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Prosperity Bancshares Inc. Message Board

  • poorboy7 poorboy7 Aug 28, 1998 4:14 PM Flag

    let's not forget...

    O'K all you PB holders, let's not forget all the
    reasons why we bought this stock. Let's not foget all the
    articles we read about how well run this company is, how
    safe it is (rated one of the top 7 safest global
    stocks to own), let's not forget all the projections of
    mid 40's to lower 50's, and finally let's not forget
    how much we read about the "long term" potential.
    Everyone is taking a beating these day, this stock if you
    will remember is a great long term play. Keep it, buy
    more if you can, but you're crazy to dump it at a
    lost. The fundamentals of the company are good, the
    peso will bounce back, and things will eventually
    settle down. Great long term stock pick!

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • I couldn't find the free site I used, but these two sites look reasonably useful/interesting:

      www.in-the-money.com
      www.financialcad.com

      Have fun!

    • I agree with the general advice on options, with
      some additional commentary.

      Option trading on
      margin is not intrinsically evil. Like commodities
      futures trading, it can be safe and profitable if one
      knows what one is doing. However, it should only be
      done in a controlled, loss-limiting manner, whereby
      one has the luxury of monitoring positions full-time
      - as in full-time options traders. I hesitate to
      say, only professionals should engage in it, because
      many of them simply don't know what they're doing, and
      following such leads could be dangerous.

      I
      personally do not engage in options (or futures) trading on
      margin, nor do I intend to any time soon. Furthermore, I
      would not recommend going down this path unless you
      first give yourself at least year or two of full-time
      trading option/future trading experience first.


      I'm not sure how much luck you'll have finding
      worthwhile reading on the subject of options outside of
      academic and web searches. Much of what I've seen is
      fairly pedestrian. Academically speaking, most finance
      and accounting text books will give a cursory
      overview and usually give some explanation of the
      Black-Scholes pricing formula. The pamphlet published by the
      AMEX/CBOE that most brokerage firms give out is about the
      best single reference I've seen.

      If you're
      mathematically inclined, and have some finance
      training/experience there are some decent websites on the
      Black-Sholes pricing formula. Spreadsheet users can even
      download a fairly useful tool pak that can be added and
      used for pricing analysis. If I find the site that I
      used, I'll post it, but I remember doing a search in
      metacrawler for "Black Scholes formula." I think it was a web
      site that some grad student had posted.

      The
      theory and math are really not that terribly
      complicated. The black magic lies in the various assumptions
      and inputs - which are ultimately driven by supply
      and demand (of market makers). PB is perhaps a more
      extreme example of an issue which diverges widely from
      what Black Scholes pricing would predict, especially
      based on its most recent volatility.

      While
      these facts might lead one to think that there is
      opportunity to profit by "options arbitrage" until options
      prices for PB are bought to Black-Sholes equilibrium, I
      would not encourage this. Options pricing and trading
      is still a relatively obscure and arcane practice.
      Unfortunately it is still a very small elite, and dare I say
      collusive and controlled minority, which exerts a very
      strong influence on options prices.

    • ...and all you see is bulls. One bull in
      particular who just threw away $6500 on some options with
      very high premiums.

      The _new_ reality, that
      you all need to get used to, is that this company
      will, under no circumstances, earn more than $1.60 in
      FY1999. Further, if the Peso and SA currencies continue
      to fall, then Panamco will have a lot worse problems
      than just Venezuela. The co has roughly $50 mil/year
      in $ denominated interest payments on its debt -- do
      the math and you can see how a small (10-20%) slide
      in the currencies where they do business could
      easily knock earnings down to $1.00. Nor will the
      multiple on these earnings be very high (at least not
      anytime within the next 6-12 months), because people will
      continue to lack confidence in the currency. So, let's
      figure Panamco at 15x our new earnings, which gives us a
      12-month price target of $15 - $24. Doesn't sound like a
      stock I'd want to buy right away.

      Coke is great.
      But the fact of the matter is that Brazil's
      government can afford to run for only about 45 days without
      issuing more short-term debt, and the rate they have to
      refinance at could well grow higher and higher (cf.
      Russia).

      Why not wait until the stock is at $10-14
      to buy it? If it gets there, you've gotten a good
      deal. If it doesn't get there, you didn't lose
      anything; in fact, you've earned a little interest having
      some cash on hand.

      -- Bearatologist


      P.S. In the beverage sector, look right here at home.
      Celestial Seasonings is a strong brand at a fair price,
      with good visibility and no currency exposure. I sold
      my Lucent Tech at $101 a couple of weeks ago (a 124%
      profit :-) and put it into CTEA at $40 this week. The
      stock won't go lower than $30 without a serious change
      in fundamentals.

      • 1 Reply to bearatologist
      • Celestial Seasonings! Are you trying to be funny?


        Are you seriously trying to compare a ~100 million
        dollar company to a 2.5 billion dollar company? Well
        maybe being a smaller company it has better growth
        potential...oh, no, not really, according to the analysts. Well
        maybe they have a better profit margin...oh no, wrong
        again. Well, Coke's a household name and Cestial Seasons
        is...hmmm...no...never mind. Well, I'm sure there is some reason you're
        pushing the stock...

        You're welcome to your
        investments, I've been quite pleased with PB since you were
        going through puberty. Rest assured, the premium on my
        options was a steal. As always, I'm prepared to lose the
        premium on any options play. But I wouldn't be buying an
        inflated premium.

        You might want to study up a bit
        efore you declare a given call premium is high
        (actually, I think you said, "very high"). PB options
        typically trade at a significant discount, considering the
        stock's volatility. For that time period, a premium twice
        that would be common for at-the-money calls on other
        stocks with this kind of volatility. But, just in case
        you're worried, I've already got a paper gain on the
        trade, even at the bid.

        So...what's the pricing
        like on CTEA's options?. Oh, that's right, it's a
        small cap, they don't usually trade
        options.

        <"this company will, under no circumstances, earn more
        than $1.60 in FY1999.">

        Unfortunately, your
        saying it does not make it so. Nor does your pick of a
        15 P/E have any relevance.

        Of course PB has a
        significant foreign exchange risk! Ummm...doesn't that mean
        there is also a significant foreign exchange upside?
        You are welcome to assume whatever exchange rates
        you'd like and trade based on those. But it sounds like
        the risks of international investing are not for you.
        Guess the rewards won't be either.

        15 P/E? Where
        did you dig that number up? Hmmm..what is KO's
        P/E?...Oh yeah, close to 50, but then, it doesn't have the
        growth PB has, so...wait a minute, that doesn't make any
        sense. Well, maybe you're talking about bottlers...but
        CCE has an even higher P/E. Well, maybe you're
        talking about international bottlers...but, no, KOF
        appears to be trading well above that too. Well, I'm sure
        you have a good reason for picking 15; I just can't
        figure it out.

        For what it's worth, PB's growth
        is generally estimated to be over 20% next year and
        high teens for the next five. Absent abnormal currency
        fluctuations, PB can justify a robust P/E based on its growth.
        The comments people have been making about demand and
        the fundamentals are, unfortunately, highly relevant.


        The fact that PB is diversified across Latin America
        may mean that it is hit hard by regional and global
        concerns. But it also means that it can weather
        single-country-specific aberations quite well, given its interests in
        Mexico, Columbia, Brazil, Venezuala, Costa Rica,
        Nicaragua, etc.

        <"do the math and you can see how
        a small (10-20%) slide in the currencies where they
        do business could easily knock earnings down to
        $1.00">

        Actually, you'll have to do that math for me. Even starting
        from next year's low estimate and assuming another 20%
        currentcy hit, your math doesn't work for me. In fact, your
        scenario, even assuming a lowly 15 P/E, is pretty close to
        today's price, reinforcing the notion that today's price
        is pretty attractive, especially since I can
        perceive many more attractive scenarios than the one you
        present.

        I couldn't care less whether you invest in this
        stock or not. And you're more than welcome to short it.
        But let's stop with the alarmist, fact-free, and
        otherwise misleading postings? And hyping your pet stocks?
        Now that's just a bit tacky.

 
PB
60.57+0.64(+1.07%)Sep 18 4:02 PMEDT

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