MALL

[David Randolph]

BigSully1 has been pounding the table on MALL and in fact I find it irresistible at this point.

Because everybody is so afraid of a consumer slowdown (shall I say contraction?) investors took this stock down to levels which are extremely attractive from a fundamental standpoint as I'll show in a moment.

MALL's results were out yesterday:

• PC Mall Reports Record Fourth Quarter Results
Business Wire (Thu 9:00am)

While the US GDP grew just 0.6% in the 4th quarter (compared to the prior year 4th quarter), MALL's revenues rose 38% and EPS shot up 146% to $0.32.

The full year 2007 EPS was $0.90, up 190% from $0.31 EPS in 2006. The trailing p/e multiple is 10.9 while the growth rate from the year ago level is 190%.

Of course, MALL was growing from a small base and I don't expect this growth rate to continue. But even if the US economy falls into recession, I believe there's still going to be strong growth in online retailers.

As I see the future, what it looked like it was going to be true in 2000 will actually be true (the only problem then was that investors were far too early and too optimistic). That is, the majority of shopping will be made through the internet and not in brick and mortar stores. The new generation will prefer to buy online, because it is cheaper, one can make comparisons faster and the product gets delivered at our door.

Given this long term vision I love the idea of buying online retailers at these very cheap prices. If in early 2000 somebody said that profitable online businesses growing 100% plus a year would be selling for about 10 times earnings nobody would believe.

But it's a fact with MALL. I guess insanity happens both ways.

And if you're too worried about the economy and an earnings slowdown consider MALL had revenue of $1.22 B in 2007 and its market cap is just $107 M. The price to sales ratio is 0.087.

Technically the stock gave a bullish signal yesterday, crossing above the 50 days SMA, with the highest volume of the past three years.

Trading Plan:

Buy MALL, 5% of capital.

[BigSully1]

I don't think I exactly pounded the table on it, but have only been keeping everyone informed on it because of it's relation to SYX. Even after the fantastic ER, I am not holding it currently, and have only been trading it. I sold just before the close. Didn't it close just under some major resistance?

[David Randolph]

I don't think I exactly pounded the table on it, but have only been keeping everyone informed on it because of it's relation to SYX. Even after the fantastic ER, I am not holding it currently, and have only been trading it. I sold just before the close. Didn't it close just under some major resistance?

Thanks for the information and sorry for misunderstanding you.

I think the important resistance for MALL was the 50 days SMA, and one needs to consider the stock was up 30% at one point in the session, it was normal for some profit taking to exist.

Anyway, if I'm buying it is because I don't care what the next 20% will be, up or down.

[la-onda]

fyi:
PC Mall "outperform," target price reduced
02/07/08 - Northland Securities
NEW YORK, February 7 (newratings.com) - Analysts at Northland Securities reiterate their "outperform" rating on PC Mall Inc (MALL). The target price has been reduced from $23 to $16.

[David Randolph]

It is curious to note that even though the 4th quarter is the strongest in terms of revenue for MALL, in fact the company had a superior EPS in Q1 2007 ($0.14 per share) when compared to Q4 2006 ($0.13 per share).

Over the conference call the company's CEO said the company is experiencing good revenue growth in Q1 2008 (compared to the previous year 1st quarter), even though not as high as the 38% reported in Q4 2007.

If the recent history of this company is any guide, it is entirely possible that it will report an even higher than $0.32 EPS in Q1 2008. If this happens I think MALL will be valued at 15 times $0.32 EPS annualized, that is, about $19.2 in late Q2 2008.

We'll see what the future brings, I'll continue holding MALL for the long term.

[David Randolph]

Fortunately MALL is reacting positively today, as it is up 5% as I write, because I was starting to feel disappointed by the market's reaction to the company's spectacular 2007 earnings.

I like to think with my own head and have strong hands, but I'm not a hero and won't let the Main erode much more due to my positive view of online retailers in general.

I already have PFSW and SYX in that camp, if MALL fails to perform ... I'll be a chicken and cut my losses short, since I have too much exposure to the sector and have been wrong for some time ... if I sell MALL I'll be looking for another PAL, but for now I'll hold MALL.

[David Randolph]

MALL held the 50 days SMA support and reacted positively. I'm aware that MALL's fundamentals, from a valuation standpoint, are very attractive but I worry that bears may have it right and US consumption falls of a cliff in 2008.

This isn't my expectation, but since I'm somewhat overly exposed to the US consumer (with PFSW, SYX and MALL), my hands in MALL aren't as strong as I would like them to be.

It's not easy to be a contrarian, so if I'm right I expect to be paid handsomely.

Anyway, so far so good, I'll keep holding MALL.

[realcoolhead]

David, I think it is a good idea to pay attention to sector diversification. If you need to reduce exposure to US consumer sector, would it make sense to sell the weakest of SYX, PFSW and MALL? And which one do you think is? Thanks.

MALL held the 50 days SMA support and reacted positively. I'm aware that MALL's fundamentals, from a valuation standpoint, are very attractive but I worry that bears may have it right and US consumption falls off a cliff in 2008.

This isn't my expectation, but since I'm somewhat overly exposed to the US consumer (with PFSW, SYX and MALL), my hands in MALL aren't as strong as I would like them to be.

It's not easy to be a contrarian, so if I'm right I expect to be paid handsomely.

Anyway, so far so good, I'll keep holding MALL.

[David Randolph]

David, I think it is a good idea to pay attention to sector diversification. If you need to reduce exposure to US consumer sector, would it make sense to sell the weakest of SYX, PFSW and MALL?

Not at this moment in time. I sense we've just hit bottom and sooner rather than later we'll start a very powerful bullish move that will take the general market to new all time highs.

The very depressed and undervalued sectors can benefit the most on this rally that I foresee. Essentially, where people are more pessimist can be where the biggest profits are, as they change their perceptions of reality.

So, even though I wrote that perhaps I'm a bit over exposed to the US consumer (not really, I think, just about 15% of total equity), I'll probably just stay path for the next few months.

Sorry for some personal sentiment changes, I guess I just keep adapting my views due to the incoming information, even though my central case has remained more or less the same for some considerable amount of time.

Thanks for your question

I'll hold MALL.

[David Randolph]

Ok, this is it, I have no more courage to fight the trend, I'll SELL MALL today.

Hats off to BigSully1 and his trading decision of selling MALL even with all the good news. I was very stubborn/slow to perceive and accept the market's verdict about this company: investors believe the online retailers "e" will turn negative, so they sell the stocks even as the current earnings multiple looks so attractive.

This has also happened with homebuilders, mortgage lenders and banks in the recent past, and investors were certainly right in those cases.

I'm not brave enough, not confident enough, to fight investors perceptions in this sector.

I'll just take my loss in MALL.