Friday, January 01, 2010

GME Gamestop Inc.

GME Gamestop Inc.

Back in July 2009, I was taking my son Jack to join Gamestop. He has been forced to watch Bloomberg for the last three years every morning at breakfast. As a result he understands that some companies have stock and that he can own some of that stock. I keep him up to date on his portfolio, (separate from Salve Lucrum). On the way to Gamestop he asked me if they have those “stock things”. I did not know but entered the facility with a different view, as a possible shareholder. We were duly impressed with the experience and I asked about the business model.

Upon returning home, we did some homework on the stock which almost bored my 12 year old to death, until we actually listened to the second quarter earnings call. He understood just about all of the products (games and platforms) that the CEO and CFO were talking about. Jack also provided some insight into games that would be released late and could possibly help income when released.

The fundamental were very sound. As a result we added GME to his portfolio over a period of 4 months. I also made it about 6% of The Salve Lucrum portfolio. The average cost was about 21. There were some nice profits taken in mid October. The stock has corrected down to the 20s again and is about 4% of the Salve Lurcum Portfolio. Nothing has really changed the adjustment is over fears that the margins will erode due to some predatory pricing by Wal-Mart on systems and games. I feel and from straw poling Jack and his buddies that the lower prices at WMT will actually create new GME members and I feel the first and second quarter for GME will be healthy. Assuming a slight recovery and that WMT is successful in moving a few hundred thousand new game platforms, we could see 30-32 by mid year 2010.


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