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RVB's Market Musings

What began here as an avenue to interact and learn has far exceeded those goals.

If you are a prospective employer, please consider this site a place where you can see my passion for investing...

Friday, January 27, 2006


Sometimes the market kind of throws you a sweet fat pitch across the plate. BEBE just happened to be coming. The market's expectations for BEBE had gotten pounded simply too low. This happens alot - a company posts "lousy" earnings, then analysts pull down their expectations. It's hard not to, especially with a company like BEBE that has had earnings quality issues in the past. We all manage our expectations - when I'm going to see an Owen Wilson or Vince Vaughn movie, I know that it probably isn't an oscar winner. Yet the little gem called "Wedding Crashers" far exceeded my expectations. Who doesn't do this stuff? Anyhow, BEBE is having a nice day today, up 17% as a result of beating the beaten down expectations. I had mistakenly mentioned on the 16th of January that BEBE was an interesting candidate for a value investment. Deep value, it maybe wasn't, I should have said it was a Growth-at-a-Reasonable-Price (GARP) play.

For a company growing at 35% per year, BEBE was trading at only 19 times earnings - a multiple lower than Guess, Charlotte Russell, Aeropostale, and Abercrombie and Fitch. Yet, that 35% growth rate is higher than all of those stores...of course with the somewhat questionable earnings quality issues of the past (and I think they're kind of in the rearview mirror), maybe that 19x was sort of justified...just not at that growth rate, in this author's opinion.

Of course, I'm not here to say that sometimes I don't swing at that fat pitch and miss it anyways. The point is, you still gotta swing the bat!


At January 27, 2006 10:55 AM, Blogger NO DooDahs said...

When I miss by not swinging, I wax poetic ... at least I'm fishing in the right pond, if I'm seeing stocks I've looked at going up.

Now, if only I had enough capital to buy EVERYTHING I halfway liked.


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