Outsized Gross Profit to Enterprise value

The list of 17 ideas out of 4,000 was created using the following rules coupled with
others.

EV (Price -Cash + Ttl Debt) /Price < .90: Strong financial position

Prior average 3 year share count /TTM share count >.97 : No dillution, excessive options or financing

Gross profit/ EV > 1

See results with additional historical data such as 5 years woth of ROIC and FCF and how these value relate to current price.

Please Click to view

11/29/09 Magic Formula Results

The 129 results presented in the prior post:

http://shadowstock.blogspot.com/2009/11/magic-formula-investing.html

I’ve broken the ideas down into potentially more useful groups.

My first “filter” of the original magic formula 129 ideas was as follows:

Share count remaining stable over the past 3 years

1) Average share count over the past 3 years / trailing 12 month share count > .98

Balance sheet strength using cash versus total liabilities

2) Enterprise value (Price – (Cash + Total liabilities))/Price < .90

Also:

-SGA/Revenue over the past 12 months <.35
-Positive cumulative FCF over the past 5 years
-Positive CFFO (cash flow from operations) over the past year

See Results:

http://www.shadowstock.com/ss_112909Filter1.html

EV/Rev < .40

See Results:

http://www.shadowstock.com/ss_112909Filter2.html

Additional comments:

http://www.shadowstock.com/ss_112909NOTES.html


if this post was useful or you have suggestions please let me know. Thanks John

john@shadowstock.com

Magic Formula Investing

Joel Greenblatt’s magic formula investing site generated the following ideas based on multiple market caps as of 11/29/09.

http://www.magicformulainvesting.com

As we know his site looks for stocks with a high earnings yield and return on capital. 127 ideas were produced in 65 industries and 7 sectors as of 11/29/09.
The link provides all the ideas by sector, industry with critical financial data.

There is an Excel spread sheet that can be downloaded for further sorting or filtering on P/S,EV to price, and many other metrics. I will provide additional insight on the list generated in a future post.

Click to view results

Buybacks at bargain prices: updated for corrected 52 week change

All the data in the previous post was correct except to the 52 week change. I reran the data but only included stocks with a negative 52 week change. The ideas in the other days post were valid for companies with large buybacks over the past 12 months.

The new list was created as follows:

1) No Dilution
: Average 3 years shares outstanding / Trailing 12 months shares outstanding > .97

2) Strong Balance Sheet
: EV/MC < .90

3) Negative return over the past 52 weeks

4) Share buybacks / Float Amount < -.05


The results are as follows and sorted by the largest sales buybacks to float amount ratio

Click to see the results

Share repurchases at depressed prices

The list was further refined with the following

No dilution:
1)Stocks with an average 3 year shares outstanding / trailing 12 months >.97

Strong Balance sheet:
2)Enterprise value (market cap - cash + total debt)/ market capitalization < .90

Only stocks reporting a negative return over the prior 12 months
3)52WkChng<0

The results are as follows

November 16-20:Positive insider buying

Celsion Corp (CLSN) $3.16

Tandy Brands Accessories (TBAC) $3.24

Charles & Colvard (CTHR) $1.28

Rofin-Sinar Technologies Inc (RSTI) $ 22.61

Courier Corporation (CRRC) $13.01

Urologix (ULGX) $.98

ACCO Brands (ABD) $6.10

Ultralife Corp (ULBI) $4.10

For a more complete list of positive insider activity for the prior week and important additional data

Click to view

Meade Instruments Corp (MEAD) is a RISKY 1- 2 year potential turnaround

Pros

For the current value of 2.7 million, shareholders receive “valuable brand names and intellectual property that provides MEAD a competitive advantage in the marketplace”. The Coronado brand name has a unique niche in the area of solar astronomy. 7.4 million in sales for the most recent quarter with a 17% gross profit margin.

Solid balance sheet with per share data as follows: EV = $2.39 ($2,789,130), Price = $2.50(2,917,500), Sales = $6.51, Cash = $2.07, AR = $5.17, Inventory = $7.47, Total Liabilities = $5.03

Read more

Large debt load … a catalyst for a higher stock price

A few thoughts for tonight

It makes sense that a large debt burden could be a motivating factor to improve productivity by forcing lower costs and executing a more selective approach to capital expenditures or acquisitions.

But to help avoid an investment mistake I want to stay with companies posting strong historical FCF but has a depressed stock price do to current earnings below expectations or historical profitability.

These were some of my search criteria;

1) No dilution and a share count that has been stable over the past 3-4 years. So my first filter was:
*Average share count last 3 years / Share count over the past 12 months >1.00

2)Large debt relative to total capital structure:
*EV{(Price+Total Debt)-(Cash)}/Price >4.00

3)Low administrative costs as measured by selling general and administrative costs as a percentage of total annual revenue.
*Annual SGA/Rev<.15

4) Postive FCF over the past 5 years demonstrating debt carrying capacity

5) Increasing total equity value over the past 4 years

6) Positive cash flow from operations over the past 12 months as a measure operational health regardless of the temporary poor bottom line results relative to historical performance

7) EV/Sales <1.90

8) Current price 75% below the 5 year high and a negative price return over the past 3 years.

9) Positive insider buying over the past 12 months



Two of the ideas that I’ve selected were as follows:

DPZ (Domino's Pizza) $7.38

DPZ is a pizza delivery company that has locations in all 50 states and in more the 60 countries. 90% of their stores are owned and operated by franchisees which reduces risk and maximizes free cash flow.

Although this has no influence on my thoughts, George Soros was recently buying according to gurufocus.com

Link

http://www.gurufocus.com/StockBuy.php?symbol=DPZ


Price to sales is selling at a discount of .30 for the trailing twelve months versus 1.0 for 2004.

Price to cash flow is trading at a trailing twelve month of 4.7 versus 12.10 for 2004.

Great historical ROIC; 2008 – 2004 = 26.34%, 17.75%,70.83%,62.10%,35.36%


PTRY (Pantry Inc) $14.27

Pantry is a convenience store operator in the Southeast, with more than 1,600 stores in 11 states. 373 locations coupled with the corporate headquarters are owned.

P/S, P/CF, P/B are at a discount to their historical measures. One year return is -38% and 79% off the 5 year high.


Neither one is a micro cap but the approach can be used with smaller companies.

Attributes that warrant a closer look

First I wanted to find well run stocks posting great ROIC for the past 5 years not just the prior 12 months.Then I wanted to find companies selling at a discount to normalized earnings.

ICOC: ICO Inc manufactures specialty resins and concentrates, and provides specialized polymer processing services.

- 2.74% held by famed value investor Michael Price.

- Shares outstanding reduced year or year. -5,556,000 paid to purchase shares over the prior 12 months.

- Pre tax ROIC 12.82% 2008, 16.97% 2007, 13.66% 2006

- OI/EV % currently selling at a discount to prior 5 and 3 years earnings run rate. The stock based on the high ROIC in past years may be selling at a substantial discount to normalized earnings to be realized in future periods.

- EV/Price = 1.59, CFFO/EV = 27.26%, EBITDA/EV = 7.72%

- 73% off 5 year high, 3 month return = 18.10%, 52 week change – 14.09%

- Price to book, sales and CF are all trading at a discount to the prior 3 years

- Real estate owned nationally and internationally

- EV = 168 million


Negatives

Declining GP margins
YOY revenue down 39%

Also looking into GPX and ASGR. Sorry for the rushed post.

I don’t own shares of ICOC and need to finish the above data. Going to sleep now but will search for and introduce other high ROIC stocks (well run companies) over the past few years selling at a discount to normalized earnings.

LINK

http://www.shadowstock.com/ss_portfolio.html

Another Margin of Safety , MVC

The below was copied and pasted from the link below

Link

<< As another "margin of safety" play, consider MVC Capital , a business development company that specializes in acquisitions and financing of middle market companies. The market cap is $227 million, or $9.35 a share, against stated net asset value of more than $17 a share. In fact, management just this morning issued a release that the aggregate value of the fund's investments increased by $1.33 a share at the end of October.

MVC is not highly levered; its portfolio is nearly two-thirds equity and the shares currently yield 5.3%. Chairman and portfolio manager Michael Tokarz receives no salary and an incentive of 20% for any realized gains. At a nearly 50% discount to net asset value, this stock is trading at one of its largest discounts ever, and you can rest assured management is considering how to fix this discrepancy. MVC invests in old-economy businesses, many that have been around for decades.

The big risk of course, is taking management's assessment of NAV at face value. (If this company were trading at 20% of NAV, I probably wouldn't be writing about it.) Management owns more than 11% of outstanding shares, a small sign of alignment of incentives. The discount in NAV protects you from some unexpected adjustments. The dividend along with the fair pay structure gives management every incentive to grow the value of the business.

All investing entails risk. Focusing on the balance sheet can help eliminate a lot of that risk, but an investor's greatest margin of safety comes when a sound business chugs ahead with a functioning earnings engine >>

I have a position in MVC

Screening with Greenblatt’s Magic Formula

https://www.magicformulainvesting.com/marketing/servlet/forms/MFI/Marketing/forms/WelcomeForm

Link

Using the magic formula investing website I came up with a list of 115 symbols. The screen was run for stocks greater than 50, 350 and 3,000 million.

These 115 ideas were further filtered based on some additional criteria.

EV/Sales <1.50

3yr average Shares outstanding/TTM < .97

EV/Price<1.60

Annual SGA/Rev <.35

Company share buybacks

Click to see the ideas

Link

Insider Buys Large Amount of Stock in MVC Capital (MVC)

<This represents an increase of 4% on his existing position in MVC Capital Corp (NYSE: MVC). At the transaction price of $8.97 the total purchase was for $219,000.
MVC Capital is a private equity business development company which invests in a portfolio of private companies throughout the world and across several sectors.
MVC Capital is currently trading for close to 60% of net asset value and has largely missed the market run up since March.
The company is down 14.6% year to date, but did trade up 4.7% to $9.29/share today on higher than normal volume.>>

TAKEN FROM Benzinga.com

Link

ICCC: ImmuCell Corp (Nano Cap Value)

Stock reached a price of 4.75 today on positive news:

I own shares of ICCC

"Co announces that in a study of approximately 300 qualified cows with subclinical mastitis that was conducted at sixteen sites across the United States, the Mast Out treatment group showed a statistically highly significant overall cure rate in comparison to the placebo group. The preliminary breakdown of the data by species suggests both the necessary numerical superiority and clinical relevancy to support robust product performance in the field. The primary objective of this study was to demonstrate effectiveness in the field, at a level similar to currently marketed intramammary antibiotics "

The post below was written June 09:

Link

ICCC: ImmuCell Corp

Cash per share is 1.73 with no long term debt. They own a 26,800 square foot building at 56 Evergreen Drive in Portland, Maine. Enterprise value is only .63 : Price (2.20) – (1.57) (Cash – Liabilities) = .63 EV

This biotechnology company is dedicated to marketing products that improve animal health and productivity in the dairy and beef industries. Their product focus encompasses prevention, diagnosis and treatment of bovine diseases.

The key risk is FDA approval of Mast out.

I have a position in ICCC.

Additional positive insider activity today 06/09/09

Additional positive insider activity

ICCC Quote

http://finance.yahoo.com/q/it?s=ICCC

Link to ShadowStock

Deepest of deep value (DCU)

Dry Clean USA is completely neglected, ignored, unloved and illiquid but is still one of the deepest of deep value micro cap stocks, IMO. Dry Clean USA (DCU) closed at $1.00 this Friday 09/23/09 and qualifies as a candidate to discuss on Seeking Alpha. I thought it may interest some nano cap investors. My first mention of DCU on this blog was September 2008 at .75. Link

Not quite jaw dropping returns or suited for almost all institutional investors but in comparison to the returns generated by DFSCX (DFA US Micro Cap I) which was down 21% over the same period its fundamental performance as a company and to a much lesser extent its stock performance makes the idea interesting to some deep value investors.

DCU is a leading distributors of industrial laundry, dry cleaning, steam boiler equipment and replacement parts. They service the hotels, hospitals, cruise ships and independent dry cleaners. The Company also sells into the highly fragmented dry clean retail operations by selling individual and area franchises under the DRYCLEAN USA name and develops new turn-key dry cleaning establishments for resale to third parties. The Company primarily sells to customers located in the United States, the Caribbean and Latin America.

Year over year annual revenues posted a +2% growth rate .However, net earnings for the year fell 12.5 percent, to $526,863, or 7 cents a share, from $601,852, or 9 cents a share, in fiscal 2008. According to the CFO “the financial crisis will have a greater affect on the company’s operations at the start of fiscal 2010,” CFO Venerando J. Indelicato said in a news release. “However, it is anticipated that the economy will improve during the year, releasing pent-up demand that presently awaits financing.”

Valuation

Market cap = 6,693,466

EV = 4,570,705

Impressive average 5 Year (06/04 to 06/08) pre tax ROIC of 18.52% indicating a clear strong history of capital allocation.

Per Share Data:

Price = .99
EV(.65)/MC(.99) = .65
EV = .65
Sales = 3.25
OI = .116
Total Liabilities = .436
Cash (.776) – Total Liabilities (.43) = .34
GP = .7131
FCF = .223
Cash = .77

RATIOS based on the period ending 06/30/09,the most recent 10k filed 09/23/09
EV/Sales = .20

GP(.713)/EV (.65) = 110%

SGA/Revenues = .198

FCF / EV = 22.54%

FCF avg past two years (.1028)/EV (.65) = 15.82%

OI (.1106)/EV (.65) = 17.02%

No dilution as shares outstanding have remained constant over the past several years.

Shares outstanding = 7,033,804

74% below 5 year high

YTD return = 12.10%

Risk:

Closely held with CEO M Steiner owning 64% of the company. Also management made a ridiculous low ball offer of .85 cents about a year ago. The offer was quickly removed as I’m sure the minority shareholders would have rejected.

Note worthy insider activity today

Insider Sales reported today:

Bidz.com, Inc.(BIDZ) 19,278 shares sold @ average price of $3.72, NUTR 5,000 shares were sold at $11.02, PABRAI MOHNISH sold shares of HNR and PNCL

Purchases:

RLOG (C4S & CO LLC) purchased 213,207 @3.00

GMTC 6,682 shares purchased @ an average price of $1.55

PABRAI, MOHNISH

Air Transport Services Group, Inc : ATSG, Pabrai, Mohnish has a position and there was a tiny purchase by an insider on the 15th. I have no thoughts on the stock but wanted to pass the insider transaction data to readers that may have further information.

Below is a list of other value oriented micro caps with insider purchases on september 16 and 15

Click to see more data and quotes


ABD
ATGN
ATSG
GNRG.OB
HBIO
SUPG

Select Insider Buys Tonight

Mirco Cap Positive Insider Activity on September 14: Sorted in descending order based on purchase value / Total Float Amount

Click to see Results


Additional posted on twitter yesterday

Click to see results

Significant company buybacks and positive direct insider buys for August and September

Micro caps with significant share buybacks over the prior 4 qtrs with direct insider buying by Officers or Directors for August and September YTD 2009

Quotes and Yahoo Finance Data on the ideas below


Additional information on the ideas below


NOOF New Frontier Media Inc. Movie Production, Theaters :Buybacks / Float Value = -18.17%

PLXT PLX Technology Inc. Semiconductor - Integrated Circuits :Buybacks / Float Value = -11.89%

LNUX SourceForge, Inc. Internet Software & Services :Buybacks / Float Value = -9.7%

BBSI Barrett Business Services Inc. Staffing & Outsourcing Services :Buybacks / Float Value = -8.62%

CLCT Collectors Universe Inc. Business Services :Buybacks / Float Value = -7.39%

INWK InnerWorkings Inc. Business Services :Buybacks / Float Value = -5.51%

DTPI Diamond Management &Technology Management Services :Buybacks / Float Value = -4.52%

TLGD Tollgrade Communications Inc. Industrial Electrical Equipment :Buybacks / Float Value = -4%

CALD Callidus Software Inc. Business Software & Services :Buybacks / Float Value = -3.54%

HRT Arrhythmia Research Technology Medical Appliances & Equipment :Buybacks / Float Value = -1.29%

SGI Silicon Graphics International Diversified Computer Systems :Buybacks / Float Value = -0.64%

Biotechnology Micro Cap Value with Positive Insider Buys for 2009

These two ideas are selling below net cash:

KDUS; Cadus Corp, Carl Icahn buying shares, selling for less than net cash

CAPS: Orthologic Corp, selling for less than net cash, share buy backs for 2009 in the amount of 6,845,000

Additional data and several more micro cap biotech ideas with positive 2009 insider activity

Follow Link

Sept 7 - 9 insider buys; Micro Cap Value

Additional Details on the ideas below

Follow Link

INMD: Integramed America Inc, Medical Practitioner Industry,

MPET: Magellan Petroleum Corp, Heavy recent insider buying relative to float value

NENG:Network Engines Inc., Royce owns 3%

SNS: Steak and Shake, Continued insider buying at current prices by management

Micro Cap Insider Activity September 1 -4 with Value Attributes

See details

Link for Additional Data

CLCT: Collectors Universe Inc.: 2.4 mil in share buy backs prior 12 mnths
GNRG.OB: Gateway Energy Corporation (-60% YOY sales change)
IRIX: IRIDEX Corp. Medical Appliances

MPET: Magellan Petroleum Corp. EV/Price = 63%
PRPX: Portec Rail Products Inc.
SGRP: Spar Group Inc.

SNS: Steak n Shake Co.
SUPG: SuperGen Inc. EV/Price = 52%
TBAC: Tandy Brands Accessories Inc. (EV/SALES = .24)GP/EV = 120%, Textile

TIV: Tri-Valley Corp.
TRBR: Trailer Bridge Inc.

Pervasive Software (PVSW)

Pervasive Software (PVSW)

Doing some systems work tonight and stumbled upon a stock I once owned. The most interesting aspect of this stock is as follows:

*Very aggressive share buybacks over the past few reported quarters. In fact they spent 12,254,000 to buy back shares at depressed prices over the past 5 quarters.

* The current share count has been reduced and is about the same count in 2003.

* FCF generated over the past 3 years as a percentage of the current enterprise value was 15%. Current FCF/EV = 12.62%

* Net income total over the past 3 years was $4,066,667. FCF was 8,500,000 over the prior 3 years.

* YTD return is 23.90%, one month return is -2.60%, 17% below the 52 week high.

* EV = 57.395 million, EV/Sales = 1.26, OI/EV = 11.06%, EBITDA/EV = 14.20%,
I don’t own shares at this time but if the stock continues to fall I may consider.

Looking into ALOY

Link

Positive insider activity: Prior 4 days

See the ideas

Link

Ideas 08/24/09

Some the following have been introduced in the past but the market has moved them higher.

But given the large cash balances, low debt, strong capital structure, 65%- 38% of the 5 year high, respectable profitability they deserve to be monitored.

MDF, industry = Health Care Plans, 38% off 5 year high, YTD return 38%, below 52 week high 14.40%, 3 month return 15.70%, average 4 year ROIC 24.75%, EV = 78 million, market cap 52 week change 3.1 %, off 52 week low 132%, Qtrly YO Y revenue growth 5.90%, OI/EV = 22.58%, short as a percentage of float 5.90%, EBITDA/EV = 24%

See more ideas and additional data on MDF, OPTV, DGII, NATH

Link

An overlooked metric to help identify value

We all know the P/E ratio or the price to sales multiple but how often do we hear about price to the GP multiple.

A stock trading at a deep discount based on a low price or EV to gross profit can help provide insight into an overreaction to negative news or other non essential long term negative event.

Not only was I looking for companies generating large gross profits relative the price paid but the stocks had to also clear these hurdles

Dilution factor: Average shares outstanding over 3 years/TTM shares outstanding

Smart money: avoid stocks heavily shorted, Shares shorts as a percentage of the float <5%

Avoid companies with a large decline in sales. Quarterly year over year revenue growth > -5%

Management greed test: Selling and general administrative cost less than 30% of revenue

A few of the stocks worth introducing tonight

Link to the ideas



Quadra Med Corp
QDHC

Price: 6.42

Average ROA past 4 years: 11.61

Significnat Positive Direct insider buying

Large company Share Buybacks: 4.474 million expended on share buybacks over the past 12 months

5.50 million paid in dividends to shareholder over the prior 12 months

Annual SGA/REV = 26.35%

NTA per share = 7.36

EV per share = 13.12

Industry:Business Software & Services

"SUPER COMPANIES"

Price to sales was a measure guru investor Fisher used to identify super companies.

Filter created

Shareholder friendly factor: This was a quick attempt to find companies not diluting their shares outstanding
1)[Avg3Yrs/TTM]>.94
Average shares outstanding over the past 3 years/ TTM shares outstanding >.94

2) Investor sentiment or smart money:
Shares short as a percentage of float <3%

3) Positive cash flow from operation and Earnings before interest taxes depreciation and amortization greater than zero. Trying to avoid distressed firms

4) Positive quarterly year over year revenue growth

5) Measure management greed: Management greed factor using SGA as a percentage of revenue: select only companies with a SGA/Revenue <.30

6) EV (Price – Cash +Total Debt)/Price <1.75 identifies companies with no significant debt or having large cash balance.

See the results

Link

Month to date July 2009

Non Financial stocks with direct positive insider activity for July month to date

165 points of fundamental data to help with the investment decision

Link

NUTR (Nutraceutical International)

High ROIC and Earnings yield combination

Price $10.23

52 week return -13.93%, off 52 week high 23.06% off 52 week low 84%:

Industry = Drug related, YOY quarterly revenue growth = 5.6%,

Stocks buy backs over the past 12 months / EV = .01889% or $1,816,000 expended on share buybacks.

FCF/EV = 5.77%, EBITDA per share = 2.63, EV per share = 13.51, CFFO/EV = 15.47%,

EBITDA/EV = 19.47%, SGA/Rev = 39.80%, average ROA over the past 4 years = 9.09%

I have a position in NUTR

MEI (Methode Electronics)

Price = $6.29
EV per share =6.38 or $241,029,000
EV/Price = 1.028
Sales per share = 13.08
EV/Sales = .4876
ROA average 2 years = 3.96
NTA per share = 6.30
Rev/EV = 2.05
SGA/Rev = 12.47%

Average 3 years shares outstanding / TTM = .97

Current dividend yield = 4.50%

Share buy backs/EV = 2.59% or $6,246,000

Other stocks with positive activity

ISCA (International Speedway)

MMLP (Martin Midstream Partners)

CFWH.OB (The Center for Wound Healing)

TYL (Tyler Technologies)

ABM (ABM Industries)

CPK (Chesapeake Utilities Corporation)CFI (Culp, Inc. engages)

SD (SandRidge Energy)

SHE (Spartech Corporation)

HBE (Henry Bros. Electron)

VHI (Valhi, Inc. operates)

Value Filter created 07/05/09

The value filter was developed as follow:

EV/Sales < 1.50

Average shares outstanding over past 3 years/TTM Shares outstanding >.94
Shares short as a % of Float < 10%

EV/Market Cap < 1.85

Share buybacks for the last reported quarter

Positive direct net insider buying for 2009

The list was sorted by direct net insider transactions (Buys less Sales)/Float Value (shares outstanding in float * Price)

Now the results

Link

New Ideas

The list was generated based on the following criteria;

Only companies with direct insider purchases by directors or officers for 2009.

Stocks with share buybacks over the past two quarters with the belief shares were acquired at bargain value building prices.

Average number of shares outstanding over the past 3 years /TTM share outstanding >.93

I was trying to measure improvement of the capital structure based on the actual reduction of share count.

Enterprise value /Market Capitalization < 1.75 (Low debt companies with a strong cash position)

The data was measured by the value of the direct shares purchased by insiders/enterprise value

Other criteria that I will discuss on another night.

Just hope you can find the data somewhat useful.

A link to the stocks based on the above criteria.

Just updated (07/01/09)the above ideas with fundamental financial data

Share buy backs at value creating prices

Micro cap value with recent share buy backs at potential value creating prices; current insider buying

Link to ideas

Syms Corp {SYMS}

SYMS

"Assuming the bankruptcy judge approves the sale, this is a transformative deal for Syms in our view, it is double barreled, for their retail business and their owned real estate assets," said Andrew Sole, a managing member of Esopus Creek Advisors, which owns about 3.5 percent of Syms common stock.

http://finance.yahoo.com/news/SymsVornado-win-Filenes-with-rb-15529806.html?.v=1

Syms:Hidden values buried on the balance sheet

Joel Greenblatt meets Ben Graham and Warren Buffett

Ben Graham focused on buying as many statistically cheap stocks he could find. Buffett after many years of less than perfect results from investing in cheap ideas/cigar butts with textile mills, department stores and windmill companies his approached was modified. His modified approach was to focus on good companies at cheap prices such as Coca-Cola. The approach of buying good companies for cheap prices is exactly the focus of Joel Greenblatt. He took the best from both investors and with his ability to forecast normalized earnings several years out this approach has been unmatched for many years running the hedge fund Gotham Capital.

For this week’s direct positive insider activity I selected only stocks that would be potentially acceptable for further research to Ben Graham, Buffett and Joel Greenblatt.

ImmuCell Corp (ICCC)
Hurco Companies Inc (HURC)
Advocat Inc (ACVA)
Ramtron International (RMTR)
Nutraceutical International (NUTR)

Additional data on the above:

Link


All ideas last week with positive insider activity (not necessarily acceptable to Graham, Buffett or Greenblatt)

Sorted by amount of last week’s insider purchases/EV

Link

MVC Capital - MVC-NYSE

Taken from Saturday’s (06/13/09) Barrons

MVC Capital - MVC-NYSE

Buy - Price 8.56 on June 9
by Morgan Joseph

“MVC reported slightly lower-than-expected [net asset value] per share of $16.84 in F2Q09. This compares to our $17.24 ... In Securities and Exchange Commission filings, MVC reported F2Q09 income from interest, dividends, and fees of $5.8 million, operating income of $2.1 million, net income of $1.7 million, a net realized and unrealized loss on investments of $9.5 million, and a net decrease in assets of $7.8 million. The company also reported realized and unrealized losses of 32 cents per diluted share versus our estimate of a 10-cent gain. We think multiples have bottomed out among portfolio companies, while revenue and Ebidta appear to be stabilizing...We are maintaining our Buy rating and target of 17. We believe MVC's portfolio remains relatively strong and that write-downs to portfolio companies should slow in coming quarters. Our price target is based on our estimated NAV per share of $16.88 at the end of FY2Q [the fiscal second quarter of] 2010. Market cap: $208 million.”

Link

http://online.barrons.com/article/SB124484648775411207.html?ru=yahoo

I have a position in MVC

Significant positive insider activity

Link


Additional Fundamental Data

ICCC: ImmuCell Corp (Nano Cap Value)

ICCC: ImmuCell Corp


Cash per share is 1.73 with no long term debt. They own a 26,800 square foot building at 56 Evergreen Drive in Portland, Maine. Enterprise value is only .63 : Price (2.20) – (1.57) (Cash – Liabilities) = .63 EV

This biotechnology company is dedicated to marketing products that improve animal health and productivity in the dairy and beef industries. Their product focus encompasses prevention, diagnosis and treatment of bovine diseases.

The key risk is FDA approval of Mast out.

I have a position in ICCC.

Additional positive insider activity today 06/09/09

Additional positive insider activity


http://finance.yahoo.com/q/it?s=ICCC

Biotechnology

I have no expertise with biotechnology but did write the following about using insider activity with biotechnology stocks.

It seems logical Insider activity within certain industries such as biotechnology may provide more directional information. The thesis is management understands the science and future possibilities of new drug breakthroughs or ability to pass future FDA hurdles

Link

http://seekingalpha.com/article/130846-how-to-interpret-insider-transactions

DYAX was provided on my value insider list on Sunday.

Link

http://www.shadowstock.com/ss_060509.html

Insider Activity for DYAX

http://finance.yahoo.com/q/it?s=DYAX

The idea may be worth a closer look.

NUTR: High ROIC and earnings yield combination

Nutraceutical International Corp (NUTR) with its relatively high ROIC and earnings yield combination coupled with the additional small insider purchases forced me to take another look at this stock I own.

Industry = Drug Related Products

Insiders step up and add to their position but the activity has been less than perfect.

Link

http://finance.yahoo.com/q/it?s=NUTR

EV = 143,101,200
MC = 103,280,000
EV/Sales = .8650%
Trading at a historical discount
YOY Qtry Rev Growth = -5.60%
Shares outstanding consistent over several years
OI/EV = 14.12%
CFFO/EV = 30.58%
FCF/EV = 5.97%
EBITDA/EV = 20.04%

Short % Float = .20%

52WkChng = -28.34%

ROA = 9.47%

My comments back on April 14 when the stock was ~7.

Nutraceutical (NUTR) has successfully created shareholder value with a sensible capital allocation strategy. ROIC before taxes has averaged an enviable 21.58% for the past 4 reported fiscal years but has fallen to 13.81% for the most recent year end. The drop is not due to the margin compression that has actually risen from 52.56% in 2004 to 54.40% 09/08. The lower ROIC is directly attributable to SGA increasing 31.87% from 2004 coupled with sales improving 18.56% forcing operating margins to decline. But based on ROIC NUTR solidly outperforms its publicly held direct competitors: Schiff Nutrition (WNI), Natural Alternatives (NAII), NBTY (NTY), Natural Alternatives International (NAII) or Mannatech Inc (MTEX). At this point the profitability for NUTR is significantly higher than its peers and represents a bargain price with a current EBITDA/EV at 25.20%. Historical it has managed to keep its capital structure clean with a relatively constant outstanding share count over the past several years. The solid financial health is supported by years of well managed strong FCF.


Business summary taken from Yahoo

"Nutraceutical International Corporation engages in the manufacture, marketing, distribution, and retail of branded nutritional supplements and other natural products in the United States and Internationally. The company's products include vitamins and minerals, herbs, specialty formulas, and other products offered in various formulations and delivery forms, including capsules, tablets, softgels, chewables, liquids, creams, sprays, powders, and whole herbs. It also publishes, prints, and markets a line of books and booklets to book distributors, national retail bookstores, and health and natural food stores; distributes branded products of certain third parties; and owns neighborhood natural food markets and health food stores. Nutraceutical International sells its products primarily to and through domestic health and natural food stores. The company was founded in 1993 and is based in Park City, Utah.?"


Other potential value stocks on June 4/5 that had positive insider activity were the following. Hope you find the data useful.

Link

Dramatic run up justified?

Is the recent dramatic run up justified?

Link Bloomberg

<“The economy is still a scary place,” Steinhardt, 68, said in a Bloomberg Television interview. “My net feeling is that this rally doesn’t have all that much more to go and the dangers out there remain consequential.”
‘Danger Is High’>>

Spending too much effort trying to gain additional macroeconomic insight may provide little reward given how closely this topic is covered. I prefer to allocate my investing time finding new ideas or gaining additional understanding of my current positions.Trying to look 3 - 5 years out,for some ideas,and determining normalized earnings seems like a more profitable use of time.

Regardless of the direction of the economy I will continue to follow and buy micro cap value ideas. I’ve never given much weight to insider activity but instead relied solely on fundamental data. But at this time with economic uncertainty and forecasts changing daily correctly using insider transactions coupled with fundamental data may add additional value to the investment process. I’m adding this approach to assist in finding potential new ideas.

Link

http://seekingalpha.com/article/130846-how-to-interpret-insider-transactions

Some stocks I was buying this week; These are not recommendations but for me they were worth adding at that time to an existing diversified micro cap portfolio.

Brief points

RFIL:
High ROIC plus earnings yield combination, large share buybacks over the last two recently reported quarters. Solid balance sheet, stable dividend,clean capital structure, reversion to mean valuation

CLRO:
Strong fundamental valuation with exceptional insider buying over the past month, institutions such as Royce have been increasing their ownership

RAIL:
discount to normalized earnings several years out imo,
Mohnish Pabrai in the past talked about relevance of clean coal and that coal use will increase. He believes there is a 30-40 year bulge in railcar demand. Negative is that the business is unionized and narrow. Pabrai sold last year for a small profit given he had a better opportunity and thought the 40 year bulge may be off by 2 or 3 years. He made the correct move as the stock has a -63.63% 52 week return.

Source SeekingApha

UTMD:
Consistent and generous dividend yield, high ROIC and earnings yield with strong balance sheet , reducing shares outstanding, take over potential

Utah Medical: A Small Cap Gem

http://seekingalpha.com/article/131134-utah-medical-a-small-cap-gem

SIDG.PK:
VERY RISKY and although not a traditional value stock SIDG.PK does have additional attributes that can make the idea work, again very risky with no margin of safety. Good management team, Warren Kanders, recent large contract with world trade center to supply counter weights, seeking listing on major exchange, actively looking at acquisitions. Be careful as the auditors recently added a going concern statement due to loan convent violations.

Link to portfolio

Part Science, Art and Personal Goals

A question was asked about a specific idea that recently had positive insider activity.

Link

http://www.shadowstock.com/ss_051509.html

The only reason for providing potential ideas with frequent current positive insider activity with fundamental supporting data is for some investors the idea may fit into their portfolio. Or they may have additional specific insight into the industry or company to go long or concentrate their holdings. How and if an idea fits into your portfolio is personal. Not having a solid reason for buying or portfolio strategy may force the sale or purchase at the wrong time. You may also avoid intelligently adding more shares when the stock is down. Hopefully the direct insider activity with supporting fundamental data will prove useful at times for some readers.

When I’m managing my portfolio I take a highly diversified approach. Value oriented stocks are added slowly. I try to avoid position concentration, most of the time. My emotions can get carried away leading to an overweighting. This highly diversified approach will not be the most successful approach for other investors but for me it fits into my goals.

Famed investor Mohnish Pabrai became a rock star easily crushing the market with a concentrated portfolio of his best ideas for many years. He even bid $650,001 to have lunch with Warren Buffet. His Warren Buffet concentrated portfolio approach was working for several years. But 2008 he was devastated with this approach, down 59% in 2008, and the last half of 2007 was even more destructive.

Thanks to the outstanding noisefreeinvesting.com blog he just posted a recent link to a Columbia university investment class by Mohnish Pabrai. Mohnish discusses how and why he changed his investment style and now takes a much more diversified basket approach and no longer concentrates on just 4-5 of his best ideas.

Mohnish Pabrai
Link

http://www2.gsb.columbia.edu/cis/classrooms/FlashPlayer/CBSplay-nologo.html?video=class_sessions/09s/Greenwald_U412_4-21-09_1745-2045_34068.flv

Link Noise Free Investing

http://www.noisefreeinvesting.com/blog/?p=920


On Friday I mentioned PDII had positive insider activity and was a net/net Ben Graham style stock.

Link


http://shadowstock.blogspot.com/2009/05/insider-micro-cap-value-buying-on.html

The Net/Net attribute and insider activity doesn’t make the stock an automatic buy for all investors. But the information was worth discussing because for some it fits into their portfolio if they want to add to their basket of Net/Net stocks.

For me it was worth adding a tiny piece to my portfolio, less than 1% of my total equities. I believe you must take a basket approach if you want to invest in these Net Net ideas.

No guarantee but I believe there is a margin of safety and so I added a tiny piece until there is more visibility.

http://finance.yahoo.com/q/it?s=PDII

PDII has been proactive by reducing expenses. Hopefully future cash burn will slow. Any positive news the stock may begin to act positive. This is not a recommendation.

Magic formula type micro cap stocks (Joel Greenblatt) with positive insider activity during May. Good companies (High ROA) at a cheap price (High investment Yield).

Link

http://www.shadowstock.com/ss_053009.html


Good Luck
John

Comments

A reader asked for other potential investment ideas that are posted in a portfolio format.

Potential Ideas: I own most of the stocks listed

http://www.shadowstock.com/ss_portfolio.html

Since time is limited for now I recommend using the frequent posting of nightly insider micro cap value buying as a starting point posted on twitter.

Twitter.com/shadowstock
http://twitter.com/shadowstock

05/20/09 insider purchases

Insider micro cap value buying on Friday

All the ideas had insider buying on Friday (05/15/09) or Thursday (05/14/09)

I only have time for one tonight

PDII (PDI, Inc) $3.29 on 05/15/09


- Selling below net cash: EV = -.10 , price = 3.29,

Per Share Data
- GP per share = .32, Sales per share 7.91,
- AR per share $1.28, Rev Qtrly growth = -.27%, Short % Float = .6%,
- Per share cash + AR –Ttl Liab = 4.68 , cash per share = 6.33, EBITDA per share = -2.50


- Positive insider buying for 09, 08 and 07
- Clean capital structure with almost no dilution

Large shareholders are value institutions

Heartland Advisors
Rutabaga Capital Management
Royce & Associates
Kennedy Capital Management

Insider transactions:

Director purchased 5,000 shares for 3.30 to 3.47 on May 14th
Officer purchased 50,000 shares for 4.00 on December 2008
Director purchased 6,000 for 4.00 on November 24, 2008

View all transactions
http://finance.yahoo.com/q/it?s=PDII

Other that made the insider list
http://www.shadowstock.com/ss_051509.html

Value Insider Purchases

I will be posting micro cap value stocks with positive insider activity on a frequent basis.

My updates can be found at http://twitter.com/shadowstock
You can also view them on the this blog to the right

Today buys were as follows:

http://www.shadowstock.com/ss_051309.html

Industry: Industrial Metals & Mineral

direct insider purchases for the week ending 04/29/09

RTI International Metals, Inc. produces titanium mill products. Aerospace, defense, and industrial applications are their main source of customers.

Director Ronald Gallatin purchased 6,220 shares at $12.5 for a total value of $77,812. RTI is an interesting investment due to the following;

EBITDA/EV = 24.67%

Share buybacks have reduced the share count outstanding.

ROA 4 year average = 11.52
ROA 2 year average = 6.48


Other notable companies in the Industrial Metals & Mineral industry are

ZINC: Horsehead Holding Corp

EBITDA/EV = 37.12%

ROA 4 year average = 25.20
ROA 2 year average = 21.24

Share count increasing over several years.

TC: Thompson Creek Metals

EBITDA/EV = 49.38%

ROA 4 year average = 16.59
ROA 2 year average = 11.05

Share count increasing over several years.

The high earnings yield and return on capital make all 3 ideas worth a closer look

I own shares in ZINC.

Informativeness of insider transactions

Everyday thousands of insider trades occur. Insiders can only use public information but their advantage is the interpretation of this data.

Insider trading activity is not a magic potion. Many newsletters have failed to justify their existence and have folded by solely relying or simply misinterpreting the information. But having said this historical results has demonstrated if used properly insider trading data does contain predictive information and can serve as a catalyst for the stock price.

If analyzed correctly trading by insiders should help convey directional information about a company’s stock price.

A summary of key points

Insiders have a better understanding of their business economics and top executives (CEO, CFO) have the most accurate record

Purchases reveal more information than sales. Multiple insider sales with a high short position reveal negatives.

Agreement by multiple insiders increases the predictive information of trades

The magnitude of transactions is important including number of shares and net value

Multiple buys over time with no sales increases the transactions information

Current purchase in one month increases the probability of purchase for the next month

Smaller companies with activity provide more information given they are less efficiently priced.

Only analyze open market transactions, ignore private transactions

Insider activity within industries such as biotechnology may provide more predictive power. The thesis is management understands the science and future possibilities of new drug breakthroughs or ability to pass future FDA hurdles


The results of the 03/24 post for March positive insider activity was as follows
take a look


I ran a query for positive insider activity for the one week ended 04/03/09

Stocks that have excellent value for different reasons were

NUTR $6.99
Nutraceutical Int'l Corp.
Drug Related Products

PRPX $6.38
Portec Rail Products, Inc.
Railroads

PRLS $1.80
Peerless Systems Corp.
Computers Wholesale

QLTI $1.78
QLT Inc. (USA)
Biotechnology

Price Quotes for the above

Quotes on the above


click for additional information

May be worth a closer look again

It was encouraging to see Barrons this weekend providing commentary on stocks that in the past were never allowed due to the relative small size.

Taken from Barrons in an article "Cheap? Yes; A Bargain? Probably Not"

"Bradford Evans, co-manager of Heartland Value Fund (HRTVX), cites Digirad (DRAD), which specializes in cardiovascular- and nuclear-imaging systems. It projects '09 sales of $80 million, and has $28 million in cash and equivalents and a book value of $2.47. Yet its market cap is $18 million and its shares are just 95 cents. In 2008, the stock traded down from its peak of $3.50 in early February, to a bottom of 48 cents on Dec. 4. Evans, who owns Digirad stock, believes it is poised for a turnaround this year, thanks to a strong balance sheet, good technology, significant partnerships with leading medical schools and a restructuring plan that will better manage growth while controlling costs. "

Direct officer insider March buys for DRAD

http://shadowstock.blogspot.com/2008/10/digirad-corporation-drad.html

Along with DRAD, PSTA was another stock that has been on the insider buying list recently provided.

"Monterey Gourmet Foods (PSTA) is a pasta maker whose shares he has held since 2001, buying them at an average five bucks each. Although the stock is trading at 1.01, Athey isn't panicked: "The company has the lead position at large retailers including Costco and Sam's Club." He notes that Monterey also has a book value of $1.71 a share, 12 cents of cash per share, positive operating earnings and net cash flow, and no debt. "

Direct officer insider March buys for PSTA

In my opinion both of these stocks are worth closer look.

I own shares in DRAD and PSTA

Additional Company Data on the March Insider Buys

VTAL (Vital Images Inc)

http://finance.yahoo.com/q?s=VTAL

The closing price on Tuesday 03/24/09 was $10.71

Director Peet Greg purchased 5,000 shares on 03/05/09 for $9.15 and 5,000 at $9.00 on 03/09/09. Institutional investors have been reducing their positions based on the reported balances on 12/31/08. But value shop Royce and Associates still had the largest position although reduced at 8.37% of the TSO(total shares outstanding).

VTAL has A+ financial health with a solid balance sheet supported by ample cash flow from operations. But they’ve been reporting negative net income since December 2007.

One of my main concerns was the SGA expenses at 69% of revenue. The outstanding share balance has increased to 15,711,000 on 9/08 from the 09/8/2005 balance at 13,337,034.
But they have been buying back shares over the past year. For the 3 quarter period ending 12/31/08 they expended $36,114,000 to reduce the share outstanding from 17,364,000 to 15,711,000 09/30/08. Did they over pay for those share buybacks?

Additional points

Enterprise Value/Revenue = .44

P/S = 2.29
P/S 2008 = 3.50
P/S 2006 = 4.50
P/S 2005 = 6.90

Valuation based on P/S has been improving.

Revenue growth quarterly year over year = 4.40%

EV/Price = 2.07/10.71 = .1933
Cash rich with negligible debt

Per share data

Cash per share = 6.86
AR per share = 1.23
NTA = 11.66
CFFO = .48
Total Liabilities = 2.08
FCF = .09
GP = 3.58
Cash – Total Liabilities = 8.76


Industry = Business Software and services

ROA = -2.67
EBITDA/EV = -10.69
SGA_TtlYr / Rev_TtlYr = 0.6996
Shorts as a percentage of float = 3.40%

My introduction on this stock is only for informational purposes.

I have no position in VTAL.

Material positive insider activity during March 2009

The list compiled is mostly value stocks

Click here to download the fundamental data or view

Give me some time but I believed the information had value for some investors to pass along at this time.

Click here to get the list of ideas sorted by EV/Amount of insider purchases for March

If possible, can you let me know with a simple yes or no if this insider monitoring with fundamental data and the ability to download into Excel has any value to potential readers. Thanks!

your reply can be sent to

John@shadowstock.com


The results and data for March positive activity is listed here

2009 insider purchases greater than current 03/16/09 price

Hopefully this data proves useful. I looked for direct inside purchases in 2009 for an average price greater than current quote on 03/13/09. My universe was 4,520 companies. Many were smaller companies.

The screen also included

EV/Price <1.50
Shorts as a percentage of float <10
Price > Average price paid by insiders
Direct open mareket purchases
Average 3 years shares outstanding / TTM shares outstanding > .94

Their will be a link providing fundamental data. But in my opinion the information needs further analysis.

Only the top results ranked by 2009 Inside Purchases/EV

Click to view

Crosstab view

Down load data analysis to Excel

Quotes on the symbols found



Value institution holding shares in the above stocks with insider buying greater than current market price.

Symbol Insitution Percentage
APSG HEARTLAND ADVISORS INC. 8.07
APSG ROYCE & ASSOCIATES, INC. 7.73
APSG ROYCE OPPORTUNITY FUND 5.59
BBSI HEARTLAND ADVISORS INC. 4.41
BBSI ROYCE & ASSOCIATES, INC. 12.81
BBSI ROYCE CAPITAL FUND-MICRO-CAP PORTFOLIO 0.76
BBSI ROYCE CAPITAL FUND-SMALL CAP PORTFOLIO 1.67
BBSI ROYCE MICRO-CAP FUND 1.14
BBSI ROYCE TOTAL RETURN FUND 3.51
DRAD HEARTLAND ADVISORS INC. 5.28
DRAD ROYCE & ASSOCIATES, INC. 7.41
DRAD ROYCE OPPORTUNITY FUND 5.42
ECOL DWS Dreman Small Cap Value Fd 2.22
FARM ROYCE & ASSOCIATES, INC. 3.64
FARM ROYCE TOTAL RETURN FUND 3.37
ISSI ROYCE & ASSOCIATES, INC. 2.76
ISSI ROYCE CAPITAL FUND-MICRO-CAP PORTFOLIO 1.03
ISSI ROYCE MICRO-CAP FUND 1.67
ITI MARXE, AUSTIN W. & GREENHOUSE, DAVID M. 12.7
MTOX FIDELITY LOW-PRICED STOCK FUND 3.35
MTOX WHITEBOX ADVISORS, LLC 1.8
MTRX DWS Dreman Small Cap Value Fd 0.97
MTRX ROYCE OPPORTUNITY FUND 2.04
NOOF FIDELITY LOW-PRICED STOCK FUND 0.57
NOOF ROYCE & ASSOCIATES, INC. 9.81
NOOF ROYCE CAPITAL FUND-MICRO-CAP PORTFOLIO 2.38
NOOF ROYCE LOWER PRICED STOCK FUND 3.73
NOOF ROYCE MICRO-CAP FUND 3.67
NOOF WHITEBOX ADVISORS, LLC 1.86
PLT FIDELITY LOW-PRICED STOCK FUND 9.98
PMD ROYCE SPECIAL EQUITY FUND 1.1
TIER HEARTLAND ADVISORS INC. 9.09
WSTL HEARTLAND ADVISORS INC. 4.4
WSTL ROYCE & ASSOCIATES, INC. 4.94
WSTL ROYCE OPPORTUNITY FUND 3.5

Ideal Market Environment for Clarus Corp

Current Price on 03/13/09 $4.00

Current market conditions have enhanced Clarus Corp’s assets for a future combination. Clarus Corp (CLRS.PK) is a shell company with no current operating business but instead has about 86 million in cash or $4.95 per share and 223 million in NOLs. 90% of the NOLs expire 2020 or latter. The current stock price is only $4.06!

CLRS.PK is seeking to acquire a business in any industry and is being managed by the highly successful CEO Warren Kanders. Kanders has a successful track record most notably with AH (NYSE) Armor Holdings. Armor Holdings (AH) posted a ~30% compounded growth rate after he took over.

The first conference call for CLRS.PK was this past Tuesday 03/03/09.He believed given current market conditions it was important to update shareholders on the company’s status and future activities. The next conference call will only be after a new company is acquired.

Competitions for new deals have been dramatically reduced and valuations have fallen substantially. These conditions are improving opportunities for their projected 2009 asset redeployment. Clarus offers a unique opportunity. The ability to provide fresh capital with 86 million in net cash, 225 million in NOLs, immediate access to a public listing, a quick combination with no shareholder vote, and a proven talented manager with Warren Kanders.

There are many companies that would benefit from a Clarus combination. Some examples would be companies with short term liquidity issues, forced divestiture of corporate assets to generate needed liquidity, public companies selling off non core operating divisions, private entities and other situations. All of these actionable opportunities are increasing.

Clarus has stated a clear vision for the new combination and would include 25 million in EBITDA, long term favorable macro trends, an industry leading management team, a diversified customer and supplier base, predictable recurring revenue stream but would also consider acquiring ideas below the 25 million EBITDA.

I consider CLRS.PK a compelling opportunity with an excellent risk reward ratio or margin of safety.

From 8/5/2008 to 12/30/2008 Warren Kanders purchased 1,001,027 shares in the open market for an average price of $4.46 investing $4,467,208.

Additional shares were purchased before 8/05/08

CLARUS CORP --- Insider Trades

Insider Date Trans Type Form Shares Traded Price Shares Held
KANDERS WARREN B 12/30/2008 B Form 4 300,000 3.75 3,213,977
KANDERS WARREN B 11/26/2008 B Form 4 125,000 4.2 2,913,977
KANDERS WARREN B 11/21/2008 B Form 4 142,027 4.2 2,788,977
KANDERS WARREN B 8/11/2008 B Form 4 309,000 5.105 2,646,950
KANDERS WARREN B 8/5/2008 B Form 4 125,000 5.146 2,337,950
KANDERS WARREN B 11/15/2007 B Form 4 58,500 6.5 2,212,950
EHRLICH BURTT R 8/22/2007 B Form 4 25,000 7 88,000

Insider activity from Yahoo


I have a long position in CLRS.PK

Top insider buys for 2009

This will be quick and won’t provide all the needed analysis for now. But the current data will be valuable.

I’m now be able to post Excel files that can easily be downloaded and provide additional information that will help with your research.

The list was created by taking the value of total direct insider purchases for 2009 as a percentage of the total market cap and also enterprise value. I’m just presenting the top ideas based on the magnitude of insider purchases. Companies with execessive debt or dillution were eliminated. In the spread sheet that can be downloaded it contains the shares short as a percentage of float. A few were over 10%and may need to be looked at more closely.


See the ideas along with a spread sheet including other useful data. I will update and provide a more focused list once time is available.


Ideas with details

Creating shareholder value

I was interested in searching for companies that could be exploiting this bear market in the hopes that they will increase future shareholder value. A potential overlooked financial measure not immediately obvious is actual large share buybacks at depressed prices over the past 6 months. For some companies these purchases could turn out to be the most prudent allocation of shareholder capital. Many companies will issue press about share buybacks and never buy those shares. Other companies will never make a public announcement and actually buy large amounts of shares. I began the search using the cash flow statement to get a tangible measure of how much money was expended on share repurchases by quarter.


Using the “Financing Activities” section of the cash flow statement I reviewed the line item “sale or purchase of stock”. A negative indicates the expenditure of cash on share buybacks and positives would be the receipt of cash from the exercise price of options or the issuance of new shares. This may be obvious but I believe it’s an area that can provide new ideas as part of a more complete analysis.


My initial thought was to examine the past 4 reported quarters emphasizing the most recent quarterly activity. I took the amount expended on share buybacks as a percentage of the current market capitalization, enterprise value and the float value to gauge the relative magnitude. The first stock that appeared at the top of the list was HAMP.PK. Looked interesting given the stock purchases for the 3 month period ending 09/27/08 was 11,952,000. This amount was material considering the market cap of ~ 12 million on Monday February 23. They reduced the shares outstanding from 7,860,000 on 02/07 to 6,441,000 on 2/08. I was interested and wanted to take a closer look. Unfortunately I quickly discovered that on Tuesday (02/24/09) they received an all cash offer for $5.50 or a 190% premium from Monday’s(02/23/09) close at $1.85.


Lucky find, yes but I wanted to continue with the approach to see what else I may uncover. So I applied this method to over 4,000 companies. The financial sector was excluded and added the additional criteria below along with other decision making data.

1) Year over year share count reduction
2) Enterprise value less than 140% of market cap (a margin of safety measure)
3) Positive CFFO for current reported 12 month period
4) Share price > $1.00
5) Positive insider activity
6) Shares short as a percentage of float < 5%
6) Recent one year of reported net purchases of stock / current total float value, market cap or enterprise value greater than 15% of total

Some of the ideas were as follows

New Frontier Media Inc (NOOF) $1.43
Paragon Technologies (PTG) $2.54
PLX Technology (PLXT) $2.14
Frequency Electronics (FEIM) $2.58

Quotes on the above ideas


Additional financial data for the above ideas



I have a long position in NOOF

Four Net Cash Bargains

This is just a follow up on the previous posting. I selected only 4 ideas and posted on SeekingAlpha.

Four Net Cash Bargains

The liquidation of Technology Solutions (TSCC) was a strong reminder of the profit potential for stocks trading for less than net cash (cash – total liabilities). TSCC was relatively illiquid and trading between a low of $1 and a high of $1.11 this year. Some days no shares were traded. But in my article on 02/09/09 "Exploiting Market Anomalies with Neglected Illiquid Stocks" I did speak on the topic of illiquid value stocks and believe it should not deter value investors.

On Tuesday, February 10, TSCC announced they would liquidate. TSCC closed at $2.18 this past Friday (02/13/09), up from the liquidation announcement date on Tuesday 02/11/09 at $1.06 for a +105% gain. This event got me thinking I should carefully search for other net cash bargains. I screened on many quantitative and qualitative factors coupled with net cash greater than current share price. These ideas were the most appealing net cash bargains

GSI Group Inc. (GSIG) had the largest percentage net cash over market price premium at 259.05% ($2.72/$1.05), positive insider activity with purchases significantly higher than current price. Royce Associates owns 10.88% of the outstanding shares as of 09/30/08. GSIG had the lowest ratio of SGA/Revenue (.2014) over the past 12 months. This ratio (I call the management greed ratio) can be useful when comparing to others in the same industry.

Forward Industries (FORD) had the only positive YOY quarterly revenue growth but margins have continued to decelerate. Operating margins were 23.79% (2005) and dropped to negative -8.34% (2008). The cash burn has been reasonable and their current liquidity is positive with a quick ratio of 10.08 and cash ratio of 8.29. Institutional investors Dan Zeff , Trinad Management and Barclays global investors have been reducing their positions. But in this market it could be the need to raise cash for redemptions.

Paragon Technologies Inc. (PTG) inside directors purchased 10,000 shares over the past 12 months at an average price of $5.20. Based on the reported holding as of 09/30/08, value institutions Microcapital owned 100,200 shares or 5.57%, Al Frank Asset Management 76,000 or 3.84%.

FortuNet (FNET) was the only company reporting positive operating income and cash flow from operations.


Additional decision making financial data

Disclosure: I don't have a position in any of the stocks mentioned. But I will consider purchases as part of a small basket of net cash bargains

Cash Bargains

The liquidation of TSCC was a strong reminder of the profit potential for stocks trading below cash less total liabilities. TSCC was very illiquid and trading between a low of $1 and a high of $1.11 this year. Some days no shares were traded. On Tuesday, February 10 the company announced they would liquidate. TSCC closed at $2.18 this Friday (02/13/08) up from the liquidation announcement date on Tuesday 02/11/08 at 1.06 for a +100% gain.

I was a shareholder over a year ago and grew impatient in the belief that they would burn through all the cash. This event got me thinking I should search for other cash bargains in this risky market.

I screened on the following rules coupled with other factors such as avoiding negative insider activity.

* (cash – total liabilities)>price

* current outstanding share count versus the average share count over the past 4 years. The stock screened needed a 94% of the average 4 year count.


* sga/reveune < .80 one of my measures of managment greed

important financial data on the list below


Symbol Price
GSIG $1.05
JOB $0.24
TELK $0.40
TGIS $0.65
CALL $0.72
HLYS $1.78
FNET $1.50
TRID $1.53
PTG $2.42
FORD $1.78
PRLS $1.82
ADPT $2.51

Quotes on the above symbols


GSI Group, Inc (GSIG)
PRICE = $1.05
CASH+AR-TOTAL LIAB = $4.66 PER SHARE
SGA/REV 12months = .2014
NTA = $7.65 per share
Shares Outstanding/Average 4 years = .9940
Positive Insider Activity
GSI Group Gains Appeal on Activist Action
Major Holders

FORD (Forward Industries, Inc.) is the only one in the list reporting positive revenue growth for the YOY quarterly results. Now that is not an endorsement to purchase but they do have an interesting valuation. The revenue growth was 6.40% but margins were continuing accelerate down.

Institutional investors Dan Zeff ,Trinad Management and Barclays global investors
have been reducing their positions. But in this market it could also be the result of forced liquidation or the need to raise cash for redemptions. I have no idea.

From a cash bargain point of view the stock has a net cash position of $2.21per share versus the current price of $1.78. With 7,915,522 shares outstanding the value of 2.21 -1.78 = .43 in net cash premium or 3,403,674. So investors are immediately getting .43 per share to assume the risk of holding the stock. The gross margins have declined from 35.83% in 2005 to the current 20.17%. The only question will management sell, liquidate or reduce their SGA costs to return profitability. Operating margins were 23.79% (2005) and - negative 8.34% (2008). Cash burn has been reasonable and their liquidity is positive with a quick ratio of 10.08 and cash ratio of 8.29. So if this is part of a basket of other stocks selling below net cash the company looks like a reasonable bet if the position is part of a diversified portfolio and the position is built of weakness.


I will follow up with some more information but the current list has some interesting cash bargains


I have a position in JOB but unfortunately didn’t use my “greed factor” ratio, SGA/Revenue or review the golden parchute for the CEO.

Syms: Hidden Values Buried on Balance Sheet

http://seekingalpha.com/article/119470-syms-hidden-values-buried-on-balance-sheet?source=wl_sidebar


Current Price = $5.95

Most investors know GAAP requires real estate to be recorded at its historical cost. Given real estate purchased many years ago is likely to have a fair market value materially higher than the historical cost, I decided to search companies for this hidden asset. Furthermore, my initial search was to buy these inefficiently priced real estate assets with companies that have an optimistic future evident by a sound balance sheet, cash flow and desirable products and services. The real estate market has been in what some would say a depression and for some properties liquidity can be near nonexistent at this time. But some of these outsized real estate holdings can provide an overlooked margin of safety.

The approach is relatively straight forward, but can often be overlooked especially on companies lacking Wall Street or financial press coverage. For this article I focus on just one idea as the material became too long. But I will try to introduce the other ideas in a follow up piece.

This idea is more of a real estate play because their existing business is distressed. SYMS (Syms Corp) is an off price apparel retailer known for their catchy sales pitch and trademarked slogans, "where an educated consumer is our best customer" and "The More You Know About Clothing, the Better it is for Syms". Some of us may remember their commercials.

There are many angles and what if analysis to this Ben Graham style stock, but in an effort to keep the article a reasonable length for this venue and also lean on an interesting observation Graham made in his latter years.

"I am no longer an advocate of elaborate techniques of security analysis in order to find superior value opportunities"

SYMS is 57% family controlled. Their valuable real estate holdings are potentially outstanding and the reward may far out weigh the risk of being a potential value trap. The stock could easily be worth twice the current net tangible asset value currently at $12.25 per share. Their first location was purchased in 1959 in the heart of the NYC financial district and is on the balance sheet for the original cost. This one NYC property out of an additional 22 owned locations may be worth far more than 100 million. Most of their real estate holdings were purchased a long time ago.

Esopus Creek Value controls 3.7% or about 8.76% of the non-controlled portion of the company. In their 4/22/08 13D filing they sent a letter to the independent board members noting that as a large minority holder they intend to examine the board more closely for their performance as fiduciaries. The letter also addresses the need for a full independent appraisal of the company's owned real estate and asks to make their conclusions pubic. Furthermore, a request was made to review the financial performance of all stores and where necessary, sell the property, lease or close the location. Their comments get even more interesting as they focus on the specific value of the 42 Trinity NYC location.

Some of their comments were as follows:

"And just to illustrate the enormous value that has yet to be unlocked by the Company, on April 17, 2008, just four days ago, New York City property records revealed that a nearby parcel located at 8 Stone St., having approximately 100,000 buildable square feet and the same zoning characteristics as 42 Trinity, sold for over $60 million to a hotel developer. This transaction equates to $600 per buildable square foot, thus implying a valuation for 42 Trinity at $102 million."

Some activist value funds believe management has demonstrated little concern for shareholders. This belief partially stems from the company's attempt to delist from the New York Stock exchange around December 2007 to gain a listing on the pink sheets. Minority shareholders stopped their attempt from a pink sheet listing. SYMS compromised and listed on the NASDAQ where it currently trades.

Syms quietly expanded its NYC real estate holdings and if they were successful in their pink sheet listing this information would not have been disclosed. In the April 25 annual report, Syms revealed the purchase of 16,500 square feet of air rights for its NYC 42Trinity flagship location for 3.1 million. The adjacent property was also purchased for 8 million. These two transactions may have increased the value of the Trinity location greater than the 102 million estimated by Esopus. Could Syms see value in doing something other than selling off price clothing at this location? So they paid 8 million for an adjacent building and 3 million for air rights. Are the purchased air rights to put an additional 16 floors of off priced clothing merchandise, including expanding operations to the new adjacent location in this difficult retail environment, hmmm?Further evidence of the potential value of their real estate holdings was recognized in 2006 when SYMS sold 2 locations in Rochester NY and Dallas Texas reporting a gain of 10,424,000. The company also owns stores in many prime locations such as

Miami, FL
West Palm Beach, FL
Cherry Hill, NJ
Westbury, CT
Commack Long Island NY
Ft. Lauderdale, FL
Paramus, NJ
Houston TX
Buffalo, NY
Secaucus, NJ
Fairfield, CT
Ft. Lauderdale, FL
Tampa, FL
Norcross, Georgia
Marrietta, Georgia
Addison, IL
Rockville, MD
Southfield, MI
Hurst, TX
King of Prussia, PA
Monroeville, PA

I went back to the 1995 10k and found all of these properties on the books. Prior to 1995, their 10k filings were on paper according to Edgar.

In my opinion, management's financial transactions indicate they believe the stock is significantly undervalued and desire to increase their percentage ownership. There is an active share repurchase program from minority shareholders. The annual cash flow statements from 03/2004 to 03/2008 reported $17,340,000 expended on net transactions for stock buybacks offset by money received from options exercised. The shares outstanding continue to drop from 16,362,000 for the period ending 05/22/2000 to the current amount of 14,590,000.

The potential opportunity of SYMS attracted famed contrarian value investor Michael Price. He owns about .97% of the total shares outstanding although he sold some of his original position. Irving Kahn, Loeb, Barrington and Espous have also recognized SYMS as an opportunity.

SYMS basic financial data
Per Share DataPrice = $7.33
EV = $8.54
NTA (Net Tangible Assets) = $12.28
Book Value = $13.018

Ratios
EBITDA/EV = 6.07%
CFFO/EV = 9.94%
EV/Sales = .48
Market Cap = 106.9Million
EV = 119.72 Million

Disclosure: I have a long position in SYMS

Exploiting Market Anomalies with Neglected Illiquid Stocks

http://seekingalpha.com/article/117964-exploiting-market-anomalies-with-neglected-illiquid-stocks?source=wl_sidebar

The market continues to indiscriminately sell stocks. But in 2008, micro cap value took one of the biggest hits compared to other investment categories.

I occasionally like to remind myself of something Benjamin Graham said:

"It is our argument that a sufficiently low price can turn a security of mediocre quality into a sound investment opportunity - provided that the buyer is informed and experienced and that he practices adequate diversification. For, if the price is low enough to create a substantial margin of safety, the security thereby meets our criterion of investment."

Graham’s thoughts on this topic can help build a profitable diversified portfolio of value micro cap ideas. Unfortunately, these deep value micro cap stocks can also be illiquid at times. But that should not deter serious value investors. Building or selling a position requires patience if maximum profits are to be realized. We all know millions of investors are speculating and investing billions of dollars chasing liquid stocks. Logic would conclude that the potential to find extraordinary bargains with illiquid stocks are significantly higher. Exploiting market anomalies with ignored and neglected illiquid stocks can be one of the best ways to realize outsized gains. This approach can create a significant advantage for the individual investor as most institutions can’t fully participate.

I considered many factors when compiling this list. Although some of the most attractive values were below $1 per share, I had to ignore for this article due to SeekingAlpha’s restrictions. Financial measures were compiled, considered in combination and compared to other competitors such as

Dilution as measured by TTM Shares Outstanding/ 4 year average >.99

Enterprise value/Market Cap <1.10>1

Insider activity that has avoided selling at or near the current price

ROIC, ROE in combination with other attributes

Cash and total debt per share

Capital Structure

And others including those in the below list of ideas

http://www.shadowstock.com/ss_article020309.html

Disclosure: I have a long position in PRCP, DAIO, ARKR and no position in any of the other stocks in this article

Ark Restaurants Corp: An Enviable Economic Moat

Ark Restaurants Corp (ARKR) has evolved over its 25 years toward being one of the best, if not the best, shareholder-friendly restaurants. CEO Mike Weinstein was an investment banker before creating the publicly traded Ark Restaurants. The CEO’s leadership can be credited for its successful management team and outstanding capital allocation.

The company has a wide range of restaurant styles without a single identifiable concept. CEO Mike Weinstein has stated "I don't know how to build brand equity and don't want to". ARKR currently has 20 full scale restaurants with chefs and executive chefs, 30 fast food themes, catering operations and wholesale / retail bakeries. Its upscale restaurants are stylishly designed at landmark locations, including Bryant Park Grill located behind the New York Public Library, the Grill Room with majestic views of the Hudson, 1000 seat Sequoia along the banks of Washington D.C.'s Potomac River, Gallagher’s Steakhouse located at Resort Hotel and Casino in Atlantic City, and others.

Management is not complacent and will quickly close an establishment or ask the landlord for concessions if the location is not generating positive store level operating cash flows. Based on its pristine and conservatively managed balance sheet, the company is reluctant to place large amounts of shareholders capital at risk. Mike Weinstein and team further enhance shareholder value by weighing the benefits of share buybacks, dividends, and the long term profit generating opportunities from investing in a new restaurant. Given the current economic conditions, the company continues to perform well but recently made the decision to suspend the dividend as it sees better use of the cash. The company has a good cash position and if it was complacent could easily fund the existing dividend and avoid the challenging task of optimizing the allocation of shareholder capital.

The restaurant environment is difficult now, but it’s encouraging to hear management state there “will be some wonderful opportunities”. Having cash on its balance sheet with outstanding cash flow and credit availability will help create an advantage when negotiating or finding new deals. Mike Weinstein (CEO) has stated “If something comes our way that is a fat softball coming across the plate, we will take a swing at it but nothing else.” The CEO’s insightful response to an analyst’s pressure about additional share buybacks highlights some of the reasons to align your capital with ARKR management. His response was as follows:

"The question is always if you buy back your own stock, is it creating value for shareholders? Without a question, it is creating value. Is there more value in finding something that gives you a fairly good flow of income for 10, 15 years as opposed to buying stock, buying somebody else’s operation with the cash flow is significant and recurring and reliable. That’s what we are looking for. If we can’t, we will buy more stock. And by the way, one doesn’t preclude the other. If the shares are attractive in terms of where we think they are attractive, we will buy more stock if it comes in."

ARKR fits the criteria set by several respected value investors; Joel Greenblatt (high ROIC coupled with a high earnings yield, Kenneth Fisher (low P/S), James P. O'Shaughnessy (value with growth) and others. Let’s take a closer look.

Earnings Yield and related measures; “Favorable” rankings out of 55 restaurants

EBITDA/EV = 3.69/12.29 = 30.02% (1st Favorable)
CFFO/EV = 3.25/12.29 = 30.90%
OI/EV = 3.08/12.29 = 25.06% (1st Favorable)
FCF/EV = .94/12.29 = 7.65% (4th Favorable)
CFFO/NI = 3.25/2.16 = 1.50%

Out of 55 companies I reviewed in the restaurant industry, ARKR has the highest EBITDA/EV at 30.02% with consistent high quality of reported earnings evidenced by the supporting cash flow from operations, CFFO/NI = 3.25/2.16 = 1.50%. Couple the bargain price with a high return on capital and the stock is screaming "I’m a well managed company selling for a bargain." ROA (return on assets) will help measure return on capital. ARKR is near the top or about number 6 out of 55. The four year average is consistent at 15.59%. The after tax ROIC tells the same story and averages 18.61% over the same 4 year period.

Joel Greenblatt uses a combination of earnings yield and return on capital to rank companies to filter potential investments for further research. His book “The Little Book that Beats the Market” is based on this concept. I took the earnings yield and ROIC for all 55 restaurant stocks and applied Mr Greenblatt’s ideas and ARKR was ranked number one. NATH (Nathans) made the number two position.

Kenneth Fisher is credited for emphasizing the price to sales ratio as a useful forecasting tool. ARKR ranks as number 5 out of 55 for the best EV/Sales ratio. The top 4 may have slightly better P/S measures but there balance sheets were weak. Furthermore the P/S ratio for ARKR when compared to the last 4 years has improved significantly from an average 4 year P/S over .80 to the current .30. James P. O'Shaughnessy did his own research and concluded that the strongest and best indicator of solid appreciation in stocks were low PSR's (Price-to-Sales Ratios) which was first emphasized by Ken Fisher in Super Stocks. Mr Fisher no longer believes this ratio deserves the weighting he gave in the past.

It’s not immediately evident but ARKR has an enviable economic moat and this thought is supported by their consistent high ROIC. Management has developed the ability to handle complex operations which include negotiating and attracting developers on new projects, serving thousands of high quality meals daily, and even improve existing establishments with small amounts of capital by making minor changes.

The above positive attribute is even further enhanced by the YOY quarterly 6.90% revenue growth. There are virtually no shares short or a change in shares outstanding since 2004.

Value Institutions holding shares with their balance reported as of 10/01/08:

LOEB ARBITRAGE MANAGEMENT INC. 7.99% (recently selling)
ROYCE 4.74% (recently increasing position to 5.07%)
PRIDE CAPITAL PARTNERS 10.66%
FIDELITY LOW-PRICED STOCK FUND 4.66% (recently increasing position to 5.35%)

Positive Insider Activity over past 12 months: 18,315 shares purchased directly for 248,242 at a average price of 13.55; 6,350 shares purchased indirectly at average price of 13.29.

Catalysts

Institutional recognition of the deep value and future earnings opportunities
Accretive acquisitions opportunities to fuel future growth
Additional share buybacks
Takeover target
Reinstate dividend
Mean reversion; 210% off 52 week high, -65% 52 week return

Risks
Exposure to the New York high end restaurant market that could impact overall results as the financial sector job losses are realized coupled with cancelled parties and client entertainment
Rising food prices and a reversal of reasonable gas prices
Forced institutional selling
Sharp decline in tourism from the worldwide recession and weak foreign currency exchange rates for the Pound and Euro
Reduced domestic travel and spending to casinos located in Vegas, Foxwoods, and Atlantic City where ARKR has restaurants

Conclusion

In summary, there are potential short term risks to the stock price but I believe even now the shares are attractive. I will use further weakness to add to my existing position. Mike Weinstein and his team have proven they can take a business with low barriers to entry and create an economic moat. A restaurant that can post 18.46% after tax ROIC since 2004 has proven they have an advantage that few others in the same industry can match.

The potential acquisition opportunities in this economy will play into the hands of a well capitalized and experienced management team. Even if those opportunities don’t present themselves I believe share buybacks will increase if the stock weakens. So at this time it’s the high earnings yield combined with a consistently high ROIC, quality earnings, low P/S, insider buying, top line growth, ownership held by quality value institutions at higher prices, no dilution, virtually no shares short, mean reversion and an outstanding proven shareholder friendly management that makes ARKR attractive.

Additional Valuation Measures
Price = 10.90
PER Share Values
Price = 10.90
EV = 12.04
Sales = 35.77
GP = 12.36
EBITDA = 3.69
Operating Income = 3.08
NI = 2.16
CFFO = 3.25
FCF = .94
AR = 1.19
Cash = .85
Total Liabilities = 4.64
Market Cap = 39.22 million
EV = 42.019 million
Share outstanding = 3.49 Million
No dilution as the amount is virtually unchanged from 2004.
Industry Rankings out of 55 restaurants
EV/Rev = 12.04/32.92 = 36.57% (5th Favorable)
EV/MC = 12.04/11.24 = 1.07 (4th Favorable)
OI/EV = 3.08/12.04 = 25.58% (1st Favorable)
GP/EV = 12.36/12.04 = 1.0266 (2nd Favorable)
FCF/EV = .94/12.04 = 7.81%
EBITDA/EV = 3.69/12.04 = 30.65% (1st Favorable)
NI/EV = 2.16/12.04 =17.94% (2nd Favorable)
EV/NI = 12.04/2.16 = 5.57 (2nd Favorable)
52 week change = -65.16%
52 low = 7.92
52 High = 34.59
Disclosure: I have a long position in ARKR.

Recession resistant: U.S. Physical Therapy (USPH)

http://seekingalpha.com/article/115252-u-s-physical-therapy-recession-resistant


Okay, not recession proof but USPH is a recession resistant health care service provider. USPH has an outstanding financial position with 35 million of an unused credit line, consistent stable free cash flow, and a proven management team that will enable it to continue expanding market share by exploiting the current lower multiples on overlooked smaller accretive competitors. U.S. Physical Therapy, Inc operates 349 outpatient physical and/or occupational therapy clinics in 42 states representing about 7% of this highly fragmented industry. From a macro point of view the long term economics of physical/occupational therapy can only improve with aging baby boomers and a country in less than perfect physical health.


The consistently high ROE currently at 14.10% screams out well managed company and the high earnings yield of 17.50% (EBITDA/EV) is proof of a bargain stock price. A sound capital structure is also contributing to the high and consistent ROE. Shares outstanding are basically flat over the past 4years at 11.96 million shares and proof of a shareholder friendly management. The recent quarter reported significant top and bottom line improvements. Comparative third quarter 2008 results versus Q3 2007 improved with revenues +26% to 47.20 million, net income +19%, same store revenues + 3.40%, same store visits +2.80% offset with a .01 EPS negative impact from Hurricane Ike.

Additional indications of value

Proven value institutions holding USPH; % of TSO (total shares outstanding) with Royce & Associates 12.71%, FMR LLC 4.48%,O’Shaughnessy Asset Management 4.71%, shares acquired at higher than current prices.

Key insider buys with CFO purchasing 2000 shares on the open market (11/10/08) for $13.60 and 1000 for $9.61 on 11/21/08.

EBITDA/EV =2.50/14.28 = 17.50%
CFFO/EV = 2.29/14.28 = 16.03%
CFFO/MC =2.29/12.38 =18.49%
EV/NI = 14.28/.857 =16.66%
FCF/EV = 1.93/14.28 = 13.51%
FCF/MC = 1.93/12.38 =15.58 %
CFFO/NI = 2.29/.857 = 2.67%

The above indicates the high quality of earnings yieldROA TTM = 14.31 ;ROA 4 yr average = 11.25

Consistent productive use of assets as measured by ROAUSPH ranks near the top for this measure in the specialized health care industry

Share count average past 4 years = 11.60 millionShare count TTM = 11.96 million
No dilution indicating a priority for shareholder value

P/S (Price/Sales) average over the past 4 years = 1.28
P/S TTM = .76
P/B (Price/Book) average over the past 4 years = 3
P/B TTM = 1.87

Both price to sales and price to book are selling at historical discounts

Per share data

Current Price $12.38
EV = $14.28
52 low = $9.00
52 high = $21.00
CFFO = $2.29
FCF = $.1.93
EBITDA = $2.50
NI = $.857
Cash = $.765
A/R = $2.33

To summarize, as I stated above U.S. Physical Therapy is well managed and selling at a discount. I believe this opinion is further supported by significant ownership held by proven value institutions, recent key insider open market buys, quality of reported earnings indicated by the strong free cash flow, low capital requirements to run and grow the business , potential customer demographics growing , an economic moat evidenced by a high and consistent ROE, high earnings yield supported by ample free cash flow, discounted valuations based on P/S and P/B compared to historical measures, A+ balance sheet , selling significantly off historical highs ,very few shares sold short and double digit growth.

Risks

Long lasting deep recession
Reduced insurance coverage driven by companies implementing cost savings
Government changes in covered health care procedures

DisclosureI own shares of USPH

Neglected and Ignored; DWCH

http://seekingalpha.com/article/113168-datawatch-a-microcap-value-stock

Datawatch is a micro cap (7.10 million market cap) that provides business intelligence software solutions for the desktop and enterprise. More than 20,000 companies and government agencies worldwide including most of the Fortune 100 benefit from their various software solutions. The firm is best recognized for Monarch software which has sold in excess of 400,000 registered copies. Their software is available in multiple languages including German, French, and Spanish. At this time approximately 38% of the company’s revenues are derived overseas.
Over the past few years the company has reinvested with the support of their solid cash flow to expand and strengthen their existing presence in other higher ticket enterprise data analytic solutions. The company has already completed a successful strategic shift to focus on more profitable enterprise solutions using their internationally popular Monarch technology as the engine.

Per share data

Price = $1.20
Cash = $.83
Total Liabilities= $1.38
Revenue = $4.16
Operating Income = $.18
Gross Profit = $3.02

CFFO(12months) = $.50
FCF(12 months) = $.46

Ratios

P/S = .30The P/S ratio is selling at a discount compared to prior years

OI/EV = .10
EBITDA/MC = 19.21%
CFFO/NI = 2.35
EV/NI = 15.39
P/NI=10
FCF/MC = 22.14%
CFFO/MC = 25.90%

Comparable company valuations

Several years ago the only comparable product that has most directly competed with DWCH’s Monarch software was from a company called Data Junction. Data Junction sold Cambio to replicate some of the functionality of Monarch to mine data from disparte text data sources. To make a long story short Monarch is far more capable, popular and functionally rich with the ability to mine data from PDF,XPS, HTML, MDB,XLS and other popular sources of data. I’ve used both of the company’s products a can testify to the superiority of Datawatch’s Monarch.

April 2003, Pervasive software saw the potential of Data Junctions report mining software and purchased Data Junction for 22.1 million in cash and 5 million shares of PVSW (Pervasive) stock . The transaction was valued at a total of approximately $51.7 million, based upon Pervasive's closing price per share of $5.91 on August 8, 2003. At the time of the purchase Data Junction had “more than 25,000 customers”. Datawatch’s desktop Monarch currently has over 400,000 growing license users worldwide. The Datawatch story with their other rapidly growing BI solutions make the current and future valuation significantly greater than the grossly undervalued price of 1.20 or 7.10 million market cap.

Another important valuation comparison is with Mobius (MOBI ) . Back on April 11, 2007, MOBI accepted an offer from the privately held Allen Systems Group for $10.05 cash per share. The total value of the offer was about 195 million. Mobius resells the Datawatch data analytics product, Monarch, under the Mobius product name DocuAnalyzer. Datawatch now competes with Mobius on larger BI enterprise solutions. Based on just a price to sales basis DWCH would be valued at a multiple times the current price when compared to the MOBI all cash deal for $10.05. MOBI was sold for about 2.0 time sales. When compared to Datawach’s current .3 price to sales. I strongly believe DWCH is temporarily selling at depressed prices with a loyal evangelical like customer base.

The major risks for DWCH are the world wide recession coupled with lack of Wall Street coverage. But there are several catalysts that may move the stock higher.

Catalyst:

- Older versions of Monarch will not be compatible with Vista. Some of their 400,000 customers will be forced to upgrade to version 9 or 10 if their company or personal computer is using Vista coupled with the significantly improved functionality.

- A new CEO was put in place about a year ago with a proven track record selling large enterprise solutions with higher margins and recurring revenue steams from their new proven enterprise BI solutions.

- Investment community recognizing the value based on sustainable high FCF and depth and bright prospects of product offerings.

- New product upgrade Monarch version 10 just released in this current quarter.

- International recognition of the significant cost benefit of using Datawatch technologies with no comparative value solution. Furthermore, Datatwatch recently embarked on a re-branding effort communicating their new focus on more profitable enterprise solutions.

I own a small amount of DWCH as part of well diversified portfolio

Click below to receive an RSS feeder

http://feeds2.feedburner.com/ShadowstockDeepValueMicroCapStocks

Value Creation

For a company to increase intrinsic value the formula is simple.

Value creation formula = (ROIC – WACC)*Growth (Return on invested capital – weighted average cost of capital) multiplied by growth.

ROIC = ((after tax operating profits)/(sum working capital + fixed assets))

Many companies pursue growth at all cost. CEO’s and executives get seduced by the institutional imperative. Many feel corporate activity such as acquisitions help confirm their value instead of improving ROIC.

Growth alone will not increase value and but instead destroy value if the return on capital is less than the cost of capital. Furthermore a company can have amazing growth but if the return on capital is equal to the cost of capital the firm will not realize any value. There may be a short term pop in the stock price but this will not hold unless capital returns are improved relative to cost of the capital.

Free cash flow or owners earnings is positively impacted by increasing ROIC, or lowering WACC or increasing growth only when ROIC is greater than WACC. Managers must control these “levers” that drive ROIC. Management must understand how ROIC, WACC and growth will increase the value of their company.

Hence its plain and simple the value of any business is the sum of all cash you receive from the business now and in the future. An important point to realize is a company with great management will have a high ROIC relative to industry peers indicating an efficient use of corporate assets. So finding companies with high ROIC and a high earnings yield clearly indicates bargin/value. In essence you’re buying a great company evident by a high ROIC for a cheap price (high earnings yield).

ROIC = ((after tax operating profits)/(sum working capital + fixed assets))


ARKR has some important attributes that is not common with most stocks.

Quote ARKR

-)Outstanding ROIC for the restaurant industry indicating effective management coupled with little or no dilution

Period Ending: 9/2008 9/2007 9/2006 10/2005 10/2004
Gross Margin 43.27% 43.80% 42.40% 43.60% 30.78%
Operating Margin 7.81% 9.13% 6.65% 7.14% 8.31%
Pre-Tax Margin 8.72% 10.06% 7.34% 7.79% 8.78%
Profit Margin 5.57% 10.48% 4.50% 5.69% 5.75%
Pre-Tax ROE 28.93% 32.80% 21.41% 24.05% 29.71%
After Tax ROE 18.46% 34.16% 13.13% 17.58% 19.46%
Pre-Tax ROA 20.60% 23.96% 17.14% 19.55% 22.95%
After Tax ROA 13.14% 24.95% 10.52% 14.29% 15.04%
Pre-Tax ROIC 24.28% 28.96% 19.23% 23.27% 28.39%
After Tax ROIC 15.49% 30.17% 11.79% 17.02% 18.60%

At this time ARKR meets some of the important factors for value as we discussed.

I own a small amount of ARKR shares in a well diversified portfolio.

New Micro Cap Value Ideas 12/21/08

New Micro Cap Value Ideas 12/21/08

http://www.shadowstock.com/ss_portfolio.html

These stocks have passed several important investment criteria hurdles but I will have to give you the important details latter. PRCP, ARKR, MSC, USPH and BITI

Opti Inc (OPTI.OB), Logility, Inc (LGTY), Actuate Corp (ACTU)

OPTI.OB

Friday December 5, 2:33 pm ET
OPTi Receives Ruling in Markman Hearing in Patent Infringement Action Against Apple Inc

http://biz.yahoo.com/bw/081205/20081205005622.html?.v=1


Price = 2.20
Cash/MC = .42
Insider buying = Positive
Per share cash – total liabilities = .95

OPTI.OB is a cash rich company winning major patent infringement lawsuits. Friday 12/5/08 OPTI received a positive ruling for patent infringement against Apple inc. Total amount has yet to be determined. High probability there will be other positive patent infringement suits in favor for OPTI.

LGTY

Company Reports 14th Consecutive Quarter of Profitability

http://biz.yahoo.com/prnews/081204/clth069.html?.v=101

Revenue declines 6% over the second quarter of fiscal 2008;

-- Software license fees for the quarter ended October 31, 2008 were $3.3 million, a decrease of 4% over the second quarter of fiscal 2008;

-- Services and other revenues for the quarter ended October 31, 2008 were $1.4 million, a decrease of 32% over the second quarter of fiscal 2008;


“The overall financial condition of the Company remains strong, with cash and investments of approximately $45.2 million as of October 31, 2008. This is approximately an $814,000 sequential increase in cash and investments compared to July 31, 2008 and approximately a $5.6 million increase compared to October 31, 2007. During the quarter, the Company repurchased 27,122 shares of its common shares for approximately $181,000 under its authorized stock repurchase program.”

Stock at $4.24 is attractive

ACTU Actuate Corporation

Actuate boosts tender offer price after buyout bid
Thursday December 4

http://biz.yahoo.com/ap/081204/actuate_tender_offer.html?.v=1

Stock is attractive at the current price of $2.95
GP per share $1.84
Cash + AR – Total Liabilities = $.52
I own a small position in all the above stocks as part of a highly diversified portfolio.

One of the great thinkers on investing: Jim Grant

This lecture on October 15th 2008 is very informative and thought provoking!


http://www.moaf.org/resources/media/video/20081015

Reporting postive results this past week; No real positive price change for these ShadowStocks??

SYTE.OB $.055 : 11/14/08 Opening Price

SYTE.OB
http://biz.yahoo.com/iw/081114/0452798.html

“The Company continued to deliver on its growth strategy, eclipsing Fiscal Year 2007 net income for the nine months ended September 30, 2008 and acquiring Velocity West, a Texas-based Internet Service Provider (ISP) and wholesale managed modem solution provider. Financial highlights for the quarter include:”

-- Total Revenue for the three (3) months ended September 30, 2008 was $2,485,294, an increase of $1,003,408 or 67.7% from $1,481,886 for the same period in 2007. -- Net Income for the three (3) months ended September 30, 2008 was $392,060, an increase of $207,316 or 112.2% from $184,744 for the same period in 2007.

-- Total Revenue for the nine (9) months ended September 30, 2008 was $7,644,538, an increase of $3,193,938 or 71.8% from $4,450,600 for the same period in 2007.

-- EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) for the nine (9) months ended September 30, 2008 was $3,461,515, an increase of $1,748,708 or 102.1% from $1,712,807 for the same period in 2007.

-- Net Income for the nine (9) months ended September 30, 2008 was $1,092,939, an increase of $510,107 or 87.5% from $582,832 for the same period in 2007.


Regarding the Company's future outlook, Mr. Erhartic commented, "Strong companies make bold strides during economic downturns. We believe that good, but monetarily weakened, ISPs will be increasingly more receptive to being acquired by Sitestar in this market. Similarly, we think that our high profit margin dial-up customers may be less likely to switch to more expensive but lower margin broadband service offerings in an economy where households seek to curtail discretionary monthly expenses. Being in a healthy financial position amidst weakened market conditions, we are confident about the future of Sitestar."

based on earnings SYTE.OB is CHEAP but the balance sheet in the past raised concern although improved results has taken most of this concern off the table at this point


RLOG $4.24 : 11/14/08 Opening Price

http://biz.yahoo.com/bw/081113/20081113005586.html?.v=1

Rand Logistics Reports Record EBITDA of $13.2 Million for the Second Quarter of Fiscal 2009, up 347 PercentThursday November 13, 7:32 am ET

RLOG Posted Record EPS of $0.38 for the Quarter, $0.58 YTD
NEW YORK--(BUSINESS WIRE)--Rand Logistics Inc. (Nasdaq: RLOG - News) (“Rand”) today announced financial and operational results for the second quarter of fiscal 2009 ended September 30, 2008.

Second Quarter Fiscal 2009 Business Highlights

Marine freight revenue (excluding fuel surcharges, outside charter and other surcharges) increased by 45.9% to $32.3 million, from $22.2 million in the prior year quarter
Vessel margins1 increased by 176.9%, to $16.1 million, from $5.8 million in the prior year quarter due to increased operating leverage
EBITDA1 increased by 347.2% to $13.2 million from $3.0 million in the second quarter of fiscal 2009

Fiscal 2009 EBITDA projected to meet or exceed the high end of management’s EBITDA guidance provided last quarter of $18.0 million to $19.5 million
Year To Date Fiscal 2009 Financial Results
For the six months ended September 30, 2008, marine freight revenue (excluding fuel surcharges, outside charter and other surcharges) increased 42.8% to $59.6 million, compared to $41.8 million for the same period last year. EBITDA was $21.5 million for the six months ended September 30, 2008, compared to $5.9 million in the same period last year. The $15.6 million increase in EBITDA was due to ongoing operational improvements, the successful integration of strategic acquisitions, vessel upgrades and infrastructure investments.

Management Comments

Scott Bravener, President and CEO of Lower Lakes, stated, “Our second quarter results illustrate the underlying strength of our business. We achieved record EBITDA this quarter of $13.2 million, versus $3.0 million in the prior year quarter, fueled by increased freight rates, better vessel utilization and continued operating improvements. Demand for our services in our second quarter was strong in the Great Lakes region where we operate, and we employed all twelve vessels this quarter. For the quarter ended September 30, 2008, vessel margin per day (before SG&A) equaled $14,069 versus $6,772 for the same quarter last year, an increase of 107.8%. We believe these strong operating trends will continue, as we further improve the performance of our fleet.”

Outlook

Laurence S. Levy, Chairman and CEO of Rand, added, “Our results this quarter are indicative of the normalized earnings capability of our assets, as we continue to realize their full potential. We believe that our business remains well protected as a result of the diversity of the end markets and customers that we serve, our low cost operating position and long-term contractual nature of our revenues. Although end market demand has softened somewhat, we are 100% contractually committed for the balance of this sailing season and based on our existing contracts and our knowledge of customer demand, we expect that our vessels will be fully utilized for the 2009 sailing season. Year-to-date, we have generated EBITDA of $21.5 million, exceeding our internal expectations, and we believe that we will meet or exceed the high end of our previously stated EBITDA guidance of $18.0 million to $19.5 million. The fundamentals of our business remain solid, and we continue to extract operating efficiencies from our fleet.”

http://biz.yahoo.com/bw/081113/20081113005586.html?.v=1

It my opinion RLOG still has dilution to work off. The business is profitable with a strong moat.

DCU $.83 : 11/14/08 Opening Price

Friday November 14, 10:33 am ET

For the first three months of fiscal 2009, revenues increased 42.5% to $6,750,817 from $4,736,644 for the same period of last year. Net earnings increased 84.9% to $209,001 or $.03 per diluted share from $113,044 or $.02 per diluted share in the first quarter of fiscal 2008.

http://biz.yahoo.com/bw/081114/20081114005554.html?.v=1

This tiny stock is still attractive at these prices

My original introduction


STMF.PK $0.77 : 11/14/08 Opening Price

Company website
http://www.stamfordig.com/

Recent Conference Call
http://www.stamfordig.com/content/sound/StamfordIndustrialGroup,Inc_11.10.08.mp3


*3rd quarter revenues were up 47.20% from 2007

*Full year revenue guidance increased to $135 - $145 million

*Full year EPS before non-cash items guidance increased to $0.29 - $0.32

“The increase in revenue is primarily due to increased demand for our products from existing customers resulting in higher sales volume, increased spending in commercial and industrial construction and infrastructure building end markets, price increases to customers and an increase in average scrap selling prices.

Net income for the third quarter ended September 30, 2008 was $4.4 million or $0.09 per diluted share versus $0.6 million or $0.01 per diluted share in the third quarter last year. Diluted earnings per share before non-cash benefits and expenses for the third quarter ended September 30, 2008 was $0.12 per share.

Cash provided by operating activities was $3.7 million for the third quarter ended September 30, 2008 compared to a cash usage of $0.1 million in the same quarter of the previous year.
Total debt was reduced $3.5 million in the quarter to $26.3 million compared to $29.8 million as of the prior quarter.

http://biz.yahoo.com/prnews/081110/nym029.html?.v=101

At .75 coupled with a talented management team backed by Warren Kanders large stake; STMF.PK should warrant further investigation.

Great management with a promise to list on a major exchange


ELST.OB $.31 : 11/14/08 Opening Price

ELST.OB reported 3rd quarter results.

Net Income for the third quarter of 2008 was $25,449, or $0.01 per share, compared with net income of $42,838, or $0.01 per share, for the third quarter of 2007

http://biz.yahoo.com/bw/081114/20081114005124.html?.v=1

For .31 you purchae Cash + AR – Total Liab = .44 per share, and sales per share of .56.

EV = Price per share (.31) – Cash (.40) + Total Liab(.049) = -.0439

http://shadowstock.blogspot.com/2008/08/electronic-systems-technology.html




I own a position in all of the above stocks as part of a highly diversified portfolio

Bruce Greenwald on Value Investing: Also STMF.PK Stanford Industrial Group

Greenwald advises not getting lured by stocks selling at low P/Es based on peak earning such as steel companies. He suggests looking more closely at assets or an economic moat.

http://biz.yahoo.com/usnews/081107/07_bruce_greenwald_on_value_investing.html?.v=1


Why STMF.PK

This is not a traditional Graham and Dodd value stock with a strong balance sheet. In fact the balance sheet is horrible. But attributes that makes the stock a risky but high return investment would be as follows in my opinion.



I've purchased shares of STMF.PK as part of a highly diversified portfolio. They posted another quarter of spectacular results with double digit growth for the top and bottom line .

http://biz.yahoo.com/prnews/081110/nym029.html?.v=101

Digirad Corporation: DRAD

Thought Provoking Videos Worth Watching

http://www.digirad.com/


“Digirad designs and sells nuclear technology for mobile cardiovascular imaging to doctors' offices and hospitals across the United States. The company commercialized the first nuclear gamma camera and offers its products through both sale and leasing options through its digital imaging solutions subsidiary. The company's gamma cameras range from single- to triple-head configuration, with imaging procedures topping 100,000 in 2007.”

The story by numbers

Current Price = $.84 and the stock has moved from $.71 per share the other day after we introduced helped by the strong market over the past few days.

Shares outstanding are 18,930,000 * .84 Price Per Share = $15,901,200 – Cash = 23,251,000 or 1.228 per share + 12,671,000 for total liabilities or .67 per share. EV = .28 =.84 -1.228 +.67 = .28

Per Share Data

Price = .84
Cash = .54
Short Term Investments = .68
Net Receivables = .53
Long Term Investments = .12
Total Liabilities = .67


EV (Enterprise Value) = .84-.54 -.68+.67 = .28

Add back Net Receivables, Long Term Investments and the valuation looks more enticing .28 EV - .12 (long term investments) – AR .53 = a negative -.37

With this superficial look DRAD appears to be selling below break up value.

Annual revenues were 77.19 million and GP of 20.52 million which compares very favorable to 5.300 million total enterprise value. One major negative is the heavy reliance on capital expenditures. DRAD reported a -4.443 million negative free cash flow over the prior 12 months. This stock is risky due to negative free cash flow; economic head winds, commodity nature of their product, potential for product obsolesce and further margin compression.

I purchased a few shares on Friday as part of a highly diversified portfolio.

Margin of Safety Deep Value Micro Cap

Quotes on the stocks DRAD, AMCS,PTIX,VIRL

DRAD $0.73 10/27/08 Digirad Corporation

AMCS $1.72 10/27/08 AMICAS Inc

PTIX $3.17 10/27/08 Performance Technologies

VIRL $3.80 10/27/08 Virage Logic Corporation


This is not a deep value stock but risk takers looking for a pink sheet stock with solid mangement, growth aspirations and current profitalble operations may consider STMF.PK (Stamford Industrial Group, Inc) $.70 on 10/27/08

Currnet stellar financial reports

Important 8k with business plan

Nassim Nicholas; TUES Tuesday Morning Corporation

Nassim Nicholas; always entertaining and provides useful insight


http://www.youtube.com/watch?v=ABXPICWjFIo


Discount Variety Stores

How does TUES (Tuesday Morning Corp) compare to some other publicly held discount variety stores?

TUES was below 2 the other day so I bought a few shares and will hold back until there is further weakness in the stock price that last traded at $2.42. In the past the investment would have been a high probability event to revert back to its historical valuation. But the future profitability is too uncertain for me to bet heavy.


EV/Sales = .25
YOY Qtry Rev Growth = 75%
P/S or EV/Sale is selling at a discount to the historical valuation

GP/EV = 112%

EBITDA/EV = 18.68%
OI-Taxes/EV = 8.66%
FCF/EV = 12.168%
CFFO/EV = 129.92%

Share outstanding have remained steady for many years at 41.82 million shares outstanding.

The stock is down 62% over the prior 52 weeks and the stock price has declined more dramatically than the other more expensive discount variety retailers.

6.20% of the float is short; this is in the negative territory but compares favorably to their peers.

Per Share Data for Tuesday
Current price 2.45
EV/MC = 224%
OI = .72
Cash + AR – Ttl Liab = 3.44
GP = 6.09


TUES is cheap and currently trading at a huge discount to its historcial valuation

Two new ideas

These stocks have short and long term value at these prices; my positions are alway built slowly. I have not made any purchases at this time.

MCGC TUES Quotes

Troubled stocks in trouble times but the value is signficant, IMO

MCG Capital Corporation

MCGC $.70

Tuesday Morning Corp.

TUES $2.96

Avalon Holdings Corp AWX: Real Estate Play?

Company website

http://www.avalonholdings.com/

Not quite the bargain at 2.70 per share or a EV of 16,259,700 million that I first thought the other night. This is far from a slam dunk and could turn into a value trap by going dark with deregistration of shares.

The original attraction was primarily the real estate holdings as follows; The PPE of 35 million was significantly higher than the EV of 16.259 million coupled with their profitable waste management business made the idea an interesting investment at first glance.

Taken from the recent 10k

PROPERTIES
<ALGI owns an 18-hole golf course and practice facility on approximately 200 acres, a maintenance and storage building of approximately 12,000 square feet, a restaurant building of approximately 10,400 square feet, and a banquet facility of approximately 7,000 square feet. ALGI currently leases the restaurant building and banquet facility to a third party operator. All of ALGI’s facilities are located in Warren, Ohio.
TBG, Inc. leases and operates the Avalon Golf and Country Club at Squaw Creek in Vienna, Ohio, which includes an 18-hole golf course and practice facility on approximately 224 acres, an outdoor swimming pool, four tennis courts and a 67,000 square foot clubhouse that includes a pro shop, fitness center, restaurants and banquet facilities.
Avalon Country Club at Sharon, Inc. owns an 18-hole golf course on approximately 130 acres. The clubhouse is currently being renovated and additional banquet and recreational facilities are being constructed. When completed, the renovated clubhouse and recreational facility will be approximately 80,000 square feet and will include a pro shop, dining and banquet facilities, an outdoor swimming pool, a spa and fitness center.
The captive landfill management operations use approximately six pieces of equipment (such as bulldozers, excavators and backhoes) all of which are owned or leased by ALMI.
Generally, Avalon’s fixed assets are in good condition and are satisfactory for the purposes for which they are intended. >>

Avalon Holdings Corp AWX derives most of its revenue from the waste management industry. Over the last 4 quarters they reported revenues of 44.66 million.

Important financial data;

EV/Rev = .33
OI-Taxes/EV = 3.36%
CFFO/EV = 28.77%
FCF/EV = -58.37%
The negative FCF was significantly impacted by additional improvements made to their Golf properties over the past 12 months

EBITDA = $1,840,000

Per Share Data

Cash+AR-Ttl Liab = .82
Cash – Ttl Liab = -1.08

CFFO/NI = 2.32
52WkChng = - 58.87%
Cash%Price = 32.07%
No Shorts
Financial Health = C
Growth = C
Profitability = F
PPE/EV = 233.54%
Qtrly Rev Growth % = 1.60%

P/S of .33 is trading a slight discount compared to the prior 3 years.
EV/MC = 1.37
EBITDA/EV = 12.18%
3,803,000 shares outstanding
MC at a price of 2.90 = 11,028,700
Cash = $3,552,000
AR = $8,148,000
FA = $35,633,000
CL = $8,552,000
TL = $8,783,000

EV = 11,028.70 (MC) – 3,552 (Cash)+ 8,783(TL) = 16,259,700

For $16,259,700 EV you are getting $44,662,000 in annual historical revenue and PPE recorded at a historical cost of 35,600,000 million.

Value Micro Caps 10/02/08

Stocks I was buying today; LOAN (Cash), AWX (Real Estate), USOO.OB (Over Sold Value),SPRO (Niche with High Earnings Yield), and KRSL (Growing Profitable Manufacturing Nano Cap)

More details in next post

LOAN,AWX,USOO.OB,SPRO,KRSL

http://www.shadowstock.com/index.html

DCU: Oversold, Neglected, Ignored, Unloved and Illiquid but still has DeepValue

DCU Dryclean USA

Short on time tonight so I will give only a few pieces of financial data. I expect to add more.

September 14, 2008 I posted a few thoughts on DCU when it traded around .75. I believed it was a bargain so I was making purchases around this price.


Here are a few reasons why;

Top line:

They have EV/Sales of only .27; this compares very favorably to P/S of .91 (2004),1.1 (2005),.90(2006),.60 (2007),.30 TTM

GP/EV = 1.05% or we can say the company’s enterprise value is selling for the LESS than annual gross profit. The Annual gross profit is 5.80 million and the EV is ~ 5.283 million = Market Cap 5.84 Mil – Cash 4.149 Mil + Total Liabilities of 3.592 Mil = 5.283 Mil enterprise value.

Subtract A/R of 1.759 million and it brings the cost of buying the company down to 3.24 million. Annual sales were 20.39 million for the prior 12 months.

CFFO was strong at 1.342 million for the last 12 months and FCF was 1.28. CFFO/EV = 25% and FCF/EV = 24%. EBITDA/EV = 16.09%, EBITDA = 885.91k
OI-Taxes/EV = 8%, OI/EV = 14%,

Float total value based on EV = 1.436 million
Profit Magin 2.92%, Operating Margin = 3.71%
Tax/OI = 45%

-9.40% = Qtrly Rev Growth

ROA = 4.98%

Earning Quality represented by CFFO/NI was positive with CFFO of 1.342 million over the last 12 months compared to reported NI of 596.13k

EV/MC = 5.84/5.283 = .902

Bowlin Travel Centers(BWTL.OB) is the company now up for sale?

09/11/08

LOAN, again had modest insider buying.

BWTL.OB

Bowlin Travel Centers

http://biz.yahoo.com/prnews/080910/law039.html?.v=101

Management was reading my mind. On Wednesday September 10, BWTL.OB the company retained Miller Capital Markets, LLC, and investment banking firm and FINRA member, to assist the Board of Directors in assessing a number of strategic and business options. Looks like they may consider a sale of the company.

Furthermore they reported “net sales from continuing operations of $7.645 million, a decrease of 7.5% compared to net sales from continuing operations of $8.268 million for the prior year second quarter period. The Company reported net income for the three-month period ended July 31, 2008, of $118,000 or $0.03 per basic and diluted share, compared to net income of $711,000, or $0.15 per basic and diluted share for the prior year period ended July 31, 2007 that includes income of $549,000 (net of income tax expense) from the sale of one location.”

BWTL.OB selling at discount to liquidation value??

BWTL.OB dropped Friday and reached a low of .76. It bounced back to .95 to close the day down 17.39%. The contrarian in me couldn’t resist this tiny 4.35 million unknown OTCBB retail stock. Warning 41.7% of the Company’s net sales are derived from the sale of retail gasoline.
But with a $2.83 healthy book value that is comprised of cash and real estate.

I purchased shares on Friday with a long term outlook willing to wait for the potential company sale, share buybacks, a going private transaction or the sale of company owned real estate to unlock value. Note shares were available at the .95 close price this Friday 09/05/08.

Lets break down the book value of 2.83 per share. Cash is .87 , current assets 1.77, long term investments of .13, fixed assets 2.37 and this includes real estate at 5 locations. As of January 31, 2008, the Company operated ten travel centers, seven of which are in New Mexico and three of which are in Arizona. The Company owns the real estate and improvements where five of its travel centers are located, all of which are subject to mortgages. Total liabilities are 1.43 per share and cash – current liabilities = .56, retained earnings are .70 per share. Current assets (1.46) - Current Liabilities (.31) =$1.15. A $1.15 NCAV versus a stock price of .95 or lower on Friday is a clear Graham’s NCAV strategy.

P/S is at .16 and is sits at a historical low going back to 2002. Price to book is also at historical low .95(price)/2.83(Book value) = .33

“the Midas touch”

Important MDS information

The Midas Story:

Midas, (MDS)

Many of us remember the commercial “the Midas touch”. We believe the brand name has value not represented in the current price. But this is not the main reason the stock may be selling at a discount to intrinsic value.

MDS was trading around $12 5 years ago and the current price of 14 looks cheap.

Although we don’t give macro analysis much weight but the obvious should be pointed out. The cut back in the purchase of new cars could be a push for repair shops such as Midas.

EV/Sales are a modest 2.09 with year over year quarterly sales growth of 8.70%. The price to sales ratio of 1.20 is trading at a discount to the prior 4 years. P/S was 2.1 in 2006, 1.6 in 05 and 04. The return to the mean factor is a real possibility, YTD ~-6.00%, and since 2005 has is down 6.80%. PPE/EV = .24

“Midas owned 223 retail locations, leased 500 locations and used other forms of real estate control over an additional 694 locations.” This was taken from the recent 10k.

Short position over the past month dropped about 11.35% from 1,410,000 in the prior month to 1,250,000 in the current month or 9.6% of outstanding float.

ROA = 9.06%, CFFO/NI over the past 12 months is a very healthy 2.76 indicating the high quality of reported earnings.

The dilution story is outstanding, there are few companies can say they have reduced the shares outstanding form prior years. 13.90 million Shares outstanding in the most recent quarter versus 16.10 million for 2004. This will have a powerful impact in increasing future EPS.

CFFO/EV = 27%, FCCF/EV = 7.06% this generous cash flow has allowed the company to regularly buy back shares. EBITDA/EV = 7.97%.

MDS has a solid list of value institutions buying at higher prices. This is a list of ownership filed in the 04/28/08 proxy.

Mario Gabelli and affiliates own 17.3%, Silverstone Capital 9.56%, Keeley Asset Management 9.56%, RGM Capital 6.68%,

Electronic Systems Technology

ELST.OB

We picked up the stock today at .41 to average down shares recently purchased.

Talk about unloved, ignored and neglected, ELST.OB has and enterprise value of less than a few hundred thousand. EV/Sales <.~20, no dilution, with no debt and a solid balance sheet


Ben Graham stated

“It is our argument that a sufficiently low price can turn a security of mediocre quality into a sound investment opportunity - provided that the buyer is informed and experienced and that he practices adequate diversification. For, if the price is low enough to create a substantial margin of safety, the security thereby meets our criterion of investment."

ELST in our opinion meets these criteria and if your investment horizon is over 12 months this stock looks attractive to us at these prices.

New Stock Ideas

for 08/25/08

http://www.shadowstock.com/ss_portfolio.html

Important Value News

Glenn Greenberg Says Concentrate

http://www.valueinvestingnews.com/glenn-greenberg-says-concentrate


Value Stock Losers Buffett, Miller Poised as Winners

http://www.bloomberg.com/apps/news?pid=20601213&sid=aGM0dW8Mjc44&refer=home

When Cheap Stocks Become Cheaper

http://www.gurufocus.com/news.php?id=33931

More Important Than Margin of Safety?

http://www.gurufocus.com/news.php?id=33722

Selling below Cash less Liabilities, Profitable

Several weeks ago the stock symbol was DAGM, The new symbol is LOAN (Manhattan Bridge Capital)

The business shift prompted a name change to LOAN (Manhattan Bridge Capital)

http://finance.yahoo.com/q?s=loan

LOAN was introduced at .94 back on July 2008 using a nano cap deep value filter.

http://shadowstock.blogspot.com/2008/07/nano-cap-value-filter.html

The stock still deserves a closer look at these deep value prices selling far below the net cash value.

Loan has only 3.24 million shares outstanding and couple this with 6.651 million in cash less total liabilities of only $103,000. The stock clearly has a huge margin of safety. We’ve initiated a position.

The most recent news on business activity for LOAN can be found in the link http://biz.yahoo.com/pz/080812/148378.html

The 07/06/08 Selection Criteria for the original nano cap filter was as follows

1) Float * EV < 15,000,000Stocks with an Enterprise Value based on the outstanding float less than 15 million

2)EV/Sales <1.50Enterprise value/Sales < 1.50

3) Enterprise Value/Market Cap < 1.50Looking for stocks with little debt


4)[DiluAvg/TTM]>.96 Shares outstanding over the past 4 years/ TTM(trailing 12 months) > .96This indicates a tight control on dilution


5)Year over Year quarterly revenue growth greater than negative 15%[RevGrowthQtrly]>-15

6)Exclude stocks in the financial industry

7)Shares short as a percentage of float less than 5%

8)[AveragePS-TTMps/AveragePS]>0

P/S price to sales ratio improving based on Average P/S over the last 4 years versus TTM P/S. We use a ratio; Average PS – TTM PS/Average PSIf the PS over TTM is improving compared to the average of the past 4 years we select

9)Positive Operating income – Taxes / Enterprise Value

ttp://www.shadowstock.com/ss_portfolio.html

ShadowStock Ideas

View some of our ideas since December 2007. The most recent micro caps are MLR, ARTL, and others. The list will be updated with the most recent closing prices tomorrow, sorry.

http://www.shadowstock.com/ss_portfolio.html

TCCO.OB still has value

Below is my post on TCCO.OB on 02/07/08 when the stock was ~3.0. The margin of safety still fits and earnings were enviable today.

Margin of Safety 1-Feb-07 08:32 pm
My reasons for holding this stock are several and these initial comments will focus on certain aspects of the balance sheet. TCCO has an impressive and improving balance sheet offering investors a significant margin of safety. NTA (net tangible assets) have grown slightly over the last 4 quarters even without reported earnings. The market cap and enterprise value (EV) are approximately 4.50 and 3.15 million respectively. Additionally, market cap – current assets - long term investments+ total liabilities are only 32% of the stocks price or calculates to 1.44 million versus the market cap of 4.50 million. Cash is 41.34% of the share price. Cash less all liabilities for the current period was 1.344 million versus reported 4 quarters ago .368 million. The balance sheet continues to quietly improve but reported earnings have been weak potentially offering us an opportunity to invest before positive net income is reported and the stock price quickly increases.
Sentiment : Strong Buy

http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_T/threadview?m=tm&bn=36608&tid=1&mid=1&tof=22&frt=1

Value News and Specific Stock News 07/26/08

Evaluating Ambac: Intrinsic Value Withstanding Market Volatility

Steak n Shake needs healing

Another personal interview with investing guru, Bruce Berkowitz

Bruce Berkowitz video interview on Fox and CNBC

Even the Legends Are Losing in Today's Markets

Value Investing vs. Business Investing

Security Analysis: Introduction (Part 1)

Where to Find the Market's Bargains

Francis Chou: The Best Bargain-Hunting Value Investor from Canada?

David Dreman Quotes

The smallest of the small value stock filter

Stocks of interest

MAIL

MAIL: Stocks has been crushed after a business disagreement with Google that seems to have been resolved

http://biz.yahoo.com/bw/080723/20080723005485.html?.v=1

IPAS

13D filing by Foxhill Capital Partners, LLC

3,572,04 shares owned or 5.8% of the shares

http://finance.yahoo.com/q?s=IPAS

CLRS.PK

Significant recent insider buying at CLRS.PK
Warren Kanders
7/18/2008 P 13900 A $5.15

7/15/2008 P 100000 A $4.80

Sokolow Nicolas

7/17/2008 P 37500 A $5.15

7/18/2008 P 13900 A $5.15

CATS introduced on 02/05/08 for $3.60

CATS was introduced on 02/05/08 for $3.60 http://www.shadowstock.com/ss_portfolio.html

on ShadowStock.com http://www.shadowstock.com/index.html


This ShadowStock received a take over today from ON Semiconductor and will pay 0.706 of its own shares, worth $8.84 each at Wednesday's close, for each share of Santa Clara-based Catalyst stock. The price represents a 53 percent premium to Catalyst's closing price of $4.06. CATS closed today at $6.45.

"Phoenix-based ON (Nasdaq:ONNN) plans to add Catalyst's analog and mixed-signal chips to its own similar product line. ON Semiconductor will pay 0.706 of its own shares, worth $8.84 each at Wednesday's close, for each share of Santa Clara-based Catalyst stock. The price represents a 53 percent premium to Catalyst's closing price of $4.06.
Catalyst shares soared $2.20, or 54.2 percent, to $6.26 in Thursday morning trading. ON Semiconductor shares rose 28 cents, or 3.2 percent, to $9.12. "

http://phoenix.bizjournals.com/phoenix/stories/2008/07/14/daily51.html?ana=yfcpc

Wisdom from Benjamin Graham for a tough market

“It is our argument that a sufficiently low price can turn a security of mediocre quality into a sound investment opportunity - provided that the buyer is informed and experienced and that he practices adequate diversification. For, if the price is low enough to create a substantial margin of safety, the security thereby meets our criterion of investment."

The employment industry may be the last place most investors would look for a new investment opportunity. But JOB listed on the AMEX may interest some adventuress investors.

Let’s start with a very brief introduction and some negatives. The CEO total compensation for 2007 was ~543,041. But with only 5.17 million shares outstanding the CEO costs approximately .11 per share or 3% of the last 12 months of revenues. This payment is significantly higher than their staffing industry group.

The current quarterly revenue compared to the prior year’s quarter dropped 21.60%. But the enterprise to revenue is the lowest in the industry near .07. With cash per share at .91 and only .37 in total liabilities these amounts compare very favorably to a closing price of only .69.

Management has recognized conditions have been challenging and recently announced proactive measures to turn the company around. Their recent press release stated “The Company closed three of its unprofitable offices this year, and we will not rule out closing other underperforming branches."

"Right now, reducing our overall general and administrative expenses is a top priority. We are maintaining tight controls over spending, and continue to critically review our cost-cutting options. We are prepared to implement some of those options if a turnaround is slow in coming."

The full story

http://biz.yahoo.com/prnews/080707/aqm079.html?.v=54

Quality Value Investing Articles

Free Cash Flow vs Unlevered Free Cash Flow

Equity Isn't Free

Competitor Comparison Spreadsheet

Mosaic Chapter 17: Yes, But I Like to Punt!


Mosaic Chapter 15: On Avoiding Enron-itis!

The Twenty Best Financial Blogs

Characteristics of Successful Investors


Psychology and The Markets


A S

SmartPros Acquires Loscalzo Associates

SPRO was first mentioned on the Nano Cap Value Filter 07/03/ See post below

http://shadowstock.blogspot.com/2008_07_06_archive.html



http://biz.yahoo.com/pz/080707/145838.html

<<“HAWTHORNE, N.Y., July 7, 2008 (PRIME NEWSWIRE) -- SmartPros Ltd. (NasdaqCM:SPRO - News), a leader in the field of accredited professional education and corporate training, today announced that it has acquired Loscalzo Associates. Loscalzo is a leading provider of live accounting- and auditing-related CPE programs, conferences and seminars. They deliver numerous seminars each year through co-sponsorship with state CPA societies, accounting firms, and associations of accounting firms. “

``Loscalzo Associates is a perfect addition to the SmartPros portfolio of companies, and will greatly enhance our service offerings in the accounting and finance markets,'' said Allen Greene, SmartPros Chairman and CEO. ``SmartPros core products have been focused on self-study and online learning, while Loscalzo Associates has developed an incredible channel program to deliver CPE programs via live conferences and seminars. With Loscalzo Associates offerings in the mix, SmartPros now offers a complete blended learning environment for accounting- and finance-related organizations on a national level. Loscalzo Associates' clients have been asking for more technology, while SmartPros clients have been looking to augment their programs with more live training. It is our largest acquisition to date, and meets our criteria of being accretive within one year.''
Loscalzo Associates (http://www.loscalzo.com/), formed in 1981 by Margaret Loscalzo, will operate as a wholly owned subsidiary of SmartPros Ltd., and will continue its operations from its current Red Bank, N.J., headquarters. Ms. Loscalzo, who has built this distinguished company, will remain President and head the subsidiary with the current staff.
``SmartPros' strength in the self-study and eLearning markets is a great complement to our existing live seminar programs,'' said Margaret Loscalzo, Founder and President of Loscalzo Associates. ``Through this transaction we will continue to offer our clients our existing programs, but can also leverage SmartPros' technology to enhance our curriculum.''
SmartPros will host a teleconference today beginning at 9:30 a.m. ET to discuss some details of the purchase, and invites all interested parties to join management in a discussion regarding this meaningful development. The conference call can be accessed via telephone by dialing 1-800-240-8658.
About SmartPros Ltd.
Founded in 1981, SmartPros Ltd. is an industry leader in the field of accredited professional education and corporate training. Its products and services are primarily focused in the accredited professional areas of corporate accounting, financial management, public accounting, governmental and not-for-profit accounting, financial services, banking, engineering, legal, ethics and compliance, and information technology. SmartPros is a leading provider of professional education products to Fortune 500 companies, as well as the major firms and associations in each of its professional markets. SmartPros provides education and content publishing and development services in a variety of media including Web, CD-ROM and video. Our subscription libraries feature hundreds of course titles and 2,300+ hours of accredited education. SmartPros' proprietary Professional Education Center (PEC) Learning Management System (LMS) offers enterprise distribution and administration of education content and information. In addition, SmartPros produces a popular news and information portal for accounting and finance professionals serving more than one million ads and distributing more than 200,000 subscriber email newsletters each month. SmartPros' network of sites averages more than 450,000 monthly visits, serving a user base of 500,000+ profiled members. Visit: http://www.smartpros.com/>>

Nano Cap Value Filter

Stocks using the Nano Cap Value Filter click link to the left "Nano Cap Value Filter" to see results

07/03/08
DAGM $0.94
DCU $0.86
TOF $2.75
LGTY $7.08
PTG $5.92
SPRO $3.49
DWCH $2.29
HRT $5.02
KRSL $12.25
FEP $1.97
INOC $3.52

Selection Criteria

1) Float * EV < 15,000,000

Stocks with an Enterprise Value based on the outstanding float less than 15 million


2)EV/Sales <1.50

Enterprise value/Sales < 1.50


3) Enterprise Value/Market Cap < 1.50

Looking for stocks with little debt

4)[DiluAvg/TTM]>.96

Shares outstanding over the past 4 years/ TTM(trailing 12 months) > .96

This indicates a tight control on dilution


5)Year over Year quarterly revenue growth greater than negative 15%

[RevGrowthQtrly]>-15

6)Exclude stocks in the financial industry


7)Shares short as a percentage of float less than 5%


8)[AveragePS-TTMps/AveragePS]>0

P/S price to sales ratio improving based on Average P/S over the last 4 years versus TTM P/S. We use a ratio; Average PS – TTM PS/Average PS
If the PS over TTM is improving compared to the average of the past 4 years we select


9)Positive Operating income – Taxes / Enterprise Value

Value Articles Worth Reading

http://shadowstock.blogspot.com/feeds/posts/default?alt=rss
Subcribe to my blog


Is Value Dead

http://www.theglobeandmail.com/partners/free/globeinvestor/investment/may08/chou.html


Market Wisdom from Bernard Baruch

http://www.thekirkreport.com/2008/06/market-wisdom-f.html

The First Analyst Coverage of Neglected Stocks: 4/10

http://empiricalfinanceresearch.blogspot.com/2008/06/first-analyst-coverage-of-neglected.html


Westen Sizzlin Annual Report (WEST)

http://www.western-sizzlin.com/pdfs/Chairmans%20Letter%202007.pdf

Piotroski Index Scans

http://members.cox.net/econisvoodoo/piotroski/

A look at Return on Invested Capital

http://www.fool.com/news/foth/2000/foth000927.htm


Market Underreaction to Open Market Share Repurchases: 9/10

http://empiricalfinanceresearch.blogspot.com/2008/06/market-underreaction-to-open-market.html


Interview with Prof. Sanjay Bakshi

http://www.go2cio.com/articles/index.php?id=2262


Noisefreeinvesting.com

http://www.noisefreeinvesting.com/blog/wp-content/uploads/2008/06/men-with-hammers_web_v2.pdf

Clarus Corp CLRS.PK

CLRS.PK is a shell company with no current operating business but instead has about 85 million in cash and 223 million in NOLs. CLRS.pk is seeking to acquire a business in any industry and is being managed by the highly successful investor Warren Kanders. Kanders has a successful track record most notably with AH (NYSE) Armor Holdings. Armor Holdings (AH) had about a 30% compounded growth rate after he took it over.

Taken from the May 5, 2008 first quarter results

Warren B. Kanders, Executive Chairman of Clarus, stated, "While the state of the economy and credit markets continue to be challenging, this has not translated into a slow-down in potentially actionable transaction opportunities under review or materially impacted our ability to seek debt financing. We continue to be actively reviewing potential acquisition opportunities that meet our publicly stated goals of acquiring an industry market leader with solid management teams, strong free cash flow generation and a minimum EBITDA of $25 million."

CLRS currently sells at $5.50 with $5.07 in cash, 223 million in NOLs coupled with Warren Kanders represents a stock with a significant margin of safety. I own shares of CLRS.PK and was buying this Friday 06/28/08. I consider CLRS a compelling opportunity with an excellent risk reward ratio .


RLOG (Rand Logistics): Positives; Strong economic moat, Long term growth opportunities set in place , Upbeat conference call on 7/26/08; Talented management, large NOL's; Negative: excessive dilution from warrants and restricted stock grants.

For me it is a long term hold that could pay off significantly in several years.

IPAS; At 2.00 the stock looks like a buy at or below these prices

I own shares in CLRS.pk and RLOG. no postion in IPAS at this time

Successful Investing

How to Become a Billionaire
By Tim Hanson January 22, 2008

http://www.fool.com/investing/small-cap/2008/01/22/how-to-become-a-billionaire.aspx

We found the following most informative from Tim Hanson's excellent article.

"The secret to successful investing, then, is not found in any single strategy, but rather in picking the strategy that's right for you and executing it faithfully. As lauded NYU finance professor Aswath Damodaran writes in his book Investment Fables, "Each strategy has the potential for success if it matches your risk preferences and time horizon and if you are careful about how you use it."
That's it. That's the secret. Because if you get too cute -- chasing hot sectors, buying high and selling low, and giving yourself only six months or less to master a given investment strategy -- you're simply setting yourself up for failure. "

Opportuntiy in a Bear Market

Wisdom from Benjamin Graham for a tough market

"It is our argument that a sufficiently low price can turn a security of mediocre quality into a sound investment opportunity - provided that the buyer is informed and experienced and that he practices adequate diversification. For, if the price is low enough to create a substantial margin of safety, the security thereby meets our criterion of investment."

Investors "must demand convincing evidence that he is not risking a substantial part of his principal"

“Obvious prospects for physical growth in a business do not translate into obvious profits for investors"

"I am no longer an advocate of elaborate techniques of security analysis in order to find superior value opportunities" Benjamin Graham

"Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble... to give way to hope, fear and greed"

Illiquid Stocks

This should make sense to serious deep value investors. The potential to find extraordinary bargains with illiquid stocks can be profound. Why … well it is simple, millions of investors are speculating/investing in a relatively small group of heavily traded liquid stocks. This greatly lowers our chances of finding long term wealth building value. The ignored and neglected illiquid stocks have a higher chance of presenting us with dramatically undervalued securities. So if your goal is to maximize wealth, logic would dictate that your research investment efforts are best spent with illiquid stocks that have been avoided by the public and Wall Street.

Ideas for Entertainment Purposes
http://www.shadowstock.com/ss_portfolio.html

Research@ShadowStock.com

ShadowStock

This blog , ShadowStock was developed to share ideas on the fundamental market inefficiencies that have been uncovered by academia. Our approach starts with what has been called the small firm effect. We believe that the real reason the small company anomaly exists is simply the lack of attention and number of analysts that follow these stocks. What we have is really an ignorance effect. And it's because of the scarcity of information on these tiny companies that our research efforts should pay off. If we were researching stocks already covered by Wall Street or the financial media we would be wasting our time since these companies are more efficiently priced. The cornerstone of our investment style is to search for inefficiencies that exist in companies ignored by institutions and the media.

http://www.shadowstock.com/index.html

Research@ShadowStock.com