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Strategies & Market Trends : Value Investing

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From: J Mako	10/4/2011 6:55:02 PM
	Read Replies (3) of 78671

ADVC.OC - microcap (nano?) upfront disclaimer: I long ADVC. It is thinly traded. It took me months to accumulate a meaningful stake in it. market cap 15m CEO/Founder holding 54% P/E 9 div yield ~9% ROA 60% (!) 5-yr avg revenue growth 5.5% 5-yr avg profit growth 15% bought back $270k stocks in 2007-09. no debt ADVC is an established web-based EDI provider for small grocery suppliers. It's been in web EDI for 10 years and in general EDI for 20 years. This constitutes 80% of its business. It allows smaller suppliers which don't have IT resources to use EDI to trade with big retailers like Wal-Mart and Kroger. It is recession proof and has strong moats. It's like Buffett's toll booth. It charges the small suppliers, not the big retailers. Charges are volume based. A supplier typically pays a couple of hundred dollars per monthly. There is no incentive for them to switch EDI vendor. (It's a bit like once you use an accountant, you are reluctant to switch.) It increased price in 2010. That shows the pricing power. Since it's basically a software company, FCF tracks net profit closely. At a minimum, profit should grow with GDP growth. In normal environment, this will give an earning yield ~15%. This doesn't factor in its historical growth rate and any future growth potential. ADVC has been trying to expand into Automotive EDI. It signed up Honda in 2009. I will hold this for long-term.

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