As my regular readers know, I am bearish on Tim Hortons. I think that the market is currently pricing them significantly higher than what I believe to be their intrinsic value. However, the fact that Tim Hortons is being priced so high, makes Wendy’s look very attractive given the 85% stake that they hold in THI.

Given the closing price of Tim Hortons on friday, they have a market cap of about $5.75 billion. This makes Wendy’s stake in the company worth approximately $4.9 billion. Wendy’s market cap currently sits at $7.2 billion. Utilizing our first grade math skills, we will subtract Wendy’s Tim Hortons stake from their current market cap, and arrive at a figure of $2.3 billion. Considering that Wendy’s will be selling off its 85% stake before years end, the market is only valuing Wendy’s core business at our $2.3 billion figure that we derived. Let’s take a look at some ratios using our adjusted valuation of Wendy’s…

* Trailing P/E: 10.2… McDonalds: 17

* Forward P/E estimate: 7.4… McDonalds: 14.6

* Price to Sales: 0.6… McDonalds: 2.1

* Forward Price to Sales: 0.56… McDonalds: 1.95

By all of these metrics, Wendy’s looks very cheap. Earnings growth should pick up nicely, as displayed in their forward P/E estimate. With management exploring various cost cutting and efficiency models. Also, with their proceeds from the Tim Hortons sale, I would expect them to pay down their outstanding debt. They only have $625 million in debt on the books, but at 15% interest (a stab, i dont know what the actual rate they are pating is) this detracts $100 million from earnings. By paying that off, and implementing the efficiency model that management has suggested will be put in place, I believe they could beat current estimates.

Based on relative valuations, shares could double within the near. Throw in the possibility of exceeding expectations, and shares could appreciate even more. The Tim Hortons IPO has created an opportunity to snatch up shares in Wendy’s at a very low valuation. This price discrepency must be corrected, as fundamentals govern valuations in the long run. This is a great value play at these levels, I’m sure Graham would concur.

Originally published in The New Wall Street, a proud member of the Wall Street 2.0 Network.

http://www.thenewwallstreet.com

Eric Nuttall:

Coal bed methane (CBM) is perhaps one of the last significant natural gas resources available in Canada. With the maturing of the Western Canadian Sedimentary Basin, the potential for elephant sized discoveries has been greatly reduced. Higher natural gas prices have also greatly improved the economics for CBM exploitation. We at Sprott Asset Management are quite excited about the prospects for companies with coal bed methane assets so long as natural gas prices remain above $6 per Mcf (thousand cubic feet). The economics would be very skinny under $6.

StockInterview: But there may be elephant sized discoveries in CBM?

Eric Nuttall:

Well in Canada, CBM is called the “oil sands of natural gas.” The analogy is that it’s a very large resource. The Alberta Energy and Utilities Board has assigned 71 trillion cubic feet of gas in place for Horseshoe Canyon and 239 Tcf of gas in place for the Mannville coals. Those are very large potential resources. They fit the definition of an unconventional resource: definable in aerial extent, predictable in nature and repeatable. In contrast to the oil sands, which are only found in Alberta, emerging CBM plays exists in many areas of the country, such as in Nova Scotia (Stealth Ventures), Southern British Columbia (Storm Cat Exploration), and even in Northern Ontario (Admiral Bay).

StockInterview: Can you explain why everyone refers to CBM as an unconventional resource, when methane is the key constituent of “conventional” natural gas?

Eric Nuttall:

Coal bed methane is referred to as an unconventional resource, because it requires different techniques and approaches than the exploitation of natural gas from a conventional reservoir. One such difference is the need to fracture the reservoir, often using air or nitrogen, due to the lower permeability of coal versus a conventional reservoir. This fracing can often be equal to the cost to drill a coalbed methane well, depending on the number of coal seams. Also, CBM wells typically come on at lower rates than conventional wells, yet have many of the same fixed costs, in addition to the added costs of fracing and compression. So it makes sense that in order for the economics to be equal, the CBM well would require a higher natural gas price.

StockInterview: Where is the strongest area for CBM exploration in Canada?

Eric Nuttall:

For the past four years, Horseshoe Canyon (province of Alberta) has been the primary industry focus. Horseshoe Canyon coals are almost always dry, are relatively shallow, produce sweet gas, and can be drilled with basic drilling rigs. The Horseshoe Canyon Trend is generally known, and exploration risk is fairly minimal. The primary risk is not whether the coals will contain gas, but rather whether there is enough natural cleating to allow for an economic rate of gas production.

StockInterview: But there appears to be more excitement in Alberta’s Mannville area?

Eric Nuttall:

The Mannville coals are a deeper and more complex target. The allure of the Mannville coals is they are thicker and contain much more gas than the Horseshoe Canyon coals. However, they contain large amounts of water. A joint venture between Nexen (Toronto: NXY) and Trident in mid-2002 began a 40 vertical well pilot project. They found that the coals were taking over two years to dewater and reach commercial gas rates. Such a long dewatering time greatly reduced the economic viability of the play. In August 2004, rumors of a successful horizontal Mannville well began to circulate, with gas rates of over 1MMcf/d mentioned. These rumors eventually turned out to be true, and marked a shift in Mannville CBM exploitation towards the use of horizontal wells. Operators have found that it takes months, not years to dewater the coals. The average stabilized rate is approximately 200 to 300mcf/d, an economic rate in a robust natural gas environment. Another pivotal event that served to increase interest in Mannville CBM was a recent Mannville acreage Crown land sale on December 14, 2005. EnCana (NYSE, Toronto: ECA) spent $159 million dollars to purchase rights to approximately 270,000 acres. This was their most costly land acquisition since spending $930 per acre in Cutbank Ridge. EnCana is a pioneer in the exploitation of Horseshoe Canyon CBM. I think this recent purchase demonstrates EnCana’s belief that Mannville CBM is both technically viable and economic. I expect data from many wells that have been on tight hole status to become publicly available this year, and will further increase enthusiasm towards the play.

StockInterview: How does the Sprott Asset Management team feel about investing in CBM?

Eric Nuttall:

We have significant investments in several coalbed methane companies, in addition to companies with exposure to other unconventional resources, such as tight gas. I have many that I continue to monitor. We get quite excited over companies that have large resource potential and it’s very difficult to find that in Alberta and British Columbia now, because the basin is so mature. We look for multi-baggers at Sprott, so we look for opportunities that have well in excess of 100 percent potential upside on our investment.

StockInterview: Sprott Asset Management appears to be betting on an ongoing energy crisis, does it not?

Eric Nuttall:

Absolutely. It’s a very strong macro view of Sprott Asset Management, that due to the world having peaked in its ability to produce meaningfully more oil, we are in an environment of sustainably high energy prices, whether they are natural gas, oil, coal, or uranium.

StockInterview: Which are some of your favorite CBM investments?

Eric Nuttall:

The most interesting one to us currently is Canadian Spirit Resources (TSX: SPI). We own about 15% of the company. It is a significant player in an emerging CBM play in Farrell Creek, which is north of Hudson Hope in northeastern British Columbia.

What’s unique about Canadian Spirit is the company’s president Phil Geiger worked at Chevron between 2002 and 2003 at a time, when Chevron was deciding whether to pursue CBM development. Natural gas prices were low and Chevron decided not to pursue CBM. Phil Geiger was then able to leave with all of the data that he had accumulated over that time in which he evaluated potential CBM plays across the country. Farrell Creek was the one project he decided to pursue. Last year, Sproule Associates, the premier CBM reserve engineering company, assigned a contingent resource of 9 to 14 Bcf of gas in place per section, based on 46 sections. The company now sits on almost 60 net sections. Sproule is set to release a new report evaluating the entire Gething Formation. I think the assigned gas in place number could easily double. With gas content confirmed, the next risk was economic productivity. On March 15th of this year the company, after refining their frac job, released a stabilized rate of 250 – 300mcf/d from only part of the formation in one well. This is in my opinion clearly an economic rate.

Should Canadian Spirit Resources be able to replicate this rate on future wells, the company could be sitting on over 1 Trillion cubic feet of net recoverable gas, with a Duke gas pipeline running right through their property with 100MMcf/d of spare capacity. Though it would take many years to develop, if one were to value Canadian Spirit on a take-out basis I do not think it unreasonable to place a value of $1 per Mcf of recoverable gas, suggesting a market capitalization of $1 billion, roughly 7X larger than today’s. It is important to note that the play is still in its infancy. Significant risk still remains. But this story possesses the type of upside that we look for, hence our significant ownership in the company.

StockInterview: Is there a favorite CBM company in Alberta’s Mannville area?

Eric Nuttall:

Ember Resources (Toronto: EBR) is the only pure play Mannville CBM company in Canada, and has approximately 219,000 acres of potential Mannville exposure. Half of their Mannville acreage offsets the Nexen/Trident Manville Project that was declared commercial in July of 2005, and whose partners plan on investing $400 million over the next year and a half to prove up the productivity of the acreage. Expectations of companies pursuing Mannville are that each section will recover approximately 3.6Bcf. Ember has over 340 net sections that are prospective. So their potential could be quite large, though it will take many years to prove up their resource potential. An investor should apply an appropriate risk factor to their acreage. I wouldn’t be surprised if Ember were to be acquired at some point in the future, since it is extremely difficult to accumulate such a large contiguous area of prospective acreage.

StockInterview: Can you share another favorite with us?

Eric Nuttall:

Another company would be Rockyview Energy (Toronto: RVE), which was a spin-out out of APF Energy Trust. They were one of the first energy trusts to pursue coalbed methane. The management team is solid. Steve Cloutier, the President, was one of the cofounders of APF Energy Trust and was able to bring along his CBM technical team from the Trust to Rockyview. Rockyview has both existing conventional and CBM production, and is trading at roughly industry multiples on a cash flow basis. However, the company sits on significant Horseshoe Canyon and Mannville acreage, with 132 net sections of HSC and 55 net sections of Mannville exposure. On a risked basis, the company could have 160Bcf of unbooked resource potential. At a NPV of $1.50 per Mcf in the ground, would suggest the possibility of appreciation of over 100%. I think Rockyview would be a great take-out candidate for a Trust seeking low decline assets. I wouldn’t be surprised if the company is not around in a year from now.

StockInterview: Are there many pure plays?

Eric Nuttall:

It’s difficult to find pure CBM plays. There is Ember, Canadian Spirit, Rockyview, many others I wouldn’t necessarily recommend. Maholo Energy (Toronto: CBM) is an exciting story I believe has significant upside potential. But their primary growth asset is not in Canada, it’s in Oklahoma, targeting a CBM horizon, but also an emerging shale play in the Caney/Woodford Shale.

StockInterview: Do you ever look outside North America to invest in CBM?

Eric Nuttall:

There really aren’t many coalbed methane plays that I’m aware of outside of North America other than in China. A few companies have chased CBM in Australia, but they have not to my knowledge had a tremendous degree of success. I think anyone who has invested in an Australian coalbed methane story has not had a very pleasurable experience. We’re invested in a few Chinese CBM companies. We’re invested in Pacific Asia China Energy (TSX: PCE). We’re also in a private company called Terrawest, which will be going public later this year. We’ve found in general investments in Chinese CBM companies to have been somewhat challenging. It can take an extraordinarily long amount of time to sign a production sharing agreement with either CUCBM or with one of the state oil and gas companies. The wheels of bureaucracy move slightly slower in China than in North America.

Thankfully, future investors in Terrawest won’t have to endure the wait that we had to go through. I expect over the next year that China will become a hotbed for natural gas exploration, and would encourage investors to seek companies that have already signed production sharing agreements. Both Pacific Asia China Energy and Terrawest have such agreements.

COPYRIGHT © 2007 by StockInterview, Inc. ALL RIGHTS RESERVED.

James Finch contributes to StockInterview.com and other publications. StockInterview’s “Investing in the Great Uranium Bull Market” has become the most popular book ever published for uranium mining stock investors. Visit http://www.stockinterview.com

Spring breakup came early for Forum Development (TSX: FDC), and today’s news release showed a continuation of the decline which began a few trading days ago. Cutting short the drill campaign was weather-related, not result-related. In talking with Rick Mazur about his joint venture’s recent drill campaign at Costigan Lake in Canada’s Athabasca Basin, there was a sort of sadness in his voice. “Unfortunately due to spring breakup coming a little more quickly upon us, we were unable to continue our planned program and to drill two further holes we wanted to test,” Mazur told us.

What Forum did find will be interpreted by Dr. Boen Tan, when assays come back from the lab. Mazur expects them by the end of this month. Dr. Tan’s interpretation may very well turn around the stock’s recent and steep sell-off. This is the typical “buy on the mystery, sell on the history” found in nearly all Canadian exploration plays. The news release announces 824 meters of drilling. Five holes were drilled at shallow depths, between 125 and 160 meters. Three of the holes encountered radioactivity in the C3 conductor. Five holes spaced out over a 2.4 kilometer strike length was a pretty speculative exploration plan, but the plan was to find a “sniff” of uranium mineralization and not a uranium mine. We believe there may be reason for optimism with the exploration project.

We talked about the C3 conductor. “This one conductive trend occurs over the full extent of the property,” Mazur explained. “It hosts the uranium mineralization from previously drilling from 1978-79 appears to be the conductive horizon of interest to us. There is anomalous radioactivity in the footwall of the graphitic horizon, which is highly encouraging to us. It is typical of the mineralization which occurs in the basement rocks at Key Lake (Athabasca Basin, Saskatchewan province in Canada).” Mazur talked a bit more about the geology, “The drilling has confirmed that it is due to a very thick graphitic horizon. That’s promising.”

So where does Forum Development stand on this property? “We have to go back in and drill some more holes,” said Mazur. “This drilling campaign has verified that it does have potential. At this stage, we would most certainly like to go back in and continue drilling.” But he laughed and added, “Of course, I have to go over that with my joint venture partner.” He was referring to Breakwater Resources, which is the minority joint venture partner on the Costigan Lake project. Mazur will be mobilizing the company’s wholly owned Maurice Point project for a summer program. Maurice Point is where Forum’s geologists found uranium mineralization over a 100 meter strike extent, grading up to 7.3 percent U3O8 during the last field season.

Forum Development shares may be down for now, and may bottom around these levels, depending upon the momentum of the spot uranium price. But, don’t rule them out so fast. They have planned a series of exploration projects over the coming twelve months, which should again create some upward momentum. For the speculatively minded, the quiet period between exploration programs may offer an opportunity to acquire shares at bargain prices, before the next momentum rally. If spot uranium prices continue to rise, or sustain at the current price level above $40/pound, then optimism in the sector will continue. And Forum Development should hold its own, stock-wise.

COPYRIGHT © 2007 by StockInterview, Inc. ALL RIGHTS RESERVED.

James Finch contributes to StockInterview.com and other publications. StockInterview’s “Investing in the Great Uranium Bull Market” has become the most popular book ever published for uranium mining stock investors. Visit http://www.stockinterview.com

A recent news release issued by Uranium Resources (OTC BB: URRE), emphasizes the underlying stress this uranium bull market is creating for utilities. The company’s appears to confirm that spot uranium prices should run much higher over, at least, the short term. Uranium Resources announced it was restructuring its long-term sales contracts in order to establish a “market related” contract with Itochu Corporation. This the multi-national Japanese-based conglomerate has more than 150 offices in 80 countries and over 4,000 employees. This should give Uranium Resources a strong boost in the international uranium mining community, which is growing more populated each month.

On February 10th, we talked to Paul Willmott, chairman and chief executive of Uranium Resources about the nature of the current uranium cycle. He told us, “…everybody is entering into ‘market related contracts,’ which is the price at the time of delivery. Because it’s a seller’s market, they are able to get floors that protect them in the same way they would be protected by having a long-term price.”

Willmott did just that. He is willing to pay Atlanta-based UG USA, a uranium broker and trading company, $12 million to terminate a long-term uranium supply contract. Otherwise, it would have run through 2008 on prices, which would not have been favorable to Uranium Resources. His terms with Itochu Corporation established a floor of at least $30/pound on the first 3.65 million pounds of uranium deliveries. Uranium Resources also plans to raise up to $45 million, plans to forward split its stock 1-for-4, and hopes to list on the NASDAQ National Market. With a market capitalization in excess of $300 million, and climbing, there is no surprise with the latter of those announcements.

What Uranium Resources accomplished with their recent news announcement was two-fold: (a) it points to a higher spot uranium price over the next several months; (b) other utilities have been alerted and may begin pursuing deals with other U.S. uranium juniors. We have frequently written that there is a scramble on for uranium by U.S. and Asian utilities. At least two uranium juniors have told us they’ve met with utility companies about contracting for their not-yet-mined uranium. These were early negotiations. Uranium Resources’ news announcement has primed the pump for these and other negotiations to accelerate.

Uranium Resources also announced a joint venture with Itochu Corporation to develop the company’s Church Rock (New Mexico) property. Itochu has agreed to fund development costs, estimated at $32 million, in exchange for 50 percent of the profits. Itochu will also pay the cost of a feasibility study, about $675,000. That Itochu has decided to pursue this joint venture is a very positive sign for not only Uranium Resources, but for others who plan to develop their New Mexico uranium properties. The two top contenders include Strathmore Minerals (TSX: STM; Other OTC: STHJF) and Energy Metals (TSX: EMC). Both have properties nearby (within walking distance) of Uranium Resources’ Church Rock property. What is good for Uranium Resources will also be good for these two uranium development companies.

The primary concern some investors had about Church Rock was that there might be delays because of the New Mexico environmentalists and their surprisingly strong influence over the current Navajo president, Joe Shirley Jr. With the entrance of Itochu into New Mexico, this may open the door to greater uranium mining development efforts in that state by the current contenders. We believe this may open the doors to more companies taking a greater interest in New Mexico. It would not be surprising for other major companies, on the level of an Itochu, to begin thinking about buying into New Mexico for uranium mining.

COPYRIGHT © 2007 by StockInterview, Inc. ALL RIGHTS RESERVED.

James Finch contributes to StockInterview.com and other publications. StockInterview’s “Investing in the Great Uranium Bull Market” has become the most popular book ever published for uranium mining stock investors. Visit http://www.stockinterview.com

When investors look ahead to what may be great investments for the next year, they much too often focus on what were big winners from the previous year. For example, shares of Google (GOOG) more than doubled in price during 2005. So, quite naturally, Google gets a lot of attention these days as a good investment choice.

But investing in what’s currently popular isn’t usually the most profitable move. The big winners in the future are much more likely to be stocks that are unpopular right now but happen to represent ownership in great businesses.

One such business may be American Eagle Outfitters (AEOS). American Eagle caters to teenage shoppers who tend to change preferences in clothing retailers based on which way the wind is blowing.

The stock is down about 30% in the last five months. However, American Eagle happens to be a very good business that can be bought at a bargain price. A high return on capital virtually guarantees that a business is a good one. And American Eagle certain qualifies on that count. By my calculations, its return on capital (earnings before interest and taxes divided by net working capital and net fixed assets) is 48%.

And shares of American Eagle can be bought at a bargain price right now. Its earnings yield (earnings before interest and taxes divided by enterprise value) appears to be about 17%.

A good company at a cheap price. That’s a combination that makes money for patient investors. American Eagle may be flying low right now. But look for the eagle to soar again.

This article is for education purposes only and should not be considered to be investment advice.

(C) Larry Holmes

Larry Holmes invites you to visit http://www.smart-money-report.com/ Your common sense guide for financial and investment success.

Excuse me for saying so what appears that General Motors loss of $323 million in Q1 is no time to celebrate. However analysts say that they beat the Street, as their losses were expected to be a lot worse. I find a troubling that someone would consider this to be good news. In fact I am appalled at the lousy business media coverage on this issue.

Failure is not an option, weakness is not an American trait and GM’s loss is not a good thing. In fact their dismal performance and excuse ridden rhetoric is typical of something you’d find coming out of Washington D.C. and not the largest automaker in the world.

But apparently investors are happy to see the GM only lost $323 million; this news insanity. General Motors failed to adapt and their labor relations are terrible, while their vendors are out for them selves and GM has over $10 billion and under funded pensions. Excuse me but what’s wrong with this picture?

Their Chief Executive Officer Rick Wagoner is reducing pension contribution costs and reneging on prior promises, while trimming health-care benefits and over 35,000 jobs. Additionally they’re building six plants in Mexico to build cars. It seems rather odd that anyone ever said; “what’s good for GM is good for America” because today from where I stand it appears to me that what’s good for GM is much better for Mexico then America.

Due to General Motors failure to time the market and learn from the Deming years, may have given 10 percent of their market share to Toyota; how can they sit here today and say they’ve made a few mistakes, but they have everything under control. As far as I am concerned it looks to me like GM is toast and they will continue to lose market share to the Japanese automakers and God help them with the Chinese start importing cars in 2007. Consider this in 2006.

"Lance Winslow" - Online Think Tank forum board. If you have innovative thoughts and unique perspectives, come think with Lance in the Online Think Tank and solve the problems of the World; www.WorldThinkTank.net/

Pacific Ethanol, Inc. is a publicly traded company (NASDAQ: PEIX) that is engaged in the development, production and marketing of renewable fuels in the United States. The company has five ethanol plants under construction on the West Coast with expected capacity of 200 million gallons. In addition, the company’s wholly owned subsidiary is one of the largest marketers of ethanol and generated in excess of $82 million in sales last year.

Since January, the stock of Pacific Ethanol, Inc. (NASDAQ: PEIX) has increased almost 400% and currently trades at a market valuation in excess of $1 billion. Why all the investor excitement?

Pacific Ethanol may be in the right place and at the right time for the following reasons:

a) Ethanol is a commercially viable fuel additive that is rapidly taking the place of a fuel additive which has been banned in many states.

b) Ethanol additives results in less pollution than existing gasoline.

c) Demand for ethanol has far exceeded the industries production capacity.

d) The production of ethanol has been highly profitable.

e) Federal and State governments are rapidly moving towards the use of alternative fuels to reduce dependence on foreign oil.

f) They have one of the strongest management teams and board of directors.

g) The company has attracted significant funding, including approximately $84 million in preferred stock from Cascade Investment, LLC, which is owned by Bill Gates.

Historically, companies with strong management, access to necessary investment capital and with critical mass in a rapidly growing industry – are companies to watch very closely. We believe that the Pacific Ethanol is well positioned to capitalize from the production and marketing of ethanol and should be watched closely.

Joel Arberman is the Managing Member of Stock Aware, LLC. We publish a free investment research and analysis newsletter and offer investor relations and investor awareness services. Learn more at StockAware.com

Bill Gates is super rich but his once high-flying software company has been in the doldrums since mid-2002 after falling from the $35 level. The problem with Microsoft (MSFT) has been its failure to grow both its revenues and earnings at the superlative rates the company once enjoyed.

Any company the size of Microsoft, with a market-cap of $242 billion, will find growth an issue because of its size. But this is not to say the stock is dead. Far from it, Microsoft remains a viable long-term software company and is cash rich with $34 billion or $3.28 per share in cash. This gives the stock plenty of financial flexibility to develop or buy growth technologies. Microsoft just announced it would spend $1.1 billion in R&D at its MSN Internet unit in the FY07. And according to the Wall Street Journal, Microsoft is exploring the possibility of taking a stake in Internet media company Yahoo (YHOO) to take on Internet advertising behemoth Google (GOOG).

But with an estimated five-year earnings growth rate of a pitiful 12%, the company has its work cut out for it. Trading at 16.30x its estimated FY07 EPS of $1.44, the stock is not expensive but appears to be priced not as a growth stock.

Its PEG on the surface of 1.51 is not cheap, but if you discount in the cash of $3.28 per share, the estimated PEG falls to around 1,0, a decent valuation. Also, if Microsoft can improve on its estimated 12% growth rate, the PEG would decline further.

The fact is Microsoft at the current price deserves a look. If you want to play the stock but don’t want to shell out the $2,347 for a 100-share block, you may want to take a look at the long-term options, also known as LEAPS. For instance, the in-the-money January 2008 $22.50 Microsoft Call LEAPS not set to expire until January 18, 2008 currently costs $380 a contract (100 shares).

This means you risk a total of $380 for the chance to participate in the potential upside of 100 shares of Microsoft over the next 20 months. The breakeven price is $26.30. If Microsoft breaks $26.30, you would begin to make money on your LEAPS. Conversely, if Microsoft fails to do anything, your maximum risk is $380 on the initial option play.

Warning: The aforementioned example is for illustrative purposes only and not to be construed as an actual option strategy. Due to the higher risk inherent in options, I recommend you speak with an investment professional before deciding to employ any strategy involving options.

George Leong is the founder of Investornomics.com (http://www.investornomics.com) - a provider of independent stock and option trading commentary. He has a degree in finance/economics and offers over 15 years of research experience in investing and trading.

On new year day, I wrote a piece of article to sell your 2005 winners. The lists include: Nutrisystem (NTRI), GeoGlobal Resources (GGR), Peerless Systems (PRLS), ViroPharma (VPHM) and Fieldpoint Petroleum (FPP).

I reasoned that we should sell these best performing stocks simply because history is not on their side. Most best performing stocks will lose value during the subsequent years. It is not the end of the year yet but the performance of these stocks during 2006 bears some striking resemblance except one:

NutriSystem (NTRI), up 75.7%
GeoGlobal Resources (GGR), down 40.0%
Peerless Systems (PRLS), down 24.7%
ViroPharma (VPHM), down 39.5%
Fieldpoint Petroleum (FPP), down 4.3%

As I pointed out at the beginning of the year, the reason for selling was merely statistical one. So far this year, I am correct on most of this call except for this one stock, Nutrisystem (NTRI). What on earth is going on? Late Monday April 24th 2006, NutriSystem reported earnings of 60 cents or $ 22.3 Million for the first quarter of 2006. Most importantly, earning soars from 10 cents a year earlier and it tops analyst’s estimate by 20 cents. For your information, that is 50% more profits than estimate. As a consequence, share rises 30% in early trading.

If you look at past best performers, they all experienced sickening drop on the subsequent year. Therefore, the question now is: Should you sell NutriSystem if you still own it? I have recommended selling your shares for the best performing company in 2005 on January 1st 2006. I still believe that statistically, NutriSystem is poised to fall. However, statistics is just that. Boston Red Sox won the World Series (finally), after 80 years of drought. Thus, nothing in this world is quite certain but the odd for NutriSystem is getting slimmer and slimmer.

If you own the other stocks mentioned above, it may be too late to sell, as they have already experienced quite a sizable drop. But, for NutriSystem share owners out there, if you bought it at the beginning of 2005, statistically, this may be a wonderful time to sell. But, please note that I have done no research whatsoever regarding the fundamental of these companies. I am merely expressing my opinions based on past statistics.

Distributing your own investing content is easy. Simply, click here. Furthermore, you can get your free investing idea at http://www.noviceinvesting.com.

When you look at stocks trading at a P/E ratio of 15, you will think of stodgy food companies or steel companies at its peak, not the technology sector. The technology sector, used to be stocks with the highest valuation and growth rate. These days, you can find ample companies in the techland that fits the criteria of value play. This is defined as companies with slower growth and thus lower P/E ratio. Furthermore, they are solid companies with long history of profitability, not some funky google-style outfit.

Prepare your notepad and take note. This won’t take long.

Microsoft Corp. (MSFT). Microsoft is the stock investors love to own during the 1990s. Two Harvard school drop-out has built Microsoft into the world largest software company. In recent years, stock has languished between $ 24 - $ 30 range. Lately, it has done worse. Stocks fell sharply after Microsoft reports its third quarter earning on April 27th 2006. It reported so so earnings and plans to spend $ 2 Billion into its research and development to wage war against search engine giant, Google Inc. Subtracting its $ 4.29 of positive net cash, at recent price of $ 23.77, Microsoft is trading at 13.9 times fiscal 2007 earning estimate. ($ 1.40 earning per share estimate). Heck, that is considered cheap for any kind of companies. It is extremely cheap for companies having excellent balance sheet like Microsoft. This is definitely one stock that is worth researching for.

Long history of profitability? Yes, of course. Microsoft has poured in billions of dollars into its coffers as it has successfully sold PC with windows software as a ‘necessity’.

Intel Corporation. (INTC). Intel was synanomous with its pentium chips. It is installed in more than 80% of personal computers around the world. That doesn’t make it immune to setbacks. In the latest announcement, the company has decided to engage in belt tightening for the first time in Intel’s history. Intel is expected to eliminate 2 to 3 % of its workforce, mainly through attrition.

Balance sheet is solid at Intel as well. In the latest quarter, it shows a $ 2.61 positive net cash while earning for the year is expected to top $ 1.00. At recent price of $ 19, Intel is trading at 16.39 times future earnings. It is not exactly cheap but history shows that it can bounce back from short-term setbacks. Furthermore, it has long history of profitability, apparent from the $ 29.9 Billion of its retained earning on its balance sheet. This is not earned within one year, but rather through years of consistent profitability.

Dell Inc. (DELL). This is one more fallen angels that has traded cheapest in recent years. For starter, it spot a clean balance sheet with $ 4.58 of positive net cash. With expected earning estimate of $ 1.61 and recent share price of $ 24.89, Dell is trading at 12.6 times future earnings. While Dell may look cheap and you can start researching this company, it has been known to provide low cost reliable PC. Competition from other low cost providers seemed to have eaten into Dell’s growth and it may lose its edge as the provider of low cost PC.

Symantec Corp. (SYMC). The provider of security and anti virus software has fallen dramatically in recent months. Defections of key personnel and has brought its shares to the $ 17 level. Furthermore, Veritas acquisition is slower than expected and has yet to bear any fruit. However, with $ 2.68 of positive net cash and $ 0.99 of this year’s earning estimate, Symantec is only trading at 14.5 times EPS. This share is worth looking at despite its short-term setback.

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