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Strategies & Market Trends : Value Investing

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To: Jurgis Bekepuris who wrote (44299)	9/10/2011 7:56:16 PM
From: Shane M	Read Replies (1) of 78673

Jurgis, My investment in MDF is based primarily on 1) superior capital allocators based on ROE, ROC, ROTC, and returns on marginal equity, and marginal retained earnings. They're superior on so many measures. 2) technically the stock seems to run out of sellers whenever the mkt gets overly weak. I've traded the ups and down some, but it'll often move in ways that are stronger than the market - at least it seems that way to me. Holders seem reluctant to part with it. 3) Insiders are large owners and net buyers. I like that. 4) They're in the process of purchasing CNU which is another company that I liked also and thought was undervalued. The negatives to me are the volumes are so low you've got to be careful with moving even tiny positions. A seller needing to move a large number of shares quickly can drive price large % (I think this is why you occasionally see it do the dip-recover thing in short time frames). When buying/selling I typically just put a buy or sell limit out there and let it sit all day long. My trades often end up being comprised of lots of small 100 share blocks. An aggressive buyer can move the P fast and that has resulted in some of my sells in the past, I just have to be patient when getting back in. My position is small here anyway. I don't want to deal with the logistics of such a small company where my buys/sells can move the market. But as a small position it's been a fun one for me. That said, I'm not sure I understand the concern over operating cash flow. The database I have and use shows them as having a long history of net free cash flow generators. I am going to watch how the merger with CNU impacts the numbers but I'm relying on mgmt to a degree to know how to keep up the RO* figures. at least that's my $0.02 on MDF. I have gaps in my accounting skills and have to rely on screens (like free cash flow) to protect me from some of those limitations/shortcomings.

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