Prime Stock Advisory Letter for November 13th, 1998

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Position Statement: In our Prime Recommendation Letter we attempt to identify the recommendation with the highest probability of moving higher.  We recommend that stop orders be placed at the time of purchase,  and once the position has moved profitable we recommend a stop be placed a minimum of 3/8th above the purchase price and moved higher as the position moves higher.

Today's Comments:  The overall market moved slightly lower yesterday.  I feel that the market may be pitting in a short term top,  in other words the recent failure of the market to move higher has created concerns for me that it will move lower.  How ever the mixed performance of the various sector indices over the last several days has placed a higher degree of uncertainty in forecasting the movement in individual stocks than I would care for.  This combined with the unusually strong movement upwards in a recent recommendation,  Greg Manning Auctions has lead me to decide to review that buy recommendation.  The shares of this company have more than doubled since I recommended them last week.  I continue to believe there remains significant upside potential for these shares.  There main competitors are On-Sale 'ONSL' and Ebay 'EBAY'.  On a comparative valuation basis both these companies trade at a significant premium to the valuation of Greg Manning.  While both of these competing companies are valued at many times that of 'GMAI', they do not generate a substantially greater amount of revenue.  But even more importantly On-Sale and Ebay are not profitable,  where 'GMAI' is.   This profitability makes 'GMAI' a more attractive investment than either 'ONSL' or 'EBAY'.   While I do not expect 'GMAI' to reach the stratospheric valuation of 'EBAY'  I do expect the shares to appreciate significantly from these levels.
 

Company:  Greg Manning Auctions          Symbol: 'GMAI'         Closing Price: $10.50/share.
YH: $10.50     YL: $1.125      EPS: $0.06      P/E: 63.0     Forecasted EPS: N/A
Dividend: N/A      Yield:  N/A     Ex Dividend: N/A
Price Target:  $20 & then $30        Downside Stop:  $5.00
Options Recommendation:  None Available. 

Company Description: This company auctions stamps and other collectable items.  On Friday it acquired Teletrade,  an Internet auction house.

Recent News:  10/30  Greg Manning Auctions acquires Teletrade.
10/26  Greg Manning Auction 1st qtr net $0.04 vs. loss of $0.07/share.
9/28  Greg Manning Auctions 4th qtr. net $0.13/share vs $0.02/share

Our Analysis: This company auctions stamps, and other collectible items.  On Friday,  Greg Manning Auctions acquired Teletrade, an Internet auction house.  This makes 'GMAI' the third publicly traded auction house utilizing the Internet.  What separates 'GMAI' from Ebay and On-Sale is that "GMAI' has a physical auction operation that can compliment and provide a large amount of synergy to the Internet auction site and vise versa.  Teletrade had 1997 sales of approximately $21 million dollars,  this combined with the $22 million in sales that 'GMAI' did in its latest fiscal year place it in the same sales range as Ebay.  I feel that "GMAI' is very undervalued when compared to Ebay and On-Sale.  Ebay currently has a market capitalization of over $3.2 billion,  On-Sale has a market capitalization of $340 million,  and "GMAI' has a market capitalization of less than $28 million dollars.  I am looking for the shares of 'GMAI' to make a significant move to the upside due to this acquisition.  

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