March
5, 2003:
Note from the Speculators: The Jackal is an original thinker and old acquaintance whose advice has proved valuable. As always, readers should put survival first and ensure that their reserves are sufficient to withstand any setback that may result from their choice to act on a recommendation published on this site. No recommendation here is guaranteed.
XM
Satellite Radio (XMSR):
Two weeks back Barron's had a bullish article on XMSR, the
satellite radio company. The article suggested that five years from now XMSR
may have 10M subscribers and if so would have EPS of say $1.90/share. That
would imply the shares trade at say $35 - $40. If the business doesn't work out
the stock is likely worthless. Street projections are consistent with those in the
article. We think, however, that in time as many as 65% of new car buyers will
sign on for the $10/month service. If that were to be the case, the shares
could be worth $350 - $400. The Street is not considering this possible
outcome. However, as this outcome comes into the market's consciousness, the
shares should trade at roughly $12. Today XMSR is trading at $4.70. -- Jackal
Update
on Texas Genco (TGN):
On
Jan. 6, we posted the Jackal’s analysis of a spinoff called Texas Genco
Holdings (TGN). He advised buying below $10. At least one of our readers did,
and we received the following note on March 3:
Just writing to thank you for the story and analysis by your trader/investor friend on TGN you put out a few months ago when it was being spun off. After some further research, I found his analysis compelling, and so ended up buying a bunch of TGN at around 10. Now trading north of 16. TGN is not at all the usual type of stock I invest in, but it has certainly done better for me than my other investments in the past few months.
Anything more along these lines would be welcome! What is your friend who recommended TGN thinking now?
The Jackal replies:
When TGN first came out I bought a 12% (of my equity capital) position. (I rarely ever buy more than a 10% position, but in this case I felt the shares were at an overwhelming discount from $16, the level I expected them to trade once they were fully distributed.) At $16 I sold a third of my position. However, I have recently increased the position to 13%. The rationale is that the shares should trade at bottom at $16 and near-term events are likely to lift them higher by at least 25%.
Because 40% of TGN'S generating capacity is low cost coal and nuclear, its earnings are leveraged to the price of gas, the highest cost fuel used in generating electricity. While the most recent Street estimates project TGN to earn $1.30 this year, TGN will more likely earn $2.70. For 2004, TGN can earn well over $4/share based on the current futures market pricing of gas in 2004. While TGN shares may not necessarily trade at a meaningful multiple to those earnings, the accumulating earnings will likely be distributed to shareholders one way or another.
The
Pick of the Jackal (8/9/2003): Early readers
of this Web site remember the stellar recommendation
of Texas Genco (TGN) a few months back by our stock-scavenging friend the
Jackal. The predator, who prefers anonymity, told us Thursday,
July 9, that he likes Central European Media
Enterprises Ltd. (CETV). The stock rallied from $3.89 this
time last year to a current price of $22.50 in the wake of a
successful lawsuit against the Czech government. CETV, says
the Jackal, is a debt-free company that operates four TV
stations in Eastern Europe, Ukraine, Romania, Slovenia and
the Slovak Republic. "The stations are all profitable and
growing," he says. "Until recently, the shares were in the
hands of speculators and are now moving into the hands of
investors. When fully distributed, the shares should trade at
$30 to $33."