PFSW

[David Randolph]

I've been studying and thinking about PFSW for the past few days and the conclusion I make is that I want it in the Main Portfolio.

The company now is a $50 M market cap company with estimated sales of almost $500 M for 2007. I'm buying it for roughly 1/10 of one year's revenues.

I know about losses at www.ecost.com, a PFSW wholly owned subsidiary (after last year's acquisition), but I like the long term prospects of that business. It resembles www.tigerdirect.com, in fact, it is a direct competitor. The difference is that www.tigerdirect.com is very profitable and www.ecost.com isn't.

But, also, SYX (the owner of www.tigerdirect.com) is a $972 M market cap company , that is, almost 20 times more than PFSW, so valuation already reflects the differences. My opinion is general e-commerce growth of about 25% per year for the next 10 years will lift all boats.

I also enjoy the recent developments at PFSW's traditional business, look at the latest headlines for the company:

• PFSweb Responds to Services Business Growth, Increasing Call Center Capacity by over 50% at U.S. Facilities
Business Wire (Mon, Feb 5)

• PFSweb Expands Capacity with New Canadian Headquarters to Meet Increased Demand of BPO Services
Business Wire (Thu, Jan 25)

• Riverbed Selects PFSweb to Provide International Logistics, Product Configuration and Final Assembly Solution
Business Wire (Wed, Jan 3)

• Fathead Selects PFSweb to Provide Custom Tailored E-Commerce, Fulfillment and Call Center Solution
Business Wire (Wed, Dec 27)

• LEGO Brand Retail Chooses PFSweb to Support Integrated Multi-Channel Direct to Consumer Initiative in North America
Business Wire (Wed, Dec 20)

• eCOST.com Reports Strong Sales of Select Consumer Electronics in First Week of Holiday Season
Business Wire (Mon, Dec 11)

Technically I believe the stock is about to initiate what an Elliot wave theorist would call wave 3, the longest and largest of all, after breaking out of a short term resistance trendline.

We're buying the stock on a pullback to that broken descending trendline, previous resistance, now support.

Trading Plan:

Buy PFSW, 6.66% of capital as always.

[la-onda]

just FYI:
attached 12 slides

[realcoolhead]

Obviously I am no technician, but when I look at PFSW's 3-year weekly chart, I couldn't help noticing it is also experiencing a downtrend (connecting 3.75,2.85,1.8 all the way from early 2005) breakout. Currently it seems doing a throwback to the former downtrend line. 

[guitarman]

Yep
My Fidelity T/A shows momentum and price crossing moving average as both bearish on Feb 7.
I've got a low ball limit order in.
I know what David would say! LOL
GMan

[WallStreetnBio]

looks like the MACD is about to cross the signal line...starting to look like a coiled spring

[lancefur]

I have to agree with David on this one. The stock was bearish for a long time but seems to have crossed the resistence and broken the trendline. I bought when this was recommended for 3SOF. I picked up more today as a result of the analysis. This sucker is ready to spring up fora  nice run anyday now. The MACD screams it!

[David Randolph]

Obviously I am no technician, but when I look at PFSW's 3-year weekly chart, I couldn't help noticing it is also experiencing a downtrend (connecting 3.75,2.85,1.8 all the way from early 2005) breakout. Currently it seems doing a throwback to the former downtrend line. 

Yep, nice catch realcoolhead, for a no technician :



guitarman, prodigykid6 and lancefur, you seem to enjoy the MACD as an indicator. Let me add it to my chart below.

Let's check www.ecost.com today. They could improve the design of the website ... no, don't listen to me, save those dollars, show us a profit !

Everything is working as expected, I'll keep holding PFSW.

[Se7en]

Bought PFSW @ 1.15$

[David Randolph]

Bought PFSW @ 1.15$

I guess now you just need strong hands to sell it with a nice profit !

We're buying PFSW for about 1/10 of its annual revenues and below book value. A business where I have some faith, because recently there are news out that the traditional business of PFSW has been picking up steam and www.ecost.com is at the right sector at the right time. Of course, there's fearless competition, but I think www.ecost.com being part of a publicly traded company and already selling about $140 M a year has its space. Its operations just need to be rationalized for the company to be profitable, and that's what PFSW has been doing.

I'm a believer in PFSW (also buying at a very, very cheap valuation).

[WallStreetnBio]

PFSW is killing me...$1.05 has to be rock bottom. It should rise the rest of the week with the 50 day moving average as a support. JMO

[tokyopua]

Did the earnings come out?  I see some indication that they did from DJ, but dont see any news on Yahoo yet.

[David Randolph]

Did the earnings come out?  I see some indication that they did from DJ, but dont see any news on Yahoo yet.

I don't have anything on my news service.

PFSW is killing me...$1.05 has to be rock bottom. It should rise the rest of the week with the 50 day moving average as a support. JMO

You get killed pretty easily prodigykid6. Are you using leverage?

[WallStreetnBio]

yeah i just put in a order @ 1.05 but it isn't filled yet.

[berloga]

> You get killed pretty easily prodigykid6. Are you using leverage?

This is funny! 

I used to fidget all the time (now do sometimes) over the +/-10% on the fast moving stocks. Now I get bored looking at them. I trust the mastermind (David, that is); his climate zone being well suited for a relaxed stock trading so I can be sitting here is chilling in my double-layer coat. 

[David Randolph]

I think PFSW is developing an inverse head and shoulders pattern, but that's still just a possibility. The stock needs to hold $1.03 on close to respect that technical pattern, and then rise and close above the neckline, which for today stands at $1.17.

Fundamentally, at least from what I saw until now, I can't justify this trade being wrong, since I'm buying the stock at 1/10 of annual revenues. I've had businesses before. I believe the hard part is to have meaningful revenues, to be profitable all one needs to do is to cut costs, and that almost every manager can do, that's the easiest part of a business in my opinion (most business owners only know that part, they don't know how to grow revenues).

Let's see if the inverted head and shoulders pattern is what the chart has in store for us, but I'll keep holding PFSW in the Main Portfolio whatever happens to the short term technical picture.

(thanks for your kind words berloga )