PFSW

[lancefur]

Now that the almighty Golden Cross was achieved within the past 2 weeks, when is this going to just BOOM? I know the correction was necessary but looking forward to an explosion real soon and the continuation of the bull trend.

[David Randolph]

PFSW is priced for extinction, trading at roughly 1/10 of its annual revenues. That is, the current market cap is $45 M and the company had revenues of $423 M in 2006 and expects just a bit more than that for 2007, according to the full year guidance it gave over its Q1 earnings presentation:

«We continue to maintain our consolidated revenue target of $420 to $435 million and an Adjusted EBITDA target of $8-$10 million for calendar year 2007," stated Mark Layton, Chief Executive Officer of PFSweb.»

This apparent undervaluation happened because everybody (myself included) thought the company's eCost division would drag the company down to bankruptcy, because ecost.com revenues were shrinking and losses were mounting. PFSW's balance sheet was getting too weak, showing "just" $14 M in cash and equivalents and a current ratio of just 1.18.

But, and this is a big BUT, the company was able to turnaround ecost.com quite dramatically, with a 20% surge in sales expected for Q2 2007 when compared to Q1 2007:

• PFSweb Announces Preliminary Second Quarter Sales For eCOST.com
Business Wire (Mon 8:00am)

ecost.com, which was seen as a "possible bankruptcy red flag", will now be seen as a "major growth engine for PFSW".

I expect this sentiment shift to produce no less than 50% return over the next 6 months. If the turnaround gets traction and PFSW is able to achieve revenue CAGR of 10% over the next three years, and turn a negative net profit margin of -2.13% into a positive 3% net profit margin, then I would expect PFSW to be a almost a 10 bagger from current levels.

Computing my valuation model with these estimates I get to the most attractive situation I've ever found, in terms of estimated share price CAGR:



Technically PFSW is about to make a bullish breakout of a 6 month consolidation period:



I already bought this stock yesterday for the Video Portfolio, at www.stocksonvideo.com and I would like not to have the same holdings in both portfolios (in order for some of you, like realcoolhead, to be able to diversify your investments throughout 20 different holdings), but this opportunity is too good not to buy the stock also for the Main Portfolio. And for the 3 Stocks on Fire Portfolio too, for that matter, PFSW will replace GIGM in that portfolio.

The Trading Plan is:

Buy PFSW.

[th0masss]

David, on June 15 the BOD was granted discretionary approval to effect a reverse split.

[David Randolph]

David, on June 15 the BOD was granted discretionary approval to effect a reverse split.

I know th0masss, not a problem, as it doesn't have any effect in the company's value. If PFSW's market cap goes from $45 M to say, $200 M, it doesn't matter if that means the share price going from $1 to $4 or from $5 to $20. It's the same thing.

They'll probably do the reverse split to maintain the Nasdaq listing.

But thanks anyway

[terainvestment]

So GIGM is to remove from the 3SOF portfolio?

May be I missed something...

[ygtrdr]

Nice pick David, glad to have you in this one!

BTW...not to play editor here but the spelling in English is Phoenix.

[David Randolph]

So GIGM is to remove from the 3SOF portfolio?

May be I missed something...

Yes, the 3 Stocks on Fire Portfolio is composed by the three stocks with the highest share price CAGR given by my valuation model, and the top three holdings (that is, the ones where I expect the highest return - coupled with high volatility, because they're such small caps) currently are CIMT, GSCP.OB and PFSW.

But, of course, this doesn't mean you should sell GIGM, or that I think GIGM won't go up a lot, I believe in GIGM exactly the same way I did previously.

My recommendation is for anyone to hold all holdings of the Main Portfolio, which is a well diversified, low risk portfolio.

Nice pick David, glad to have you in this one!

BTW...not to play editor here but the spelling in English is Phoenix.

Thanks ygtrdr "Phoenix"? What a complicated way to write "Fenix". Well, you English/American people can't always do it the shortest and smartest way Let me correct the title, thanks.

[Amarens]

Hi David,

Good to see this one back. I never sold it. Is there a reason why you started a new topic. May be a good idea to combine with the previous one

http://www.3stocksonfire.org/trading/index.php?topic=8895.0

Amarens

[David Randolph]

Hi David,

Good to see this one back. I never sold it. Is there a reason why you started a new topic. May be a good idea to combine with the previous one

http://www.3stocksonfire.org/trading/index.php?topic=8895.0

Amarens

hehe, it looks like you never sell anything Amarens I wonder if you still got JASO, what a miss there

I don't know, I felt like starting a new thread (I thought I never held PFSW in the Main Portfolio, just the Fire, but I see now that I did). When I close this trade I'll merge the two threads at the Previous 3 SOF Picks message board, how's that sound?

[TraderStar]

Thanks ygtrdr "Phoenix"? What a complicated way to write "Fenix". Well, you English/American people can't always do it the shortest and smartest way Let me correct the title, thanks.

C'mon be phaire David .. English spelling is really simple.
Here's a little poem to help you remember:

I take it you already know
Of tough and bough and cough and dough?
Others may stumble but not you
On hiccough, thorough, slough and through.
Well done! And now you wish perhaps,
To learn of less familiar traps?

Beware of heard, a dreadful word
That looks like beard and sounds like bird.
And dead, it's said like bed, not bead-
for goodness' sake don't call it 'deed'!
Watch out for meat and great and threat
(they rhyme with suite and straight and debt).

A moth is not a moth in mother,
Nor both in bother, broth, or brother,
And here is not a match for there,
Nor dear and fear for bear and pear,
And then there's doze and rose and lose-
Just look them up- and goose and choose,
And cork and work and card and ward
And font and front and word and sword,
And do and go and thwart and cart-
Come, I've hardly made a start!
A dreadful language? Man alive!
I'd learned to speak it when I was five!
And yet to write it, the more I sigh,
I'll not learn how 'til the day I die.

..... well, maybe disregard those last few lines. 

[berloga]

I feel jilted when I see what JASO has done to us! I suspected it would go up due to the "hotness" of the solar panel market and buzz around it. JASO also did not give in much when the market had a correction.

David, do you think it's just a hype around JASO and TSL or we can get back in once the prices retreat from the peaks? According to EPS and the PEG numbers, JASO seems to be valued properly and TSL a bit below.

Thanks.

[David Randolph]

I feel jilted when I see what JASO has done to us! I suspected it would go up due to the "hotness" of the solar panel market and buzz around it. JASO also did not give in much when the market had a correction.

David, do you think it's just a hype around JASO and TSL or we can get back in once the prices retreat from the peaks? According to EPS and the PEG numbers, JASO seems to be valued properly and TSL a bit below.

Thanks.

Yes, JASO was terrible. I'll remember it the next time I feel outraged by the market cap not being the one I initially thought. These Chinese, Indian and Brazilian stocks have this habit of having ratio's between the ADS's and the shares that aren't always apparent, not even to a person that reads their entire IPO prospects or 10-K's.

For a good example go check ACH's thread at www.stocksonvideo.com. Square7, a quite knowledgeable investor, was holding 3,000 shares of ACH, or more than $120,000, and thought the market cap was 1/4 of what it actually is.

Anyway, coming back to JASO and TSL, my feeling is there's a lot of hype involved in the solar sector, but also undoubtedly there will be huge demand, due to the cost of oil and environmental concerns. It's hard to know, the Chinese can always dilute the stocks so much that an excellent business can be a bad investment (example: XING).

I guess that at this stage I would be more interested in finding some more about ASTI's technology, as a way to participate in the future of the solar market. Of course, there's that warrants issue that keeps it under $11, but someday the value will be so high that the stock will breakout above $11 for good.

I hesitate between going for what is "in play", or "in fashion", instead of looking for more undiscovered parts of the market.

Anyway, these were my thoughts on the subject, got to go pick up my kids, see you later.

[David Randolph]

PFSW was setting itself up for a 10% plus day yesterday, but the general market weakness brought in late day sellers. Perhaps there will be a pullback to $0.97 or so to retest the broken resistance, I don't know.

But I know the surge in www.ecost.com sales is fundamentally very significant, as we've seen in the initial recommendation. We know there will be good news when the company reports 2nd quarter earnings, at least that is almost a certainty now.

I think the fundamental landscape is a lot more solid now than what it was at the stock's previous run up, when it doubled in about a month, going from a low of $0.7 to a high of $1.44. I say this because back then all we had were expectations and analyst's recommendations, now we have a solid 20% sequential revenue growth at the company's most problematic unit (the rest of the business has been doing fine - we'll study that over the next few updates).

I'll continue holding PFSW.

[David Randolph]

Insiders are fully aware that PFSW's fundamental turnaround is for real, look how they exercised options to buy shares at $0.95, when the stock was trading below that level:

SEC forms for PFSW

Technically the stock "paused" yesterday. Perhaps it will pullback a bit more to close the gap between $0.97 and $0.99 (it just needs to print $0.98), but it is really impossible to know for sure.

Over the medium term, the stock will probably continue to move higher discounting much better than expected 2nd quarter results. I'll continue holding PFSW.

[Amarens]

hehe, it looks like you never sell anything Amarens I wonder if you still got JASO, what a miss there

Looks like I don't doesn't it  . Unfortunatly I do, JASO for instance, I did sell that one. PFSW and some others like SYX are missers. Just too late and still learning to take (even bigger a day later) losses  . In some cases it also worked out great but mostly not. Looking at my portfolio, everyday I'm faced with the question do I take 30-40-50% or more loss or do I still wait. I don't need the money, it does not worry me therefore and so I hold on...even tough my common sense tells me I good have made up for the losses if I had taken them and moved on...so I just should!

The stock market acquires attention every day. Sometimes that does not work for me, running a company or being on the road. And it seems important shifts always take place on those moments  and I read a day later...

Amarens