Message Font: Serif | Sans-Serif
 
No. of Recommendations: 1
If you're into Sun Microsystems, then you know that 5 years ago you couldn't give that stock away. In 1995 it bottomed out (pe wise) under $2 or 8 times earnings. Earlier this year it hit the high 120's or just over 100 times earnings. If the stock was still at 8 times earnings, it would be a $10 stock. So $8 of SUNW's $128 rise was due to increased earnings. The other $120 was due to a change in investor's attitude about the stock.

I'm glad to see at least one NASDAQ tech junkie take a second (or first) look at JAKK, because the only way for JAKK to go up is for its VALUATION to increase. As a company, it's been making more money year after year, but its pe has zig zagged from the low 20's down to single digits almost every year since it went public. Recently the pe was just under 5, and when you consider the current assets are just around $11 per share, the stock is actually pretty close to free right now.

In point of fact, JAKK as a company is about 1/3 as large as JUNIPER NETWORKS, (JAKK= $31 m income on $255 m sales, JNPR= $88 m income on $423 m sales) but stock traders are enlightened enough to "know" that JNPR is "worth" 70,000 million dollars, whereas those same people also "know" that JAKK is to be avoided at the price of 150 million dollars, or just under 1/400 the price.

This is because JAKK is in the unfashionable "toy" industry, which has only been active for about the past 10,000 years wheras JNPR is in the much more desireable "complex technology that nobody understands" industry. If the market liked JAKK as much as it likes JNPR, then JAKK would be selling for over $3,000 per share, and if the market disliked JNPR as much as it currently dislikes JAKK then JNPR would be selling for just under a buck.

In my next post I will deatail some of the "rational" reasons why JAKK is selling so low. There are some, but I think the market has way overreacted.
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.