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Subject:  Re: True Religion Date:  8/8/2007  9:02 PM
Author:  hheiserman Number:  1366 of 1817

Paul and Mark -

Thank you for the information. I requested annual reports last week and look forward to reading them. I see in TRLG's latest 10-K that they have 11 stores, which is why I thought it might be a retailer.

My initial instinct tells me this company does not have a durable competitive advantage. There are four broad types of competitive advantages, according to Morningstar: 1) low-cost operator, 2) high switching costs, 3) intangibles, and 4) network effect.

Just for fun, if we run TRLG's growth assumptions through the PIV-ER calculator (see previous posts), then IV is $34, PIV is 56%, and ER is 78%. The key assumption here is 24% annual growth for the next five years, which is our high estimate in this 3-scenario model.

Another model that I use shows a 32% CAGR return every year for the next decade, based on last year's results.

I take these numbers with a grain of salt because, as mentioned above, I do not know if TRLG has a competitive advantage. Nevertheless, since TRLG's chart looks impressive, I bought a starter position. If I own a basket of companies that have the same growth characteristics as TRLG and the valuations aren't obscene, some of these companies blossom into 10-baggers.

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