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| geb9696 |
 Posted: Thu Feb 23, 2006 4:39 pm Post subject: GTW-Gateway Computer |
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Investing VP
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In another thread Grim mentioned this as a stock that he would pick up in the range of 1.45-1.65. Out of all the stocks that grim mentioned in that post I found Gateway to be interesting from a value investors prospective. When doing research I found that they have cash equal to
1.57 per share. This means that at Grim's entry price's the company could pay out a one time dividend equal to stock price if it wanted to. I also was interested in the fact that after many years of losing money they are back into the positive. http://quicktake.morningstar.com/Stock/Income10.asp?Country=USA&Symbol=GTW&stocktab=finance&pgid=qtqnnavfinstate
Further intrigued I wondered what the DCF would spit out to me and that was the most interesting thing that I found. I suspected that it would be undervalued but I was not exspecting it to be undervalued by around 40%. Target exit price is around 3.20-3.30. Using Grim's entry price of 1.45 you are looking at around 137% return. What is everyone else's take on it?
Last edited by geb9696 on Thu Feb 23, 2006 5:01 pm; edited 1 time in total |
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| Dave Rathbun |
| Posted: Thu Feb 23, 2006 5:01 pm Post subject: |
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CFO
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| I posted my response in the other topic. Summary: I would not buy it. I have been a fan of the company in the past, but no longer. Not a fan of the company nor the stock. |
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| Im Not Warren Buffett |
| Posted: Thu Feb 23, 2006 5:37 pm Post subject: |
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CFO
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| geb9696 wrote: | | I found Gateway to be interesting from a value investors prospective. |
| Dave Rathbun wrote: | | I posted my response in the other topic. Summary: I would not buy it. I have been a fan of the company in the past, but no longer. Not a fan of the company nor the stock. |
Dave,
As much as I respect your opinion on things (especially computer related), I'm going to leave open the possibility that Gateway is a worthy stock. If it has the cash to back up the share price, thats all you really need to look for. When geb9696 told me he liked Gateway, I was stunned. Then the more I thought about it, I realized it didn't need to be the best company, just selling at the right price. My exact quote was:
"So it sucks, but not as much as everyone thinks it sucks?"
Welcome to the world of value investing. |
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| Grimreaper |
| Posted: Thu Feb 23, 2006 6:39 pm Post subject: |
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| Im Not Warren Buffett wrote: | | geb9696 wrote: | | I found Gateway to be interesting from a value investors prospective. |
| Dave Rathbun wrote: | | I posted my response in the other topic. Summary: I would not buy it. I have been a fan of the company in the past, but no longer. Not a fan of the company nor the stock. |
Dave,
As much as I respect your opinion on things (especially computer related), I'm going to leave open the possibility that Gateway is a worthy stock. If it has the cash to back up the share price, thats all you really need to look for. When geb9696 told me he liked Gateway, I was stunned. Then the more I thought about it, I realized it didn't need to be the best company, just selling at the right price. My exact quote was:
"So it sucks, but not as much as everyone thinks it sucks?"
Welcome to the world of value investing. |
See dat, it took me an me GTW to get you to ack-chooly think like Warren Buffett! Now whatchoo goan do bout it? And what if all me udder brilliant crap tradin fo below 2 dallahs is purt near good as GTW?!!!  |
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| Im Not Warren Buffett |
| Posted: Thu Feb 23, 2006 6:45 pm Post subject: |
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| Heh, don't get too cocky now Grim. Gateway is trading for a whole $2.40, so it has a ways to go before it takes out your crucial $2 barrier. I think that Gateway is unique because it was once a very good, respectable company. It lost its position in the market through poor corporate strategy, but I think they have stabilized their situation and are on the road to recovery. While I doubt that takes them back to 1999, there may be more value here than Wall Street is giving it credit for. |
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| Grimreaper |
| Posted: Thu Feb 23, 2006 7:04 pm Post subject: |
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| Im Not Warren Buffett wrote: | | Heh, don't get too cocky now Grim. Gateway is trading for a whole $2.40, so it has a ways to go before it takes out your crucial $2 barrier. I think that Gateway is unique because it was once a very good, respectable company. It lost its position in the market through poor corporate strategy, but I think they have stabilized their situation and are on the road to recovery. While I doubt that takes them back to 1999, there may be more value here than Wall Street is giving it credit for. |
Yes, I'll try an maintain composure ova heeya. GTW is hardly "respectable" any mo like you says, in fack dey be treatin er like a HO!!! wait'll ya see's er at me tawget..."if" dat ever happens....of course I can always clean er up and when you feel safe jist jump in an we'll woik out da details on da price, it's always a matta o price, isn't it?  Maybe we can take da muny dats left at da charitable trust and switch it ta GTW at me tawget!  |
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| Grimreaper |
| Posted: Thu Feb 23, 2006 7:56 pm Post subject: |
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BTW, one of the other picks that was on that list of 5 dawgs I mentioned hit my entry tawget range, DCN. I said ta buy batween 2.95 and 2.65, today it hit a low of 2.66. I bought here at EI at 2.70 and sold it all at da close for 3.19 jist fo safety  Keep an eye on er.  |
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| Dave Rathbun |
| Posted: Fri Feb 24, 2006 2:50 am Post subject: |
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It's going to take more than cash in the bank to make the stock. Trust me, I purchased a stock that was selling in the $4 range because they had $7 book value, includeing a large stockpile of cash. Years later they're gone. Bankrupt.
What I see is that there is a fundamental change over the past 10 years in computer manufacturers. It's not just bad management, it's a bad market right now. The competition for the consumer dollar is as fierce today as it has ever been in the computer market, and I don't see GTW coming back. It pains me to say that, it really does. I purchased my first computer from them back in the late 80's. I've purchased several more (about one every two-three years) for a decade following.
As I said in the other post on this topic, Gateway was the "king" of the home consumer market. That left Dell and CPQ and to a lesser extend HP to duke it out for the corporate sales. There were at one time other computer makers... where are they today?
HP + CPQ = HPQ
Dell is the leader in the market. They are the "walmart" of this space, if you will. Whatever someone smaller does that works, they can copy. Whatever they do they can do better because of their scale.
Go to an electronics store and see what you find there. HP and Dell desktops. Sony and Toshiba laptops. Where's Gateway?
I respect that you disagree with my assessment. It takes "smarts" to find a good value play, and guts to pull the trigger when you think you've found one. But for every stock that is down and recovers, how many more are down and don't?
I based my opinion primarily on the fact that - as I said - the market for home computers has fundamentally changed over the past 10 years. Has GTW changed with the market? Not so far. I admit I have not researched the company to the degree that any of you may have. But that's my opinion. |
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| jdunn72 |
| Posted: Fri Feb 24, 2006 4:09 am Post subject: |
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| I think Grim was pretty close on the buy in range for a decent profit but I would look for the bottom to be closer to a 1.10-1.20. And by my calculations if you add net assets to the cash and subtract debt you'll get a liquidatiuon value of .70 per share and I believe that would be the level that insiders would start to take interest. It's is definately a watch see from a value stand point right now. But until it gets in the 30-40% increase of real cash value per share the only resistance to hold the shares value will be market speculation which is always there so, I think to watch for a solid reversal anywhere from this point would be prudent, if it dips to to below 1.20 I'd be looking to get out between 1.35 and 1.65 if not I wouldn't hold for more than a 8-10% gain. Great scout Grimm |
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| Im Not Warren Buffett |
| Posted: Sat Feb 25, 2006 8:30 am Post subject: |
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CFO
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Upon further inspection, I am less of a Gateway fan than I was before running the DCF model. I don't see Gateway being worth more than $3, although there was quite a fight between myself and geb9696 over that. If GTW should drop 50% to Grim's target price, then it most likely will constitute an excellent value play, because by then it should have more cash per share than the stock would be trading for.
As for now, I would sit this one out. |
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| Dave Rathbun |
| Posted: Sat Feb 25, 2006 8:39 am Post subject: |
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The question is, will there be cash left?
If Gateway can't do something to get their products moving, then they will burn cash to survive. In my opinion, investing in a company based primarily because of cash on hand is risky. Burned me once, not again.
The challenge to Gateway as a company is to find an area of the market where they can survive. The challenge to GTW investors is to determine what the short-term and long-term prospects are for the price of the stock based on the company's ability to do the former.
Ten years ago you could not open a computer magazine without seeing pages and pages of GTW advertisements. They advertised on TV. They had retail outlet stores. When was the last TV ad you saw for GTW? Their retail stores are all closed. Their products have nothing that distinguishes them from all of the other "generic" boxes out there, so where is the compelling reason to buy their products, much less their stock? I don't see it.
Let me throw out a completely different animal here as a counterpoint: American Airlines. AMR, like most other large airlines, is hemoraging cash. Fuel costs. Competition with low-cost airlines. Fewer business travellers. It's all bad news.
But consider this: remember what happened to Chrysler a few years back? Do you think the government cares if GTW goes out of business? Do you think they care if AMR were to go out of business?
I would buy AMR before I bought GTW. FWIW, I am a customer of both, and an investor of neither, nor do I actually intend to be an investor of either at this time. I'm sure at this point people are tired of me beating this horse, so I'm shutting up now. |
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| Im Not Warren Buffett |
| Posted: Sat Feb 25, 2006 8:43 am Post subject: |
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| Dave Rathbun wrote: | The question is, will there be cash left?
If Gateway can't do something to get their products moving, then they will burn cash to survive. In my opinion, investing in a company based primarily because of cash on hand is risky. Burned me once, not again.
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Whenever I see cash on hand being a significant part of the stock price, I am always extremely wary and try to figure out if there is a good reason for that. Namely, I look at trailing and future expected cash flows to see if they will be chewing through their treasure hoard to compensate for poor business. While Gateway has been cash flow positive the last few quarters, they were still losing a ton of money a few years ago. I would wait to see how well the "turn around" goes and closely examine whatever they propose as their new business model.
And Dave, you know what you're talking about, especially with tech companies. The insight is always appreciated. |
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| Colli |
| Posted: Thu Nov 22, 2007 12:35 pm Post subject: |
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| If the fact that the quality of the computers that they manufacture is in the toilet, means anything, let that stinking dog lie. At one point, they produced a good product but they have gone downhill bad. Going with cheaper OEM's to increase your profit margin and/or become more competitive can burn you badly - - - and believe me, they have been burned badly. I have worked with computers for 43 years - Mainframes, Midrange, and PC's. I have assisted may people with PC problems and have seen brand new Gateway PC's right out of the box fail. I wouldn'y buy one on a bet. Therefore, I wouldn't buy their stock either. |
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| geb9696 |
| Posted: Thu Nov 22, 2007 11:05 pm Post subject: |
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