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03/24/2005 Electronics Boutique (ELBO)
ELBO turned up in our Advanced Screen several weeks ago and has been there ever since. Our attention was drawn to it because of the relatively high OCF and the large insider holdings. With almost 24M shares outstanding, the float is only 1.5M. Despite this, ELBO has not been as volatile as might be expected. The PEG value is below 1 which is a good sign. ELBO has been a little pressured for a while partly because of concerns over the gaming industry and delays in upgrades of the popular consoles such as the XBox.
ELBO has come to life a bit in the last few days. From a technical point of view -- Note: although we are largely a fundamental site, we do like to look at the whole picture -- if ELBO clears the 52 week high of 43.75 (set at the end of 2004) on decent volume, then that will be a good sign also. Plus, it will be a cue for the stock moving out of the "cheap" area of our Screen. We like to buy stocks that are undervalued, but only when they are moving up. Buying stocks that are dropping is a sure way to lose money unless you are dollar-cost averaging over the very long term.
Positives about ELBO are the cash flow, decent net cash, low PEG value, and projected 5 year growth of 16% which is probably a conservative figure if the hardware supply issues turn out to be overblown and demand for new games picks up.