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Author: jimgreenissudden Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 553  
Subject: Future prospects of Flex Date: 8/11/2009 6:21 PM
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Hi guys,

I am a Indian. The company I was working for had been 
acquired by Flextronics 3 years ago. As a result of 
that, I was alloted 371 shares of flex in lieu of salary/bonus 
for all the hard work we had put in. :)

Being ignorant about stocks, a quick check to see that 
Flex was part of the NSE 100, and that its stock had 
traded as high as $19 a share (rate back then was 
around $14/share) made me greedly hope for more of
 the same. :)

Half Yearly checks showed the stock not going anywhere. 
Look at the charts

http://finance.yahoo.com/echarts?s=FLEX#chart1:symbol=flex;r...


I seriously thought of selling out in Febuary but 
greed/laziness and hubris  made me hold on. :(

So a couple of months when I checked again, to my shock, 
the stock had plunged as low as $2! What happened? 
Was Flex always over-valued?

My rough and ready analysis for your critique/elaboration is as follows. Balance sheets are dodgy as proved by Enron there and Satyam here. :)

 Here I will assume
 that the exchange rate remains steady. Probabilities assigned 
are arbitary, but since we KNOW it has gone down to $2, I 
am assuming 80% probabilty that it will trade forever in the 
$2-$8 range, a unrealistically very low 1% chance that the 
company wont go belly up, and 10% chance it can go up to $10, 
6% chance to $12 and 4% to $15. Are these fair values?

Flex has never paid dividends. Even assuming that the company
 is capable of earning 60 cents per share  and a interest rate 
of 10% (Indian interest rates are higher), the stock is worth 
no more than $6. :(


Stocks	Target Price	Exchange Rate	Net worth	Probability	Value Investment
371	15	45	250425	0.04	10017
371	12	45	200340	0.06	12020.4
371	10	45	166950	0.1	16695
371	8	45	133560	0.2	26712
371	6	45	100170	0.2	20034
371	4	45	66780	0.2	13356
371	2	45	33390	0.2	6678
371	0	45	0	0.01	0
					105512.4

The last column Value of investment is nothing but Net worth if the stock reaches that price multiplied by the probabilty I assigned for the stock reaching that price. And I sum up all these values, to arrive at the "fair" value of the stock. 
Summing up these values, It seems that I should I should swallow the losses, wait for some time,  hope that the stock reaches $8 and just about get 60 cents on the dollar after 3 years of waiting for profits. :) Is that a sane or loony decision?
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