GOAM

[vic666]

David,

Thanks for that nice response. Based on my knowledge of TA and charts, both the daily and weekly charts point to a pullback (overbought conditions).

I will watch for an entry at or near the 10 EMA. If I miss the opportunity, I'll look back and evaluate why, but my plan remains buying at or near the 10 EMA, with a close watch of the technical indicators/oscillators.

thanks again for that reply. 

PS: I've added a daily and a weekly chart for reference.

[stocky]

Strong Getting Stronger Near Year End

Ken Kam of Marketocracy whom I greatly respect puts that in words:

"Stocks that did well during the year tend to get stronger because no one who is sitting on a big short-term gain is anxious to sell in December. By waiting until January to sell, the owners of this year's best performing stocks push their capital gains tax liability into next year. Barring significant news, the reduced level of selling gives the best performing stocks of the year some added strength -- until January."

Based on this GOAM may continue doing well at year end.

[David Randolph]

You know I didn't buy GOAM for a quick trade. I'm a long term investor. But as I read this thread again, I saw that my analysis only goes a few months into the future. I want to look further into the future now.

The first thing I want to consider, always, is the potential size of the market. I guess most people avoid GOAM because they think the potential market is too small. But let's leave common sense and actually study the numbers.

For IP Relay Service I have this:



I see there will be about 10 million minutes a month of IP Relay calls in Q4. This means the total IP relay market size is about 30,000,000*$1.27 = $38.1 M a quarter. It has been growing at a rate of 74% a year since 2002. But I expect this growth rate to slow, as the Video Relay Service seems to make much more sense and is getting more traction. Say it will slow to an average growth rate of 20%. It will be a $79 M a quarter market in 2010, or a $316 M annual market.

GOAM had 12.5% of this market in Q3, growing from 5% in Q1. I see its market share rising to at least 20%, because the company is totally focused on this, as others have bigger fish to fry, as we've been discussing.

So, 20% of a $316 M market is $63.2 M in revenues for GOAM in 2010, coming from the IP Relay Service. But much more important is the recently released Video Relay Service. Let's study that market:



The Video Relay Service will be something like a 12,000,000 minutes*$6.64 per minute = $79.68 M market in Q4 2006. It is growing at an annual rate of 155%. Let's assume this growth will slow to 50% a year, from 2006 to 2010. Then it will be a $403 M market a quarter, that is, about $1.6 B market in one year.

GOAM has 12.5% of the IP relay service, growing from 5% in just two quarters. GOAM's VR service seems to be much more specialized, as you can see here.

I believe GOAM's long term share of the VRS market will be at least 20%. In 2010 this means $320 M in revenues.

So, joining both, the IPRS and the VRS, we get a 2010 revenue estimate for GOAM of $383 M.

We don't know about profit margins yet, but we'll soon find out. By the way, I expect GOAM to be profitable right here, right now in the 4th quarter, but I don't care much about that. Since we don't know about profits, I'll assume GOAM will have an average sales multiple of 1. Let's be prudent and also add 10% dilution a year. If these estimates are correct, the share price at the end of 2010 would be:

(($383 M)/($23.33 M*(1.10^4))*$9.48 = $106.3

This implies an annual growth rate of:

$9.48*(X^4) = $106.3 <=> X^4 = 11.213 <=> X = 83%.

This is very attractive, and safe, as it doesn't depend on economic growth, it only depends on the company gaining more and more market share, and I certainly expect that. The number can be bigger than this, much bigger, but I think this is a fair estimate.

Do I worry about yesterday's 2.7% fall? Not at all, longer term fundamentals always prevail, and I can't afford to miss a huge and reliable (as reliable can be in the stock market) profit just because I fear I'll lose my paper profits.

Instead of fear, I hope. I hope my profits grow larger. And when I'm losing, instead of hoping, I fear. This way I let the profits run and cut the losses short.

I'll keep on holding GOAM, not in a hurry to take profits.

[Dracull]

You know I didn't buy GOAM for a quick trade. I'm a long term investor. But as I read this thread again, I saw that my analysis only goes a few months into the future. I want to look further into the future now.

David, I thought that SOF was based on a quick trade strategy instead of sitting on a stock and wait as a long term investor. Being a long term investor have the problem of losing good quick and technical opportunities such as breakouts (I became in love with breakouts since Panoramix, remember  )

I'm saying this, because at long term I'm pessimist on the American market, by the follow reasons:

1- Weak housing data and possible implosion of the market due to the end of the speculation bubble.

2- Peak Oil: getting closer and closer, we are going to have a global crisis due to the Oil shortage and increasing prices.

3- Weak dollar and weak commerce balance, the dollar is not a "global coin" as it was at the past.

So, my opinion is that this rallie wont last much. (pitty, because I prefer to enter long instead of short).

[David Randolph]

Thanks for your post Dracull

I disagree on your general market assessment, as you can read on this article that I wrote about a week ago: I'm a bull !

But, the beauty of GOAM is that all this general market talk has nothing to do with it, deaf/ hard hearing/speech impaired people won't call more or less because of economic conditions, because, after all, they don't even pay for the service, it's free !

[eggman11]

I agree with David. The focus should be on the long term, that is where the most profit is made. All of the short term traders, I know are up and down. Sometimes they have great runs, but are almost always follwed by a "bad streak" Long term brings wealth. Short term brings headaches.

Keep up the good work

[basonista]

I agree with David. The focus should be on the long term, that is where the most profit is made. All of the short term traders, I know are up and down. Sometimes they have great runs, but are almost always follwed by a "bad streak" Long term brings wealth. Short term brings headaches.

Keep up the good work

I can speak from experience about the problems with short term trading.... and I probably will on the butcher block.

[vic666]

Short term trading calls for more discipline than trading with a longer time frame in mind. That's why I believe short term trading is a headache...coz' most traders (and people in general), prefer the excitement of trading over the disciplined cold-hearted approach needed to consistentlyl rake in profits. I too can speak out of experience.

But the issue with a longer term strategy is this:  If I had a larger capital, having learned my lessons thus far, I'd most definitely switch to a slightly longer term strategy with 3 - 5 stocks holding at any one time...but not having had the capital (and when I had it, I blew it with short term trading)...I'm continuing the short term strategy, against my own liking really!!

I am trying to build capital but short term trading makes my portfolio look worse than a game of yo-yo.

Basonista...you wanna talk about this sometime? i'll send u a PM perhaps.

[rpccpa]

Certain times in MKT lend themselves to Buy & Hold swing trades like past 3year run...

This mkt which is topping imo.... is best to buy QID SH and other short ETF instruments on bounces. 

[thai626]

Guys,

I have a virus............it's called fingeritis (the inability to stop buying  stocks when there are available funds in your account).  Because I sold MAMA, I had to get GOAM!!  What's my problem guys???  Can this be fixed???   

Although, GOAM is actually doing pretty well riding the momentum from T3ML.  It doesn't look like it's quite done yet hence my reason for taking a position.  Good luck all!

Thai

[JKN]

I have a friend that is a doctor, this is what he sent me...

Actually, fingeritis is only a symptom of the larger affliction known as hypercovetosis (HCT).  Fingeritis is most often observed in patients with computer stock trading platforms.  Fingeritis can also occur with telephones.  It is NOT viral but is a mental condition triggered when studying charts.  It is well documented that patients studying stock charts that exhibit increasing trends are subject to an immediate (and sometimes urgent) display of HCT.  It is associated with intense bouts of a dream-like state in which the "Jones Effect" becomes prevalent.  The patient is consumed with visions of boats, cars, yachts, exotic vacations, etc....  These extreme yearnings yield to a tendency to outspend anyone in the immediate vicinity, hence, the association with the "Jones Effect".  Once affected, the patient with HCT is virtually incurable.  However, HCT can be controlled given proper therapy, association with stock services, and messaging boards.  Essentially, treatment is a form of group therapy.

Note:  Extreme bouts of depression are common during periods of poor stock performance.    This subset of HCT may lead to "Pink HCT" and is most often manifested by placing large sums of borrowed money into speculative ventures in which the patient envisions increasing wealth by thousands of times.  Invariably, Pink HCT results in capital collapse, withdrawal from society, and drug use/homelessness.

[vic666]

holy cow!!! never knew such a condition officially existed and has a term assigned to it.

we as traders should be very wary about such conditions and try and receive help from professionals whenever we feel on the verge of mania/depression

thanks for sharing that JKN! 

[David Randolph]

I appreciate your comments on short term/long term strategies. More than appreciate, I'm thrilled . We could be here for days and days discussing the matter ... and that would be many pages of this GOAM thread.

We need to create a thread on short term vs long term on the Members Board.

Or else we'll keep it here or on any other threads, because it seems easier to discuss in some specific stock context. I don't think you're on the 3 Stocks on Fire Premium service to hear just kind words, you're here to make/learn how to make money trading stocks. So, I apologize if sometimes I can be a bit harsh when talking about trading strategies. You see, my mind is filled with trading bruises, if you know what I mean. Trading has made me suffer more than anything else in life. So I can't go easy on it ... it's too much serious to me ! You're not talking to an old man who just practices buy and hold (just look at my photo, do you see the young gambling instinct?), I spent 5 years of my life making thousands of day trades, in and out, in and out, experiencing every day trading/short term strategy available outthere. I read dozens of books on the subject. Once I had a Porsche, a second house and an amazing lifestyle, all coming from day trading ... three months later I had nothing. Then I got "rich" again, and again I lost it all day trading ... it was a roller coaster ride.

My point is: you can make all the money you need to satisfy your short term pleasures, but if it isn't made the right way (and there aren't many right ways), you'll lose it all back to the markets.

Now I'll address your comments:

- I believe eggman1 and basonista are on the right track;
- vic666 is where I was some years ago in trading terms. I recognize myself in his words. He's fighting and trying, and that's always a good thing. I wish he'll overcome this phase and start trading right again. Perhaps you (vic666) should pause for some time, just study the markets and get another income source. Trading for a living, especially when it's done with little capital, is very stressful (and impossible to sustain on a long term basis, unfortunately);
- rpccpa is looking for a top in this market. I believe looking for tops and bottoms is a futile exercise, the big money is in the middle of trends. I think we're in a bull market. I will short/buy bear market financial instruments when we're in a bear market. But for now we're in a bull market.
- thai626 is a strong believer in technical analysis and momentum trading. That's fine by me;
- I think JKN made a nice joke with thai626 ...
- vic666 is so consumed with short term trading he didn't get it was a joke

And what about GOAM?

Well, after this I don't know if I have much to say about it, you guys are messing with this thread, and I say thank you

I would like to know the cost GOAM is having to supply the VRS service. They contracted a company (I don't have the name here), I went to see that company's website but there wasn't any pricing tables. I also want to make some short term estimates for Q4 2006 results. I think that can be interesting for someone expecting to hold the stock for just a couple of months more.

I guess that goes for tomorrow's update, after all, we have time, GOAM is here to stay

[JKN]

BTW, great call David, my applause !! (after the one hour requisite since the SYX applause)

In at 5.63, holding according to the plan...

Merry Christmas to you and your family from Vicksburg, MS, USA.

[buddjas1]

I sold my GOAM shares today.  And, thank you David for your last minute recommendation that boosted my IRA by almost 70%. 

The following document that I located today really made me wonder whether GOAM's business plan is a viable plan (for profit anyway). 

http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-06-1345A1.pdf

From what I gather from the document, the FCC sets the reimbursement rate each year based on the industry participants' costs divided by the number of minutes provided.  See II.A.   IP Relay reimbursement actually decreased 5 cents from 2005 to 2006.  Para. 9.  The FCC includes only an additional "1.4 percent rate of return for an allowance for working capital" and only for IP relay.  Para. 27. 

What troubles me is that the more market share that GOAM acquires, the less profitable the endeavor becomes.  In other words, as GOAM's minutes and costs become a larger percentage of the reimbursement formula, the less GOAM can profit from the service.  The reimbursement rate will eventually equal GOAM's cost of providing the service, if GOAM's market share approaches 100%.