105 M value for the combined company, which has $200 M in annual sales, so the Price to Sales Ratio is 0.525. The average price to sales ratio of the Textile - Apparel Clothing industry is 0.73. Annual sales is the only number we have, so I'll work around it.

I'll continue holding MSI, the stock is almost getting out of the embarrassing zone.

We don't know why, but volume has been creeping up on MSI over the last three sessions. There's a subtle issue here, which is: MSI + FOH merger probably will only happen in Q4, but MSI may disclose FOH's financial details when the SEC gives authorization to do so, and that can happen anytime.

So maybe we'll be positively surprised with good news before expectations, but I'm just speculating here. It would be very nice to have one or two insiders buying shares around current levels, that would be a strong sign that good news are ahead of us.

I'll continue holding MSI.

Chart looks very nice now ...

We should have a nice move very soon  ;D

I will buy it today for sure  :)

Quote from: Garoh on May 21, 2007, 04:47:24 AM
Chart looks very nice now ...

We should have a nice move very soon  ;D

I will buy it today for sure  :)

Hi Garoh, unfortunately the price didn't respond in a bullish way to the volume above average. We've already discussed all publicly know information about this company and FOH. The problem is there isn't much publicly available information about FOH, at least not of the financial type.

I'll keep waiting and holding, since I've decided not to sell MSI without knowing FOH's financial details.

Volume has been above average for the past 5 sessions, which is a positive technical sign. It would be nice if this were an anticipation of a relevant fundamental change. Garoh is usually one day early on his technical predictions, but he's usually right. Time will tell.

I view MSI as too cheap here and I'll keep holding and waiting for the company to disclose FOH's financial details. Let's check www.fredericks.com, always an interesting view.

Quote from: David Randolph on May 22, 2007, 04:29:18 PM
Volume has been above average for the past 5 sessions, which is a positive technical sign. It would be nice if this were an anticipation of a relevant fundamental change. Garoh is usually one day early on his technical predictions, but he's usually right. Time will tell.

I view MSI as too cheap here and I'll keep holding and waiting for the company to disclose FOH's financial details. Let's check www.fredericks.com, always an interesting view.

David

Volume is picking up and the stock is slowing down ..

We could see a new low maybe this week before the rebound usually in the same day  :)

I'm in at 1.99 today and we just need to wait and see what'll happen . The chart is very interesting now .

B-Band becoming very tight.  $2.0 holding firm as the bottom of a nice triangle.  Time to see some movement, up or down. 

Quote from: buddjas1 on May 23, 2007, 08:50:02 PM
B-Band becoming very tight.  $2.0 holding firm as the bottom of a nice triangle.  Time to see some movement, up or down. 

Nice to see you buddjas1 :)

I agree with your short term technical analysis. By the way, congrats on your trading decisions on SILC and CIMT.

There wasn't any news out of MSI, but the market is saying that perhaps something is about to be announced. However, the market didn't have a clue of the future when it pushed MSI to $3.5, last February, so TA's track record on MSI is poor.

I remain committed not to sell before FOH's financial details are made public, since I believe they're attractive enough to justify a higher valuation.

I'll keep on holding MSI.

Nothing happened on MSI today (which is better than falling sharply). I'll keep holding and waiting for FOH's financial details.

MSI's volume dried again, but despite that the stock seems to be doing a rounding bottom. We don't get any news since May 11th. I've promised myself to be a reasonable and patient man (cowboys don't make any money trading over the long term), so I'll keep on holding MSI, since my initial motivation was the merger with Frederick's of Hollywood and that is still to happen.

Currently the market is valuing FOH at $49.8 M. The company was taken private in 1997 for $70 M and I believe it is worth a lot more today than what it was worth in 1997. By means of comparison, www.fredericks.com not even existed in 1997, and now it probably is responsible for more than 50% of the company's sales, that is, more than $75 M a year.

I'll continue holding MSI.

I started buying MSI shares again yesterday.  A solid base has formed and I see a nice white candle in the near future.  I hope to average down to about $2.60 and sell as soon as I can to break-even, before the FOH numbers.

Quote from: buddjas1 on May 26, 2007, 06:35:57 PM
I started buying MSI shares again yesterday.  A solid base has formed and I see a nice white candle in the near future.  I hope to average down to about $2.60 and sell as soon as I can to break-even, before the FOH numbers.

Strange strategy buddjas1, I hope your averaging down doesn't bring you problems over the long run.

MSI made another small step today, but there wasn't any new fundamental information. I just feel the stock is undervalued from the articles I've been reading about Frederick's of Hollywood. Let me check www.fredericks.com today ... it's there.

I'll keep waiting and holding MSI.

MSI was all over the place today, on very low volume of just 11,900 shares traded. Technically decision time is coming, since support and resistance lines are almost meeting.

Fundamentally, let me see if there were any news out ... no, nothing yet.

I'll keep waiting for FOH's financial details and I'll keep holding MSI while I wait.

Quote from: Garoh on May 21, 2007, 04:47:24 AM
Chart looks very nice now ...

We should have a nice move very soon  ;D

I will buy it today for sure  :)

I got in at 1.99 and I'm still holding it . we may see it at 2.40 very soon , but i'm not gonna sell it  ;D

QuoteI got in at 1.99 and I'm still holding it . we may see it at 2.40 very soon , but i'm not gonna sell it ;D

Nice entry point Garoh :)

$2.40 would be nice because it would represent a bullish breakout of the current technical pattern, which is a descending triangle pattern. The theory says that usually the bears win these wars :-\

But, since fundamentals point to a superior value, perhaps the technicals will unfold in a different way, and the descending triangle pattern will actually end up being broken on the upside. Time will tell.

But, whatever happens, my reason for buying MSI was the merger with FOH and FOH's long term potential value, so I'll keep holding MSI, at least until I know about FOH's financial details.

MSI traded just 3,400 shares on Friday, but the close was nice. Just one more step and it will break the descending triangle on the upside. Let's see if there were any changes to www.fredericks.com today ... yes, quite aggressive.

I'll keep holding MSI at least until FOH's financial details are published, which can happen anytime.

MSI remains undecided about breaking the technical pattern on the upside or the downside. I remain decided to wait for the release of FOH's financial details, therefore I'll continue holding MSI.

MSI almost did it, but closed just a bit shy from breaking the descending triangle on the upside. We also have the 50 days SMA working as a resistance, currently at $2.23.

The latest financial reports we have from Frederick's are from 1997 when the company was taken private for $70 M. We need to wait for MSI to disclose the current financial condition to better judge this investment. But I like the business, especially www.fredericks.com, which didn't exist in 1997.

Currently the market is valuing FOH at 23.7*$2.13 = $50.5 M, which seems too low.

I'll keep holding MSI.

MSI closed above the descending triangle pattern, which is a positive technical development. Now it would be nice to see the short term ascending trend continuing, and the stock to close above the 50 days SMA, which today stands at $2.22.

No news out. I'll keep holding MSI.

I am holding it as well, and also bought some around 1.9* to cover some previous lost, but i am losing confident on this one pretty fast. I guess learning trading strategy is not everthing, but i need to be calm and patient.

Again, nothing new out of MSI. 2nd quarter results will be out only in August, and maybe that's when we'll finally hear some more about FOH's financial details.

Tell me, do you have a Frederick's of Hollywood store in your hometown? How do you think the store is doing?

I search Frederick's of Hollywood in Google but can't find anything new or relevant in financial terms.

I'll keep holding MSI.

There is a FOH store at the Shopping Mall in Salem, NH, USA. There is Vic's Secret story down the hall as well. I think that although FOH offers better lingerie (my wife likes it more), the store display is kinda bland, not flashy. They don't put up their best stuff on display for passing males wanting to swerve in and leave some cash on the table to buy presents for their significant ones. They need pretty maniquenes dressed up in sultry sexy outfits. There are definitely more girls browsing the Vic's store (which is also 2-3 times larger).

Quote from: berloga on June 08, 2007, 09:30:40 AM
There is a FOH store at the Shopping Mall in Salem, NH, USA. There is Vic's Secret story down the hall as well. I think that although FOH offers better lingerie (my wife likes it more), the store display is kinda bland, not flashy. They don't put up their best stuff on display for passing males wanting to swerve in and leave some cash on the table to buy presents for their significant ones. They need pretty maniquenes dressed up in sultry sexy outfits. There are definitely more girls browsing the Vic's store (which is also 2-3 times larger).

Thanks a lot for your input berloga :)

Yes, Victoria's Secret is the market leader. It's owned by Limited Brands (LTD), a $10.6 B market cap company. FOH is currently valued by the market at roughly $50 M.

Technically both things may be happening, a negative reaction to the 50 days SMA resistance or a pullback to the previous resistance, now support, given by the medium term descending trendline.

I'll keep holding MSI.

Until we get substantial news regarding the merger or FOH's financials, the stock is a pure technical trade from here until calendar Q4.

Unless some buyers materialize to push it above 2.20-2.25 the stock is forcing straight line support around the 2.00 range.

The resulting squeeze either pops us to 2.50 or down to 1.50-1.60. I would suggest sitting on your hands until that happens. I would buy on a bargain or a clean break of this pattern on some nice upside volume. This is a fairly typical corrective/pullback drift on low volume.

About time.

What's going on with MSI?  I saw 20,000 shares traded already, which is high for this company, so I jumped in at 2.25 and now it just jumped.

Just the technical time to buy, as we have previously discussed.  We all knew this was coming.

Jesus, FOH's financial details are out, company is profitable, give me 10 minutes to review them!

FOH's financial details out in form S-1:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=37865;image)

Ok, very quickly, I see $1.9 M net income in 6 months, so about $3.8 M for a full year. Currently the market is valuing FOH at 23.7 million*$2.45 = $58 M, or about 15.3 times net income. The Textile - Apparel Clothing industry trades at average of 20.15 times earnings (http://finance.yahoo.com/q/co?s=msi).

The market also enjoys the fact that MSI will receive $20 M even if investor's don't exercise their rights to buy new shares.

Margins are much lower than I thought they were.  $802 million of the $1.9 million income is an income tax benefit.   The revenue growth is nice.  Perhaps MSI will be the manufacturing arm of FOH, which perhaps would help the margins. Tough call to make here.

Quote from: buddjas1 on June 11, 2007, 10:20:03 AM
Margins are much lower than I thought they were.  $802 million of the $1.9 million income is an income tax benefit.   The revenue growth is nice.  Perhaps MSI will be the manufacturing arm of FOH, which perhaps would help the margins. Tough call to make here.

Yeah, I didn't saw that $802 K tax benefit at first glance. On my valuation model I had 5% net profit margin estimate. Without that tax benefit, over the past 6 months, the net profit margin was $1.1 M/$80.2 M = 1.37%, so, I agree with you, net profit margin is lower than my forecast.

But the forecast was for 2009, so it is possible that the merger benefits will allow the net profit margin to expand from roughly 1.4% to about 5%. Also, we're looking at a combined company with about $210 M annual revenues, and combined market cap currently is 40.2 million*$2.4 = $96.5 M + $20 M rights offering = $116.5 M.

Price to Sales Ratio is 0.55 compared to the industry average of 0.76.

Yes, just mildly undervalued. I'll keep holding it though, I never change the trading plan over the intraday.

David, are you going to look at ELP?  Also, what changed with ACH between the first time you reviewed it and the second time you reviewed it.

Quote from: buddjas1 on June 11, 2007, 11:00:42 AM
David, are you going to look at ELP?  Also, what changed with ACH between the first time you reviewed it and the second time you reviewed it.

Did you ask for ELP in www.stocksonvideo.com? If you did, I'll cover it.

What changed about ACH was that in the first analysis I considered the next 10 years and in the second analysis I considered just the next 3 years. I expect the company to grow rapidly over the next three years, but not all that much in a longer time frame, since it is already a $15 B market cap company.

I mentioned it here and you said that you were going to cover it:

http://www.3stocksonfire.org/trading/index.php?topic=9494.msg99887#new

It is not that big a deal to me, as I can do my own analysis.  I was just trying to give you a good stock, like I did with ACH.

It's about time this thing popped...  ;D

Quote from: buddjas1 on June 11, 2007, 11:35:53 AM
I mentioned it here and you said that you were going to cover it:

http://www.3stocksonfire.org/trading/index.php?topic=9494.msg99887#new

It is not that big a deal to me, as I can do my own analysis.  I was just trying to give you a good stock, like I did with ACH.

Thanks for your help buddjas1, I'll take a look at ELP.

What about IEAM, is it next quarter that the share base compensation will go away and the company will show a nice positive net income number?

Thanks :)

Quote from: David Randolph on June 11, 2007, 11:56:42 AM
What about IEAM, is it next quarter that the share base compensation will go away and the company will show a nice positive net income number?

The report for the Q ending Sept. 30 '07 should be clear of the derivative charges.

Quote

What about IEAM, is it next quarter that the share base compensation will go away and the company will show a nice positive net income number?

Thanks :)

Insiders have been buying up shares in the $5.00 range

Same thing happened with ASY and it is up 33% from the price it was when you reviewed it and I sold it  :'(

Quote
Same thing happened with ASY and it is up 33% from the price it was when you reviewed it and I sold it  :'(

Yes, I gave it a rating of 6 out of 10 and expected it to rise about 7% per year, but it seems a new product of the company had very nice sales in April (http://biz.yahoo.com/prnews/070511/aqf019.html?.v=12) and the stock rose a lot in the two days subsequent to the news. Revenue growth is now expected to be higher than I estimated. Fundamentals change.

ASY is such a small cap, just $26 M, it can fly a lot when news hits the wires. But beware of dilution going forward, because balance sheet is weak.

I can't predict the future or if positive news will be released or when. Much less so for companies where I looked just about 1 hour or 2.

But MSI is up 20% today and this is its thread, so let me enjoy the moment :)

Quote from: David Randolph on June 11, 2007, 02:19:15 PM


Yes, I gave it a rating of 6 out of 10 and expected it to rise about 7% per year, but it seems a new product of the company had very nice sales in April (http://biz.yahoo.com/prnews/070511/aqf019.html?.v=12) and the stock rose a lot in the two days subsequent to the news. Revenue growth is now expected to be higher than I estimated. Fundamentals change.

ASY is such a small cap, just $26 M, it can fly a lot when news hits the wires. But beware of dilution going forward, because balance sheet is weak.

I can't predict the future or if positive news will be released or when. Much less so for companies where I looked just about 1 hour or 2.

But MSI is up 20% today and this is its thread, so let me enjoy the moment :)

Absolutely.... let's all enjoy MSI today!!! 

I was not at all complaining... I respect and follow your stock analysis and that is why I sold ASY... I don't expect anyone to be able to predict the future  ::) I was simply just pointing out similiar insider trading between ASY and IEAM.

Almost hit my sell-out ask at $3.  Maybe (hopefully) tomorrow.

Quote from: buddjas1 on June 11, 2007, 03:58:32 PM
Almost hit my sell-out ask at $3.  Maybe (hopefully) tomorrow.

What is the trading plan with MSI?  Obviously buddjas1 is going to sell at $3. 

Quote from: David Randolph on June 11, 2007, 10:44:34 AM
[Yeah, I didn't saw that $802 K tax benefit at first glance.

I just realized that I was wrong.  The $802 k was a tax obligation not a benefit.  So, the $1,870mm for the six months ending Jan. 27, 07  is legitimate.  I am re-analyzing the new MSI based on that info.

Quote from: buddjas1 on June 11, 2007, 05:16:59 PM

Quote from: David Randolph on June 11, 2007, 10:44:34 AM
[Yeah, I didn't saw that $802 K tax benefit at first glance.

I just realized that I was wrong.  The $802 k was a tax obligation not a benefit.  So, the $1,870mm for the six months ending Jan. 27, 07  is legitimate.  I am re-analyzing the new MSI based on that info.

This is one of the reasons why I never change the trading plan on an intraday basis, one needs to analyze things calmly and with time. 

Jesus, now we know why MSI took so long to file the appropriate material with the SEC, I've been reading the papers for hours and still read just about 10% of them.

So far I'm not enjoying it, I see many new shares on the pipe, shares that we didn't knew before, like 7 million shares for directors and employees, 10 million preferred shares in exchange of $7.5 M of FOH's indebtedness, a reverse stock split "because the stock needs to be above $2" to comply with AMEX rules, etc.

Gee, I'm sleepy and hungry, I'll complete this update and share my hold/sell decision tomorrow.

With such large amount of information concerning MSI and FOH released yesterday, what I need to do is to focus on my valuation model.

1) The initial share price is $2.55

2) The initial share count, after the merger, will be:

- 16,423,326 MSI shares
- 23,700,000 new shares issued to FOH's shareholders
- About $20,000,000/$2.17 = 9,216,590 from the rights offering

But, if we consider the share count on a fully diluted basis, which is the one that counts for the diluted EPS, we need to put more:

- 7,000,000 new shares from the new stock option incentive plan. Previously the stock option incentive plan was for just 750,000 and there were just about 200,000 still outstanding;
- 10 million preferred shares, convertible to about 3,000,000 common shares, considering yesterday's closing price of $2.55, since they're being issued in exchange of a $7.5 M debt. But,  they also have a 20% conversion premium, so let's put 3.6 million shares.

So, the initial share count on a fully diluted basis after the merger will be about 16,423,326 + 23,700,000 + 9,216,590 + 7,000,000 + 3,600,000 = 59.94 million shares.

3) Dilution factor

FOH has negative working capital, with $29.019 M in current assets and $30.265 M in current liabilities. MSI has just $82 K in cash.

So I'll have to assume at least a 5% dilution factor.

4) Final Share Count

Given a 5% dilution factor the combined company will have about 69.4 million shares outstanding three years from now.

5) Initial Revenue

The last four quarters revenue of the combined company were $61.94 M from MSI plus about $160 M from FOH, gives me $221.94 M in annual revenues.

6) Revenue CAGR

Both, MSI and FOH's sales grew roughly 15% in Q1 2007 from Q1 2006. I'll consider this growth rate for the future.

7) Final Revenue

According to the above estimates, 2009 revenue will be $338 M.

8 ) Initial Net Profit Margin

In the 9 months through March 2007, MSI had net profit margin of 1.02%. In the six months ended January 27th, 2007, FOH had net profit margin of 2.37%. The initial net profit margin is about 1.9%.

9) Net Profit Margin Estimate

Let's be somewhat optimistic and think this merger is being done for good reason and will result in a more profitable business, and expect net profit margin to expand to 4% of sales in 2009.

10) Final Net Income Estimate

This gives me $13.5 M in net income

11) EPS estimate

A $0.19 EPS estimate.

12) EPS Multiple Estimate

Here I put the Textile - Apparel Clothing (http://finance.yahoo.com/q/co?s=MSI) industry average earnings multiple which is 20.15.

13) Final Estimated Share Price

The model says MSI will be at $3.92 in early 2010.

14) Share Price CAGR

The stock is expected to rise about 15.4% a year for the next three years.

15) Optimal Selling Price

The optimal selling price today is $2.51.

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=37889;image)

What a pity. The trading plan for MSI is SELL. Perhaps not right at the open, but between $2.60 and $2.70.

Well, no mad selloff this morning, after people had time to digest the merger details.  The late buying yesterday with volume tells me perhaps I can get out of this without a loss.  So, I will keep holding for now. 

Hi David,

You'll sell no matter what? even if it does not reach $ 2,60 today?

Amarens

Quote from: Amarens on June 12, 2007, 10:53:32 AM
Hi David,

You'll sell no matter what? even if it does not reach $ 2,60 today?

Amarens

Looks like he's out at $2.45.   I think MSI will trade above that this week.

Quote from: Amarens on June 12, 2007, 10:53:32 AM
Looks like he's out at $2.45.   I think MSI will trade above that this week.

Just noticed  ;).

What do you base that on Buddjas  ??? ???

Amarens

Quote from: Amarens on June 12, 2007, 11:30:20 AM
What do you base that on Buddjas  ??? ???

There was signficant buying yesterday, both early and late.  There is no strong selling today.  There are also a ton of shares that were bought two months ago in the $3.0 range.  There is more room to the upside here.

this will drift lower,
no real interest in it . low volume , the spike yesterday tells the rejection of hgher prices.
market is overall weak so money isn't being thrown around .
just my opinion.
if you are holding i hope i am wrong,
maxi

Quote from: Amarens on June 12, 2007, 11:30:20 AM

Quote from: Amarens on June 12, 2007, 10:53:32 AM
Looks like he's out at $2.45.   I think MSI will trade above that this week.

Just noticed  ;).

What do you base that on Buddjas  ??? ???

Amarens

Sorry, I wasn't near a computer today, Ramsburg did the selling for me, at $2.45. Good luck if you'll keep holding :)

Bullish breakout of the B-Band sqeeze is confirmed.  I think MSI will see at least 3 by the end of the month.

Yep, Think I will be able to get out without a loss  (bought @ 2.99)

Yah, I managed to average down to under $3 as well.  I'll gladly break-even here.

Looking good this morning; up 9.31%.  A little more volume and we'll see $3 today.  Get your sell orders ready.

Looks like it does need a bit more volume to push higher. The technical setup looks good. The fundamentals are a bit flaky, so after the influx of capital into the stock dries out, it may turn around and fall. A stop could be good.

I'm starting a new thread for FOH, which is Fredericks of Hollywood Group, the resulting entity from the merger between Movie Start and Fredericks of Hollywood.

The merger occurred in January 28, 2008 and the company still didn't release combined results. Just MSI's results were out and they were on the negative side.

Not something to buy now, but to keep on the Watch List, because I like Frederick's business, especially www.fredericks.com.

According to the following excerpt of a form SC13 filed with the SEC ...

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=45176;image)

... FOH's number of shares outstanding is 10,197,476/0.356 = 27,938,290, so, the current market cap is $62.86 M.

The company lost ($6.3 M) over the past 6 months ...

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=45177;image)

... and book value is just $6.4 M (so the Price to Book Value is about 10).

The stock is completely dead, even though www.fredericks.com has been operating smoothly.