It is the Year of the Pig in China and perhaps that symbolizes excess and over abundance? There were 16% more private jets shipped this year compared to last (822 vs. 711). Or maybe it symbolizes over valued stock prices? As I was searching for companies over the holidays I ran across the fact that there are a lot of over valued companies in the market today. In fact it seems that over 200 companies have $1 Billion Market Values and P/E ratios over 50. Now that doesn't mean that every company is overvalued. Some had bad years in 2006, but when I saw that many of these companies had returns on their own equity lower than 12% I was a little concerned.
Let's take a look at two companies that I still cannot figure out what the real value going forward will be: GROW & CROC. My partner Paolo Fontana would say "go short, and go short big time." However, without blindly following anyone, let's do some investigating.
Let me start by looking at the market valuation, revenues, and earnings of each of these companies:
Market Capitalization:
GROW ( U.S. Global Investors, Inc.) – $483.3 Million
CROX (Crocs, Inc.) - $1.72 Billion
Revenues:
GROW ( U.S. Global Investors, Inc.) – $50.2 Million
CROX (Crocs, Inc.) - $275.4 Million
Earnings :
GROW ( U.S. Global Investors, Inc.) – $11.8 Million
CROX (Crocs, Inc.) - $47.7 Million
Here we have 2 companies in completely different industries that are doing really well, but like always the market is an anticipatory market. Like a good friend of mine says "buy on mystery, sell on history…" GROW is up 400%, even though over the last 10 years the stock had barely broke $5 a share. CROX on the other hand is up 54%, which for a new public company isn't particularly bad. The only problem I have with either is the long term business characteristics.
For instance, even Google doesn't have the same stock growth GROW has and it trades over 7 million shares daily. Maybe when they named the symbol, it wasn't a coincidence?
Paolo, being an seasoned day trader that looks actually looks at fundamentals, would recommend shorting both stocks here. Personally, I don't like the "short game," but after such a great run last year and with neither company being able to provide an initial rate of return over 3%, it's hard to argue with shorting either stock. The test will be one year from now when we look back and know that we were right because the facts told us so, or I'm re-writing this article with higher prices for both companies.
Let's take a look at two companies that I still cannot figure out what the real value going forward will be: GROW & CROC. My partner Paolo Fontana would say "go short, and go short big time." However, without blindly following anyone, let's do some investigating.
Let me start by looking at the market valuation, revenues, and earnings of each of these companies:
Market Capitalization:
GROW ( U.S. Global Investors, Inc.) – $483.3 Million
CROX (Crocs, Inc.) - $1.72 Billion
Revenues:
GROW ( U.S. Global Investors, Inc.) – $50.2 Million
CROX (Crocs, Inc.) - $275.4 Million
Earnings :
GROW ( U.S. Global Investors, Inc.) – $11.8 Million
CROX (Crocs, Inc.) - $47.7 Million
Here we have 2 companies in completely different industries that are doing really well, but like always the market is an anticipatory market. Like a good friend of mine says "buy on mystery, sell on history…" GROW is up 400%, even though over the last 10 years the stock had barely broke $5 a share. CROX on the other hand is up 54%, which for a new public company isn't particularly bad. The only problem I have with either is the long term business characteristics.
For instance, even Google doesn't have the same stock growth GROW has and it trades over 7 million shares daily. Maybe when they named the symbol, it wasn't a coincidence?
Paolo, being an seasoned day trader that looks actually looks at fundamentals, would recommend shorting both stocks here. Personally, I don't like the "short game," but after such a great run last year and with neither company being able to provide an initial rate of return over 3%, it's hard to argue with shorting either stock. The test will be one year from now when we look back and know that we were right because the facts told us so, or I'm re-writing this article with higher prices for both companies.
