3SOF

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

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)

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

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

Frederick's: The Original On- Line Sex Symbol

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 

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

One thing I must say about this holding, which is the biggest loser of the Main Portfolio, 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

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.