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Hi Jim,

Have you considered GME? The market is acting like they are going out of business tomorrow, but they keep piling on the cash. They are working on their digital strategy while they continue to open new stores in the US and Europe (which have new kiosks to try out games and download new digital content - and get GME reward points as well).

Anyway, I ran some quick numbers...

DR: 15%
Current price: $20.12
Shares: 154.1M
TTM FCF: $446.6M (I think this is right, but I haven't looked at GME for a few quarters, so I'll have to verify this)

Implied Growth Rates:
0-5 Year: <1%
6-10 Year: 0%
Terminal: 0%

Just an idea...

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Hi Dave,

No, I hadn't looked at GameStop. You probably know it was a Stock Advisor pick that was sold several months ago.

The latest ttm FCF numbers won't be available until the company releases the 10-Q (and they didn't mention anything on CFFO or capex in the conference call), so the best we can do is the $447 million you indicated and I get very similar numbers.

The biggest concern seems to be a move toward digital downloading which would make GameStop irrelevant. However, reading through the transcript of the last conference call, they seem to be addressing that, offering items for download via their website and at their stores. They're rolling out Sony downloadable content to all their stores and they're launching a preorder Halo map pack for download, with a GameStop exclusive helmet for Xbox Live players (for the in-game character, the avatar). If they continue going that route and show success, then they could conceivably overcome the worries.

I've also heard that they've moved away from PC games. Do you know if that is true and, if so, why they went that direction?

Might make an interesting shorter term play over the next quarter or two, especially if they can blow out their own raised guidance.

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I'm no expert, but Tom E and RP have been all over this on the GME board. And RP just posted this gem:

My overall take is that the market has declared GME "Netflixed" way too early. Blockbuster was way too late in responding to the threat of NFLX. But GME is actively working on the digital strategy. They have been making acquisitions in on-line gaming (like Kongregate, so I'm not sure about your comment about them moving away from PC games), have partnered with publishers to deliver digital content through their stores (Microsoft), have started a new PowerUp rewards program which is showing great results, and they have the additional advantage of being everywhere with more than 6,000 internationally. I'm not saying that this means they will ultimately be successful, but if Blockbuster took these kind of serious steps early on, Netflix might have been "Blockbustered."

You are probably aware, but the best source of info here is Tom E's page post -->

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Woo hoo! Thanks for the shout out, Jim!

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