I have always made stock lists with market caps greater than $50m and have not bought anything less than $100m. I will begin considering microcaps, but am not sure I will be able to pull the trigger. Right now, seven of my 25 stocks are under $500m (if RAIL keeps tanking it'll soon be eight).
I have the current MFI list of 25 best stocks at $1m Market Cap and greater:
| Top 25 companies with a minimum market cap. of $1 million Companies are listed in alphabetical order | ||||||
| Name (in alphabetical order) | Ticker | Market Cap ($ Millions) | Pre Tax Earnings Yield | Pre Tax Return on Capital | Price From | Most Recent Quarter Data |
|---|---|---|---|---|---|---|
| Auto Data Network Inc | ADNW | 19.43 | 54% | > 100% | 06/01 | 11/30 |
| Cutera Inc | CUTR | 224.18 | 12% | > 100% | 06/01 | 03/31 |
| Deluxe Corp | DLX | 1,106.58 | 13% | > 100% | 06/01 | 03/31 |
| EarthLink Inc | ELNK | 1,124.96 | 16% | > 100% | 06/01 | 03/31 |
| Ezenia Inc | EZEN | 46.06 | 10% | > 100% | 06/01 | 03/31 |
| Footstar Inc. | FTAR | 104.51 | 101% | > 100% | 06/01 | 12/31 |
| Fording Canadian Coal Trust | FDG | 5,228.79 | 15% | > 100% | 06/01 | 03/31 |
| Forward Industries Inc | FORD | 40.17 | 43% | > 100% | 06/01 | 03/31 |
| FreightCar America Inc | RAIL | 708.45 | 17% | > 100% | 06/01 | 03/31 |
| Intervideo Inc | IVII | 148.76 | 17% | > 100% | 06/01 | 03/31 |
| King Pharmaceuticals Inc. | KG | 4,279.62 | 16% | > 100% | 06/01 | 03/31 |
| Mannatech Inc | MTEX | 372.55 | 14% | > 100% | 06/01 | 03/31 |
| Marvel Entertainment Inc | MVL | 1,559.24 | 10% | > 100% | 06/01 | 03/31 |
| Orckit Communications Ltd | ORCT | 188.28 | 10% | > 100% | 06/01 | 03/31 |
| Patriot Scientific Corp | PTSC | 356.32 | 19% | > 100% | 06/01 | 02/28 |
| Pinnacle Airlines Corp | PNCL | 154.57 | 41% | > 100% | 06/01 | 03/31 |
| PortalPlayer Inc | PLAY | 256.70 | 70% | > 100% | 06/01 | 03/31 |
| Syneron Medical Ltd | ELOS | 440.75 | 14% | > 100% | 06/01 | 03/31 |
| Ulticom Inc | ULCM | 408.02 | 12% | > 100% | 06/01 | 10/31 |
| United Online Inc | UNTD | 769.55 | 13% | > 100% | 06/01 | 03/31 |
| Vaalco Energy Inc | EGY | 416.48 | 18% | > 100% | 06/01 | 03/31 |
| Vertrue Inc | VTRU | 395.13 | 10% | > 100% | 06/01 | 03/31 |
| ViroPharma Inc | VPHM | 679.71 | 16% | > 100% | 06/01 | 03/31 |
| World Air Holdings Inc | WLDA | 223.65 | 28% | > 100% | 06/01 | 09/30 |
| Zenex International Inc. | ZENX | 77.98 | 22% | > 100% | 06/01 | 12/31 |
Stop here if you don't want to read gory financial and mathematical details.
Now I need to comment on the fact that TGIS has mysteriously disappeared off the MFI list. I did some research today to try to see if they just didn't deserve to be on the list any more. The first ratio to calculate is the earning yield = EBIT / Enterprise Value.
I went to the SEC filings and EBIT for the 12 months ending 2/28/06 was $11.3m. (I excluded $1.2m of losses from discontinued ops, not 100% sure if that is right).
Enterprise value as far as I can tell is market cap adjusted for long term debt and cash. That = $109m. So the Earning Yield = 10.4%.
The second component is return on capital. The denominator is the same EBIT of $11.3m. The numerator is "tangible capital employed" which = net working capital + net fixed assets. Net working capital = receivables + inventories - non interest bearing current liabilities. For TGIS I get about $5.7m. That makes the ROC a very strong 198%. By my calculation, this should place TGIS on the list.
Digging further though, Yahoo Finance shows n/a for the Enterprise Value (Key Statistics). Looking at a Reuters InvestPro Report for TGIS at 2/28/06 the balance sheet does not split the liabilities into the various values, which would make the calculations impossible. My hypothesis is that the MFI database for TGIS also has these n/a values and that is why it gets tossed. But I went to the source, the filed 10Q with the SEC to get my liability values, which balanced in total with the Reuters InvestPro, but had the necessary detail. I know I am rambling, but this is the procedure I went through to convince my self that TGIS is still an MFI stock.
Just for grins (and practice), I did the calculations for ORCT, the stock I just bought:
Enterprise Value: $147.5m
EBIT: $22m
Net Working Capital: Less than 0 (not sure I understand this, but recievables + inventory = $4.3m and then current liabilities = $42.3m).
Net Fixed Assets = $3.6m.
So Earning Yield = 22m / 147.5m = 15%.
ROC = > 100% I suppose as the denominator is negative. Hmmm, the MFI listing shows a 10% earning yield. I don't see where I have gone wrong. Any comments are welcome.
I will try one more company, RAIL.
Enterprise Value: $610m
EBIT: $101m (Yahoo has $113m but I can't get there)
Net Working Capital: -18m (like ORCT)
Net Fixed Assets: $66m
So Earning Yield = $101m / 610m = 17% (hooray, I matched MFI)
ROC = 101m / 48m = 210% which matches >100%.
I feel better, hope you do as well.
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