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Blue Nile, which I owned until management started touting a misleading free cash flow number in Spring 2006, has a Euphoria Ratio of 80%. I am getting altitude sickness!


Hi Hewitt

Can you elaborate on the misleading cash flow?
Blue Nile is my current poster child for crazy valuation.Selling at a huge premium to other jewelers with a PE of around 115 and EV/EBITDA of 50 I can't understand the fascination. Growth is decent at 20% EPS growth yoy last Q2 but is it worth the current price? Sounds like you sold too soon :(

True Religion is a strange company. Looked at them around 2 years ago IIRC and they have gone nowhere--essentially flat. At the time the co was only a designer and manufacturer and had just decided to open one store in LA. Sounds like they are up to 11 stores now. The management was self-intersted and had no shame taking stock, bonuses and big salaries. They struck me as a shade sleazy. of course sleaziness is not necesarily an impediment to big earnings. My largest concern was the durability of the $350/pair distressed denim pants market. Seemed like a fad about to depart. Also management had kicked around LA in the 70's and 80's in a few failed businesses and I saw no reason to trust them with an empire of stores. but if the stores are successful and if they have moved beyond slashed ripped and stonewashed denim and have their fingers on the pulse of the next big fashion trend they might be worth a look. Earnings always were pretty good.

Will look forward to hearing all about the euphoria ratio. From what I can see there is a lot of it about in spite of the market dips.

>^..^<
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