From: owner-canslim-digest@lists.xmission.com (canslim-digest) To: canslim-digest@lists.xmission.com Subject: canslim-digest V2 #3335 Reply-To: canslim Sender: owner-canslim-digest@lists.xmission.com Errors-To: owner-canslim-digest@lists.xmission.com Precedence: bulk Content-Transfer-Encoding: quoted-printable X-No-Archive: yes canslim-digest Tuesday, May 27 2003 Volume 02 : Number 3335 In this issue: Re: [CANSLIM] VRNT and new offering RE: [CANSLIM] usna, stcr RE: [CANSLIM] VRNT and new offering RE: [CANSLIM] VRNT and new offering RE: [CANSLIM] VRNT and new offering ---------------------------------------------------------------------- Date: Mon, 26 May 2003 23:14:43 EDT From: Spencer48@aol.com Subject: Re: [CANSLIM] VRNT and new offering Katherine: I may be wrong; I'm not sure (it's kind of late at night for me). That's why I'm asking: The new shares being issued are about 20% (ie, 5Mill shares of about 24Mill). The '03 earnings in DGO are est. at increasing 30%, and '04 at 27%. Therefore, is it kosher to deduct the 20% from the 30% and 27% (making 30-6=24% and 27-5.4=21.6%), instead of converting to dollar amounts first and then seeing how much EPS increases? In a message dated 5/26/2003 10:12:18 PM Eastern Daylight Time, kmalm@earthlink.net writes: << The additional 5m shares will raise the total outstanding shares from 23.4 to 28.4m shares, so it's not quite as dramatic as it seems when you say they're "doubling the float." While increasing the number of outstanding shares by 5m will dilute the earnings, it is diluted across the total *outstanding* shares,.. >> jans - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Mon, 26 May 2003 22:38:42 -0500 From: "Katherine Malm" Subject: RE: [CANSLIM] usna, stcr Hi Tomas, If I were looking at action on 5/6, I might have considered 4/22 as the pivot, but the "handle" is upward drifting along its lows and therefore poorly formed. My general conclusion in that case is that the right side of the cup hasn't yet finished off and that a proper handle hasn't yet formed, giving the all clear for a good setup and impending breakout. See the notes on my original daily chart demonstrating the upward drift from 4/22 until the real handle forms. In retrospect on a chart like this, you might say, "so what, it didn't pullback all that much in the actual handle and it broke out any way." Problem is, for every stock that looks like this, there are 20 that had a poorly formed handle, staged a false breakout and then rolled over into oblivion. Those aren't generally the stocks that come up for discussion, so the point gets lost in the parade of good stocks that worked. Katherine - -----Original Message----- From: owner-canslim@lists.xmission.com [mailto:owner-canslim@lists.xmission.com]On Behalf Of Tomas Sent: Monday, May 26, 2003 8:51 PM To: canslim@lists.xmission.com Subject: RE: [CANSLIM] usna, stcr Katherine, I originally interprest the pivot to be at 4/22. And the BO could be 5/6. Or you could interpret the pivot point to be on 5/6 and BO on 5/15. To me, the two interpretations look to be right. If you see the chart on 5/6, do you think you would have the first interpretation? tomas - --- Katherine Malm wrote: > Hi Dave, > > On STCR, I wouldn't agree the breakout was on 5/6. > It's easier to > demonstrate by looking first at the weekly chart, > where you can see the last > bit of action on the right side of the cup and then > the 1 week handle. > > http://www.cwhcharts.com/katherine/STCRWkly052303.JPG > > Here's a close-up of the daily action in the cup, > showing when the pivot > formed to start the handle and the subsequent > breakout on 5/15: > > http://www.cwhcharts.com/katherine/STCR052303.JPG > > Katherine > > -----Original Message----- > From: owner-canslim@lists.xmission.com > [mailto:owner-canslim@lists.xmission.com]On Behalf > Of david rossing > Sent: Saturday, May 24, 2003 9:25 AM > To: canslim@lists.xmission.com > Subject: Re: [CANSLIM] usna, stcr > > > Tomas, > Thanks for the reply. > I've been holding USNA for a while now. I guess > i'll hold a little > longer and see if it goes on again from here. > > For STCR, I was actually looking at a pivot on 5/6 > of 12.3. Any > thoughts on what is the "right" pivot here? I > bought on the breakout > past that before I sent my questions last week. > > Dave > > --- Tomas wrote: > > Dave, > > > > USNA fundies looks good (it's on my watchlist). > The > > charts looks good. If you have it already, I > don't > > see any reason to sell yet. Looks like it's going > > sideway, swallowing the recent gains. > > > > As for STCR, if you are looking to buy, I think it > is > > a little too late. The left side of cup is at > 1/30. > > Pivot point is on 4/22(beginning of handle) at > $11.95. > > The BO could be 5/6 at $12.37. Volume was up > that > > day, but price did not go up that much. Not sure > if > > that is a good BO. Maybe a better BO would be > 5/14 at > > $12.45. A buy at either BO day would be good > since it > > did not go below %8 of the buy point. However, > > currently, it is extended from the base for a buy > > point. > > > > The fundies looks good. Good earnings and RS. > The > > only thing I would worry about is the industry > > strength. That industry is definitely not one of > the > > better ones. > > > > just my $.02 > > tomas > > > > > > 4-4 6.82/7 8.75/11 15.57/18 > > > > --- david rossing > wrote: > > > I was just wondering about opinions on two > stocks. > > > > > > USNA broke out of a base back in October and has > > > been going up for a > > > while. It still looks like good earnings and > > > revenue growth. In the > > > past week or so, the price has been dropping on > > > increasing volume. On > > > Friday, it went up on low volume. Is this price > > > action a good sell > > > signal to get out, or maybe just a yellow flag? > > > > > > The second is STCR. It just broke out of what > looks > > > like a CWH to me. > > > It has good earnings and rev growth. The RS > line is > > > not quite at new > > > highs in the breakout over the past two days and > the > > > industry doesn't > > > look great. > > > > > > Any opinions on fundamentals or charts would be > > > greatly appreciated. > > > Thanks. > > > > > > Dave > > > > > > > > > __________________________________ > > > Do you Yahoo!? > > > The New Yahoo! Search - Faster. Easier. Bingo. > > > http://search.yahoo.com > > > > > > - > > > -To subscribe/unsubscribe, email > > > "majordomo@xmission.com" > > > -In the email body, write "subscribe canslim" or > > > -"unsubscribe canslim". Do not use quotes in > your > > email. > > > > > > __________________________________ > > Do you Yahoo!? > > The New Yahoo! Search - Faster. Easier. Bingo. > > http://search.yahoo.com > > > > - > > -To subscribe/unsubscribe, email > "majordomo@xmission.com" > > -In the email body, write "subscribe canslim" or > > -"unsubscribe canslim". Do not use quotes in your > email. > > > __________________________________ > Do you Yahoo!? > The New Yahoo! Search - Faster. Easier. Bingo. > http://search.yahoo.com > > - > -To subscribe/unsubscribe, email > "majordomo@xmission.com" > -In the email body, write "subscribe canslim" or > -"unsubscribe canslim". Do not use quotes in your > email. > > > > - > -To subscribe/unsubscribe, email > "majordomo@xmission.com" > -In the email body, write "subscribe canslim" or > -"unsubscribe canslim". Do not use quotes in your email. __________________________________ Do you Yahoo!? The New Yahoo! Search - Faster. Easier. Bingo. http://search.yahoo.com - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Mon, 26 May 2003 21:24:13 -0700 From: "Jerome Buckmelter" Subject: RE: [CANSLIM] VRNT and new offering This is a multi-part message in MIME format. - ------=_NextPart_000_0001_01C323CD.291362B0 Content-Type: text/plain; charset="us-ascii" Content-Transfer-Encoding: 7bit Katherine, Wow! What an education on outstanding shares and spin-offs. I'm awestruck! Spencer makes a point that I never considered. Has the public offering been factored into the future estimates? Should I do that as Spencer suggests or do you think the analyst have already factored the public offering into the estimates? Thanks again for the thorough response to my inquiry. It is really appreciated. Jerome - -----Original Message----- From: owner-canslim@lists.xmission.com [mailto:owner-canslim@lists.xmission.com] On Behalf Of Katherine Malm Sent: Monday, May 26, 2003 7:11 PM To: canslim@lists.xmission.com Subject: RE: [CANSLIM] VRNT and new offering Hi Jerome, The parent, Comverse, owns 79% (about 18.5m shares) of the common. That is, VRNT is a spinoff, though the parent retains controlling interest. This is the same kind of situation you see when looking at APOL and their spinoff, UOPX, for example. When you view managment ownership in this case, you have to know that they own 700K shares of a very small pool available, as only 21% of the common (about 4.9m shares) is actually available for general ownership. As a business strategy, the reason a company is spun off in the first place is to allow it to function as a stand alone business, separate from the less focused businesses in which the parent is involved. That focus allows a the spinoff to concentrate on their core competencies and develop their competitve advantage to the fullest so as to compete more effectively. In other words, it wouldn't make sense to judge VRNT's business based on whether or not the parent itself (CMVT), which is far less focused and in other businesses all together, is itself a CANSLIM quality business. That's essentially judging a business based on the quality of its shareholders rather than on the merits of the business itself. In a primary offering all the proceeds go to the company. Why would they sell more shares? To raise capital for various business needs. (They could have also issued debt to do the same thing but then they have the additional cash flow requirements to service the debt.) As to the offering, the best way to figure out why they're floating a primary is to read the S-3 statement itself. In this case, they state the proceeds will be used as follows: "We intend to use the net proceeds to finance the growth of our business and for general corporate purposes. We may also use a portion of the proceeds for acquisitions or other investments." Reference: ( http://ccbn.tenkwizard.com/filing.php?repo=tenk &ipage=2160683&doc=1&num=7&total=106&count=1&pg=zc7Jz8nHzNHOz8rMxs3Kzc/P &TK=VRNT&CK=0001166388&FG=0&FC=000000&BK=FFFFFF&SC=ON&TC1=FFFFFF&TC2=FFF FFF&LK=0000FF&AL=FF0000&VL=800080 ) The additional 5m shares will raise the total outstanding shares from 23.4 to 28.4m shares, so it's not quite as dramatic as it seems when you say they're "doubling the float." While increasing the number of outstanding shares by 5m will dilute the earnings, it is diluted across the total *outstanding* shares, not just the float. In practicality, they must then invest the dollars raised wisely to grow the business. If they do that, then they have *leveraged* the additional capital to the betterment of the business, and that will translate into accelerated growth, which is exactly what you want to see in a CANSLIM quality stock. Given that common stock represents residual interest in the business, this is the quintessential us of "other people's money." In the short run, the additional shares in float can take a bit of time to absorb into the market place, and you may see price fall back a bit. In the long run, however, if the proceeds are used appropriately and investors see promise in the business as a result, they will bid up the price of the shares, which is again exactly what you would want to see in a CANSLIM quality stock. In the DGO/IBD figures, they state the management ownership as a % of *outstanding* shares, and both bank and mutual fund ownership as a % of the *float.* You'd have to show a specific example where fund ownership was >100% so that we could look at it. Katherine -----Original Message----- From: owner-canslim@lists.xmission.com [mailto:owner-canslim@lists.xmission.com]On Behalf Of Jerome Buckmelter Sent: Monday, May 26, 2003 12:48 PM To: 'CANSLIM LIST' Subject: [CANSLIM] VRNT and new offering I've noticed that VRNT has recently registered a public offering for 5,000,000 common shares. They currently have 3.98 million shares in the float and 23.4 shares outstanding. Management owns only 3% (i.e., 700, 000 shares). What would be the status of the remaining shares? Could they all be registered as stock options? Why would the company want to double the float? Wouldn't doubling the float significantly diminish the price per share? Should this action be considered negative for the stock? Also, Verint is owned as a subsidiary of Comverse Technologies which isn't doing well in terms of CANSLIM criteria. What possible impact could this have on the stock? Lastly, a general question: once in a while I notice that IBD indicates that fund ownership may exceed 100% for a given stock. How is that possible? - ------=_NextPart_000_0001_01C323CD.291362B0 Content-Type: text/html; charset="us-ascii" Content-Transfer-Encoding: quoted-printable

Katherine,<= /p>

Wow!  What an education on outstanding = shares and spin-offs.  I’m awestruck!  Spencer makes a = point that I never considered.  Has the public offering been factored into the future estimates?  Should I do that as Spencer = suggests or do you think the analyst have already factored the public offering into = the estimates?  Thanks again = for the thorough response to my inquiry.  = It is really appreciated.

Jerome

 

-----Original = Message-----
From: owner-canslim@lists.xmission.com = [mailto:owner-canslim@lists.xmission.com] On Behalf Of Katherine Malm
Sent: = Monday, May 26, = 2003 7:11 PM
To: = canslim@lists.xmission.com
Subject: RE: [CANSLIM] = VRNT and new offering

 

Hi Jerome,

 

The parent, Comverse, owns 79% (about 18.5m shares) of the common. That is, VRNT is a spinoff, though the = parent retains controlling interest. This is the same kind of situation you see = when looking at APOL and their spinoff, UOPX, for example. When you view managment = ownership in this case, you have to know that they own 700K shares of a very small = pool available, as only 21% of the common (about 4.9m shares) is = actually available for general ownership. As a business strategy, the reason a = company is spun off in the first place is to allow it to function as a stand = alone business, separate from the less focused businesses in which the parent = is involved. That focus allows a the spinoff to concentrate on their core competencies and develop their competitve advantage to the fullest so as = to compete more effectively. In other words, it wouldn't make sense to = judge VRNT's business based on whether or not the parent itself (CMVT), which = is far less focused and in other businesses all together, is itself a CANSLIM = quality business. That's essentially judging a business based on the quality of = its shareholders rather than on the merits of the business = itself.

 

In a primary offering all the proceeds go to = the company. Why would they sell more shares? To raise capital for various = business needs. (They could have also issued debt to do the same thing but then = they have the additional cash flow requirements to service the debt.) As to = the offering, the best way to figure out why they're floating a primary is = to read the S-3 statement itself. In this case, they state the proceeds will be = used as follows:

 

"We intend to use the net proceeds to = finance the growth of our business and for general corporate purposes. We may also = use a portion of the proceeds for acquisitions or other investments." = Reference: ( http://ccbn.tenkwizard.com/f= iling.php?repo=3Dtenk&ipage=3D2160683&doc=3D1&num=3D7&tot= al=3D106&count=3D1&pg=3Dzc7Jz8nHzNHOz8rMxs3Kzc/P&TK=3DVRNT&am= p;CK=3D0001166388&FG=3D0&FC=3D000000&BK=3DFFFFFF&SC=3DON&= amp;TC1=3DFFFFFF&TC2=3DFFFFFF&LK=3D0000FF&AL=3DFF0000&VL=3D= 800080 )

 

The additional 5m shares will raise the total outstanding shares from 23.4 to 28.4m shares, so it's not quite as = dramatic as it seems when you say they're "doubling the float." While = increasing the number of outstanding shares by 5m will dilute the earnings, it is = diluted across the total *outstanding* shares, not just the float. In = practicality, they must then invest the dollars raised wisely to grow the business. If = they do that, then they have *leveraged* the additional capital to the = betterment of the business, and that will translate into accelerated growth, which is = exactly what you want to see in a CANSLIM quality stock. Given that common stock represents residual interest in the business, this is the quintessential = us of "other people's money." In the short run, the additional = shares in float can take a bit of time to absorb into the market place, and you = may see price fall back a bit. In the long run, however, if the proceeds are = used appropriately and investors see promise in the business as a result, they will bid up = the price of the shares, which is again exactly what you would want to see = in a CANSLIM quality stock.

 

In the DGO/IBD figures, they state the = management ownership as a % of *outstanding* shares, and both bank and mutual fund ownership as a % of the *float.* You'd have to show a specific example = where fund ownership was >100% so that we could look at = it.

 

Katherine

 

 -----Original = Message-----
From: = owner-canslim@lists.xmission.com [mailto:owner-canslim@lists.xmission.com]On Behalf Of Jerome Buckmelter
Sent: = Monday, May 26, = 2003 12:48 PM
To: 'CANSLIM LIST'
Subject: [CANSLIM] VRNT = and new offering

I‘ve noticed that = VRNT has recently registered a public offering for 5,000,000 common shares.  They currently have 3.98 = million shares in the float and 23.4 shares outstanding.  Management owns only 3% (i.e., 700, 000 shares).  What would be the status of the remaining shares?  Could = they all be registered as stock options?  = Why would the company want to double the float?  Wouldn’t doubling the float significantly diminish the = price per share?  Should this action = be considered negative for the stock?

 

Also, Verint is owned as a subsidiary of Comverse Technologies which isn’t doing well in = terms of CANSLIM criteria.   = What possible impact could this have on the = stock?

 

Lastly, a general = question:  once in a while I notice that = IBD indicates that fund ownership may exceed 100% for a given stock.  How is that possible? 

- ------=_NextPart_000_0001_01C323CD.291362B0-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Mon, 26 May 2003 23:29:35 -0500 From: "Katherine Malm" Subject: RE: [CANSLIM] VRNT and new offering Hi jans, I wouldn't make that conclusion at all. You're assuming that the dilution of earnings per share is permanent. The whole point of raising capital is to support continued growth. They obviously see this as a means for *meeting* the forward estimated growth rates (and possibly raising them). You may see some dilution in the near term, but that should dissipate. For example, let's say they use the capital for an acquisition. The additional revenues and earnings generated from the acquisition would raise their growth rate. Let's say they use it to buy a piece of manufacturing equipment that doubles their productivity. That raises their profit margins, allows them to produce twice the product in the same amount of time, and, if they sell the additional units they can now produce in the same amount of time, increases both revenues and earnings. As to the math generally, it gets a bit complicated because EPS is computed based on the average number of shares outstanding during the period. Just for that reason alone, I don't think mathematically you could get away with the kind of shortcut you're suggesting (though I don't know that for a fact!) Katherine - -----Original Message----- From: owner-canslim@lists.xmission.com [mailto:owner-canslim@lists.xmission.com]On Behalf Of Spencer48@aol.com Sent: Monday, May 26, 2003 9:15 PM To: canslim@lists.xmission.com Subject: Re: [CANSLIM] VRNT and new offering Katherine: I may be wrong; I'm not sure (it's kind of late at night for me). That's why I'm asking: The new shares being issued are about 20% (ie, 5Mill shares of about 24Mill). The '03 earnings in DGO are est. at increasing 30%, and '04 at 27%. Therefore, is it kosher to deduct the 20% from the 30% and 27% (making 30-6=24% and 27-5.4=21.6%), instead of converting to dollar amounts first and then seeing how much EPS increases? In a message dated 5/26/2003 10:12:18 PM Eastern Daylight Time, kmalm@earthlink.net writes: << The additional 5m shares will raise the total outstanding shares from 23.4 to 28.4m shares, so it's not quite as dramatic as it seems when you say they're "doubling the float." While increasing the number of outstanding shares by 5m will dilute the earnings, it is diluted across the total *outstanding* shares,.. >> jans - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Tue, 27 May 2003 07:44:29 -0500 From: "Katherine Malm" Subject: RE: [CANSLIM] VRNT and new offering This is a multi-part message in MIME format. - ------=_NextPart_000_0003_01C32423.CDD2DEB0 Content-Type: text/plain; charset="us-ascii" Content-Transfer-Encoding: 7bit Thanks, Jerome. I doubt that forward estimates make the assumption that the company will be floating new shares, though when a company is fairly new or in acquisition mode, those doing the the future earnings estimates may have some probabilities built in for that in their model. I don't know that I'd get overly concerned about it either way, as forward estimates are only one thing to consider in the overall look at the preponderance of evidence. Another thing to consider is that if it knocks back their forward growth from, say 30% to 26-27% in the near term, that's *still* an acceptable CANSLIM growth rate. I see the numbers as less important than the consistency and trend of growth over time. If a company can sustain 25-35% over many years (without resorting to accounting fraud!), those are some some kick-butt managers. Katherine -----Original Message----- From: owner-canslim@lists.xmission.com [mailto:owner-canslim@lists.xmission.com]On Behalf Of Jerome Buckmelter Sent: Monday, May 26, 2003 10:24 PM To: canslim@lists.xmission.com Subject: RE: [CANSLIM] VRNT and new offering Katherine, Wow! What an education on outstanding shares and spin-offs. I'm awestruck! Spencer makes a point that I never considered. Has the public offering been factored into the future estimates? Should I do that as Spencer suggests or do you think the analyst have already factored the public offering into the estimates? Thanks again for the thorough response to my inquiry. It is really appreciated. Jerome -----Original Message----- From: owner-canslim@lists.xmission.com [mailto:owner-canslim@lists.xmission.com] On Behalf Of Katherine Malm Sent: Monday, May 26, 2003 7:11 PM To: canslim@lists.xmission.com Subject: RE: [CANSLIM] VRNT and new offering Hi Jerome, The parent, Comverse, owns 79% (about 18.5m shares) of the common. That is, VRNT is a spinoff, though the parent retains controlling interest. This is the same kind of situation you see when looking at APOL and their spinoff, UOPX, for example. When you view managment ownership in this case, you have to know that they own 700K shares of a very small pool available, as only 21% of the common (about 4.9m shares) is actually available for general ownership. As a business strategy, the reason a company is spun off in the first place is to allow it to function as a stand alone business, separate from the less focused businesses in which the parent is involved. That focus allows a the spinoff to concentrate on their core competencies and develop their competitve advantage to the fullest so as to compete more effectively. In other words, it wouldn't make sense to judge VRNT's business based on whether or not the parent itself (CMVT), which is far less focused and in other businesses all together, is itself a CANSLIM quality business. That's essentially judging a business based on the quality of its shareholders rather than on the merits of the business itself. In a primary offering all the proceeds go to the company. Why would they sell more shares? To raise capital for various business needs. (They could have also issued debt to do the same thing but then they have the additional cash flow requirements to service the debt.) As to the offering, the best way to figure out why they're floating a primary is to read the S-3 statement itself. In this case, they state the proceeds will be used as follows: "We intend to use the net proceeds to finance the growth of our business and for general corporate purposes. We may also use a portion of the proceeds for acquisitions or other investments." Reference: ( http://ccbn.tenkwizard.com/filing.php?repo=tenk&ipage=2160683&doc=1&num=7&total= 106&count=1&pg=zc7Jz8nHzNHOz8rMxs3Kzc/P&TK=VRNT&CK=0001166388&FG=0&FC=000000&BK= FFFFFF&SC=ON&TC1=FFFFFF&TC2=FFFFFF&LK=0000FF&AL=FF0000&VL=800080 ) The additional 5m shares will raise the total outstanding shares from 23.4 to 28.4m shares, so it's not quite as dramatic as it seems when you say they're "doubling the float." While increasing the number of outstanding shares by 5m will dilute the earnings, it is diluted across the total *outstanding* shares, not just the float. In practicality, they must then invest the dollars raised wisely to grow the business. If they do that, then they have *leveraged* the additional capital to the betterment of the business, and that will translate into accelerated growth, which is exactly what you want to see in a CANSLIM quality stock. Given that common stock represents residual interest in the business, this is the quintessential us of "other people's money." In the short run, the additional shares in float can take a bit of time to absorb into the market place, and you may see price fall back a bit. In the long run, however, if the proceeds are used appropriately and investors see promise in the business as a result, they will bid up the price of the shares, which is again exactly what you would want to see in a CANSLIM quality stock. In the DGO/IBD figures, they state the management ownership as a % of *outstanding* shares, and both bank and mutual fund ownership as a % of the *float.* You'd have to show a specific example where fund ownership was >100% so that we could look at it. Katherine -----Original Message----- From: owner-canslim@lists.xmission.com [mailto:owner-canslim@lists.xmission.com]On Behalf Of Jerome Buckmelter Sent: Monday, May 26, 2003 12:48 PM To: 'CANSLIM LIST' Subject: [CANSLIM] VRNT and new offering I've noticed that VRNT has recently registered a public offering for 5,000,000 common shares. They currently have 3.98 million shares in the float and 23.4 shares outstanding. Management owns only 3% (i.e., 700, 000 shares). What would be the status of the remaining shares? Could they all be registered as stock options? Why would the company want to double the float? Wouldn't doubling the float significantly diminish the price per share? Should this action be considered negative for the stock? Also, Verint is owned as a subsidiary of Comverse Technologies which isn't doing well in terms of CANSLIM criteria. What possible impact could this have on the stock? Lastly, a general question: once in a while I notice that IBD indicates that fund ownership may exceed 100% for a given stock. How is that possible? - ------=_NextPart_000_0003_01C32423.CDD2DEB0 Content-Type: text/html; charset="us-ascii" Content-Transfer-Encoding: quoted-printable
Thanks, Jerome.
 
I doubt that forward estimates = make the=20 assumption that the company will be floating new shares, though when a = company=20 is fairly new or in acquisition mode, those doing the the future = earnings=20 estimates may have some probabilities built in for that in their model. = I don't=20 know that I'd get overly concerned about it either way, as forward = estimates are=20 only one thing to consider in the overall look at the preponderance of = evidence.=20 Another thing to consider is that if it knocks back their forward growth = from,=20 say 30% to 26-27% in the near term, that's *still* an acceptable CANSLIM = growth=20 rate. I see the numbers as less important than the consistency and trend = of=20 growth over time. If a company can sustain 25-35% over many years = (without=20 resorting to accounting fraud!), those are some some kick-butt=20 managers.
 
Katherine
-----Original Message-----
From:=20 owner-canslim@lists.xmission.com=20 [mailto:owner-canslim@lists.xmission.com]On Behalf Of Jerome=20 Buckmelter
Sent: Monday, May 26, 2003 10:24 PM
To: = canslim@lists.xmission.com
Subject: RE: [CANSLIM] VRNT and = new=20 offering

Katherine,

Wow!  What an education on = outstanding shares=20 and spin-offs.  I’m=20 awestruck!  Spencer = makes a point=20 that I never considered.  Has the=20 public offering been factored into the future estimates?  Should I do that as Spencer = suggests or=20 do you think the analyst have already factored the public offering = into the=20 estimates?  Thanks again = for the=20 thorough response to my inquiry. =20 It is really appreciated.

Jerome

 

-----Original=20 Message-----
From:=20 owner-canslim@lists.xmission.com = [mailto:owner-canslim@lists.xmission.com]=20 On Behalf Of Katherine = Malm
Sent:=20 Monday, = May 26,=20 2003 = 7:11=20 PM
To:=20 canslim@lists.xmission.com
Subject: RE: [CANSLIM] VRNT and = new=20 offering

 

Hi=20 Jerome,

 

The parent, Comverse, owns = 79% (about=20 18.5m shares) of the common. That is, VRNT is a spinoff, though = the=20 parent retains controlling interest. This is the same kind of = situation you=20 see when looking at APOL and their spinoff, UOPX, for example. When = you view=20 managment ownership in this case, you have to know that they own 700K = shares=20 of a very small pool available, as only 21% of the common (about 4.9m=20 shares) is actually available for general ownership. As a = business=20 strategy, the reason a company is spun off in the first place is to = allow it=20 to function as a stand alone business, separate from the less focused=20 businesses in which the parent is involved. That focus allows a the = spinoff to=20 concentrate on their core competencies and develop their competitve = advantage=20 to the fullest so as to compete more effectively. In other words, it = wouldn't=20 make sense to judge VRNT's business based on whether or not the parent = itself=20 (CMVT), which is far less focused and in other businesses all = together, is=20 itself a CANSLIM quality business. That's essentially judging a = business based=20 on the quality of its shareholders rather than on the merits of the = business=20 itself.

 

In a primary offering all the = proceeds go=20 to the company. Why would they sell more shares? To raise capital for = various=20 business needs. (They could have also issued debt to do the same thing = but=20 then they have the additional cash flow requirements to service the = debt.) As=20 to the offering, the best way to figure out why they're floating a = primary is=20 to read the S-3 statement itself. In this case, they state the = proceeds will=20 be used as follows:

 

"We intend to use the net = proceeds to=20 finance the growth of our business and for general corporate purposes. = We may=20 also use a portion of the proceeds for acquisitions or other = investments."=20 Reference: ( http://ccbn.tenkwizard.com/f= iling.php?repo=3Dtenk&ipage=3D2160683&doc=3D1&num=3D7&tot= al=3D106&count=3D1&pg=3Dzc7Jz8nHzNHOz8rMxs3Kzc/P&TK=3DVRNT&am= p;CK=3D0001166388&FG=3D0&FC=3D000000&BK=3DFFFFFF&SC=3DON&= amp;TC1=3DFFFFFF&TC2=3DFFFFFF&LK=3D0000FF&AL=3DFF0000&VL=3D= 800080 )

 

The additional 5m shares will = raise the=20 total outstanding shares from 23.4 to 28.4m shares, so it's not quite = as=20 dramatic as it seems when you say they're "doubling the float." While=20 increasing the number of outstanding shares by 5m will dilute the = earnings, it=20 is diluted across the total *outstanding* shares, not just the float. = In=20 practicality, they must then invest the dollars raised wisely to grow = the=20 business. If they do that, then they have *leveraged* the additional = capital=20 to the betterment of the business, and that will translate into = accelerated=20 growth, which is exactly what you want to see in a CANSLIM quality = stock.=20 Given that common stock represents residual interest in the business, = this is=20 the quintessential us of "other people's money." In the short run, the = additional shares in float can take a bit of time to absorb into the = market=20 place, and you may see price fall back a bit. In the long run, = however, if the=20 proceeds are used appropriately and investors see promise in the = business as a=20 result, they will bid up the price of the shares, which is again = exactly what=20 you would want to see in a CANSLIM quality=20 stock.

 

In the DGO/IBD figures, they = state the=20 management ownership as a % of *outstanding* shares, and both bank and = mutual=20 fund ownership as a % of the *float.* You'd have to show a specific = example=20 where fund ownership was >100% so that we could look at=20 it.

 

Katherine

 

 -----Original=20 Message-----
From:=20 owner-canslim@lists.xmission.com=20 [mailto:owner-canslim@lists.xmission.com]On=20 Behalf Of Jerome Buckmelter
Sent: Monday, May 26,=20 2003 = 12:48=20 PM
To: 'CANSLIM LIST'
Subject: [CANSLIM] VRNT and new = offering

I‘ve noticed = that VRNT has=20 recently registered a public offering for 5,000,000 common = shares.  They currently have 3.98 = million=20 shares in the float and 23.4 shares outstanding.  Management owns only 3% = (i.e., 700,=20 000 shares).  What = would be the=20 status of the remaining shares? =20 Could they all be registered as stock options?  Why would the company want = to double=20 the float?  = Wouldn’t doubling=20 the float significantly diminish the price per share?  Should this action be = considered=20 negative for the stock?

 

Also, Verint is owned = as a=20 subsidiary of Comverse Technologies which isn’t doing well in = terms of=20 CANSLIM criteria.   = What=20 possible impact could this have on the = stock?

 

Lastly, a general = question:  once in a while I notice = that IBD=20 indicates that fund ownership may exceed 100% for a given = stock.  How is that possible? =20 =

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