Based on what I am seeing of late, poker seems to have suddenly reached the big time, which brings to mind the words from the old Kenny Rogers song "The Gambler": "You got to know when to hold 'em, know when to fold 'em."

What is good advice in poker also seems to make sense on Wall Street as well. The key is not to overreact. Furthermore, if you are going to sit at the table, then you need to know the house rules.

For example, does a prospective investment candidate or a current entry in a portfolio still lead its industry? Will the company's marketplace have the potential to grow as the economy continues to pick up speed? Does the business remain efficient?

Gross margins can help answer that last point. If the gross margin is acceptable, then your confidence level should increase, telling you that you have a potentially good investment.

Said a bit differently, investing is all about fundamental value. You need to ferret out that fundamental value and it will not always be easy. Wall Street is a primordial sea of rumors, opinions, exaggerations and occasionally even a few facts, all of which contribute to a continual buffeting of stock prices.

Your task is to strip a company stark naked. Look at its basic financial numbers, analyze the product line and then add in some good old-fashioned common sense. Finally, with all pretenses and hype gone, you can make an accurate assessment of the company's true value.

Consider for example Federal Express (Ticker: FDX), or FedEx as it is now called. This is another company I have not talked about for at least two years. FedEx recently reaffirmed its previous guidance of between 90 cents and a dollar per diluted share for the third quarter that ended Monday.

It also has increased its earnings guidance for the year to between $4.60 and $4.70 per diluted share. The capital spending forecast for fiscal 2005 is about $2.2 billion.

For its second quarter ended Nov. 30, FedEx reported earnings of $1.15 per diluted share, consistent with the company's previous guidance of $1.10 to $1.20 per share. Earnings in last year's second quarter were 30 cents per diluted share.

At the same time, revenue for the quarter was $7.33 billion, up 24 percent from $5.92 billion the previous year. Operating income came in at $600 million, up from the $183 million posted a year ago, and the company's operating margin of 8.2 percent, was up from last year's 3.1 percent.

For a first cut at the intrinsic value of FedEx's shares, I used an initial earnings number of $1.3 billion and allowed that earnings number to grow at a rate of 14 percent, the company's 5-year average earnings growth rate.

If you then discount the results back at a rate of 11 percent (average return of the S&P 500), you get a net present value for the company's next 10 years of earnings of $15.1 billion.

Beyond the 10th year, if you lower the earnings growth rate to 6 percent and increase the discount rate to 12 percent, the result is a net present value of $30.1 billion. (The exact formulas are available on www.RuddReport.com.)

If you then add those two figures together, subtract FedEx's long-term debt of $2.74 billion and divide by the 301 million outstanding shares, you come up with a per-share intrinsic value of $140.

Using the price/earnings approach, if you multiply my current FY 2005 earnings estimate of $4.80 per share by the current trailing 12-month price-to-earnings ratio (P/E) of 22.75, the result is $109.20. My earnings estimate for FY 2006 is $5.95. Multiply that by 22.75 and you have a result of $135, a number that is amazingly close to my intrinsic value.

FedEx's closing price on Wednesday was $97.16. In my estimation, and you may arrive at a different conclusion, there is the potential for at least a 39 percent increase in the price of the stock over the next two years.