Saturday, August 30, 2008

Newest Top 25 Stock

My group of 34 MFI stocks that I have been tracking in Parallel with MagicDiligence's stock picks has performed quite well. As a reminder, a stock gets added to my list if it hasn't been in the top 25 in the past year (I pull the list every weekend). So far, my stocks are up 6% versus the S&P being down 3% for a 9% margin (about the same as MD).

Number 35 will come online on Tuesday. It is actually a company I like a lot, VSNT. This is a small software company that has been on and off MFI lists for the past 2 years. They are there because they reported earnings last week (which were good) but they were a little lukewarm about the future. This caused the stock to drop from $29.22 to $25.53 on Friday. Here is what their CEO said:

``We are very satisfied with the results in our third fiscal quarter, which established another record quarterly net income milestone for the Company,'' said Jochen Witte, CEO of Versant Corporation. ``However, due to the strengthening of the U.S. dollar and the difficult economic environment in the U.S. and Europe, achieving our future goals will become more challenging.''

Not terrible, but I suppose "challenging" is not a favorite word of investors. I am happy to add them to my list, I expect them to be competitive. They have about $24m in cash, for a $95 million company that has been growing quite steadily over at least the past two years, And they have a built in income stream from royalties. Here is my calc of their ratios:

+ Operating Income After Depreciation 9.93
- Minority Interest - Income Account -
= Income for Calculation 9.93

Market Cap Yahoo 95,100

Share Price 25.53
+ Market Cap Calc 95.10
+ Preferred Capital -
+ Debt in Current Liabilities -
+ Long-Term Debt 0.05

Cash and Short-Term Investments 27.41
- Excess Cash 24.74
= Enterprise Value 70.41

+ Property Plant and Equipment - Net 0.79
+ Receivables 3.51
+ Inventories -
+ Other Current Assests 0.80
+ Working Cash 2.67
- Accounts Payable 0.36
- Current Liabilities - Other 6.61
= Invested Capital 0.79
Earnings Yield 14%
ROIC 1261%

They essentially require no capital. Seems like a quality company with quality management.

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