Ron,
Re: PRMO and TLC
If value investing were just a set of numbers
and the same thing to everyone, it wouldn't work.
PRMO was trading at an enterprise to sales ratio
of 0.40. This for a traditionally high margin business.
Also, it was buying back shares -- I love that, as
I've mentioned before. It had
5 bucks of cash and traded as low as 5.25 despite
having a viable product according to my industry sources.
That's value and a definite margin of safety, IMO.
TLC was less obvious:
Price 6.5
Book 4.4/sh
Revs 8.4/sh; 3 year sales growth is 94 121M, 95 167M 96 343M
5 straight Q's of $2-4 losses due to charges.
Last Q .60 (-2% from estimates)not including charges
LT Debt/Equity =2.54 (key, IMO)
Current Ratio 1.864
Free Cash Flow 1.544 (also key)
44M shs out
Note that sales growth was huge over the three years noted.
Yet the shares had fallen to a >20% discount to sales.
Its cash flow remained positive despite the losses -- a
key point to look for according to Ken Fisher. And of
course it was buying back stock. The current ratio
told me the business wasn't in immediate trouble. And
it has a great international franchise.
The more experience I get, the more I learn to look for --
1) Stock buybacks
2) Discounts to sales that are historically extreme for
a company
3) Positive cash flow during a rough patch
4) Margin of safety -- if a stock has $5 bucks in cash
and is trading at 5.25, then the upside/downside
ratio is gonna look good;
5) Insider ownership/buying at stock lows
6) In tech stocks, stocks that have been on a horrendous
fall because they failed to live up to their hype, yet
have strong balance sheets and other value characteristics.
IMO, Applix, which has recovered to 8 from where I
noted it at 4-5 is one of these now. The risk is higher
now, but at 3 1/8 (its low) it was a steal. Even now, it
is an only a moderately aggressive buy.
I'll take a WHX when it comes along, but that only happens
every few years. The rest of the time, I find I have to
compromise a criteria or two to make the stock fit.
I'm no expert - just IMO.
Good Investing,
Mike |
