Prime Stock Advisory Letter for January 6th, 1999

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Today's Comments:  I apologize for the lack of a newsletter yesterday.  On early Monday night while returning from working out at the gym I narrowly avoided a car accident due to someone apparently performing a "Three Point" turn without looking to see if anyone else was on the road.  In the process I blew out my right front tire.  I would like to thank my local Goodyear Tire dealership for using their impact wrench to put one of the lug nuts on so tight I could not remove it and replace my flat tire with the spare.  I am by no means a weak person,  but as a result of their over zealousness with power tools I had a 3 1/2 wait for the Tow truck!  Unfortunately I was not able to return to my office and produce a newsletter in time for the morning delivery or one of the quality I would like.  Yesterday's market produced a very broad based rally that affected majority of the sector indices I track.  I am looking for the market to continue to move higher. The Bottom Line:  The market should move higher.

Index Options:  OEX January 615 Calls,  Symbol 'OEYAC'

BUY:  Greg Manning Auctions 'GMAI' @ $8.75/share.  (Stops @ $7.875,  Price Targets $12.50 & $16.25)  YH: $21.75  YL: $1.19  Options Pick:  None Available.  This company operates a traditional auction business that specializes in collectable items including stamps, sports memorabilia, and other rare items.  The company recently acquired Teletrade which conducts auctions over the Internet and via the Telephone.  As a result of this acquisition there has been substantial synergy's created tat should allow for a substantial expansion of the combined business.  I am looking for 'GMAI' to expand its business to include "person to person" auctions that allow for a wide variety of items to be auctioned off to the public.  This would place the company in direct competition with eBay, OnSale, and Ubid.  Of the publicly traded auction companies involved in Internet commerce Greg Manning Auctions has the lowest market capitalization, and I feel provides the greatest potential as it moves in line with the rest of its industry.  Currently 'GMAI' has a market capitalization of $42 million dollars.  Ebay has a market capitalization of $9 billion dollars,  Ubid has a market capitalization of $950 million dollars, and OnSale has a market capitalization of $768 million dollars.  At these levels a 10 fold increase in the market capitalization of 'GMAI' would still leave it with the lowest market capitalization of the Internet Auction companies.  What is even more interesting is that 'GMAI' due to the recent acquisition of Teletrade should have 12 month trailing annual revenues of approximately $40 million dollars.  This compares very favorably to the reported 12 month revenue of $30.5 million from eBay,  $24 million in sales from Ubid,  and $181 million in sales on OnSale.  Of these four companies "GMAI' is the only one that appears to be profitable.  As I have stated in the past the very high market capitalization awarded to specific companies by the market will attract competition.  The management of 'GMAI' is very experienced in the auction business and well aware of what separates them from the other on-line auction companies.  In my opinion there are 2 main reasons why the shares of 'GMAI' are not enjoying the high market valuation of the other on-line auction companies.  1. The lack of "person to person" auctions and  2. a needed upgraded in the quality of the NASDAQ Market Makers who trade the shares of 'GMAI'.  I believe the management of 'GMAI' will address these 2 issues in the near future.