My transition to using the Mechanical approach for my portfolio is also going well. I now have 17 stocks in my portfolio that were selected using my mechanical approach, and they are up an average of 40%.
I am still 21% in cash, so I certainly have room for more stocks, but new names to the mechanical portfolio are drying up a bit as it seems to be most active in times of volatility and times of earnings coming out.
I don't think the official list for the weekend is out yet, but it does appear there will be at least one new name to consider: MIPS.
They are a small company (167m market cap) that makes parts primarily for the home entertainment industry. Frankly, that doesn't sound like a boom area. Here is my calculation of their return and EY:
| mips | ||
| + | Operating Income After Depreciation | 21.49 |
| - | Minority Interest - Income Account | - |
| = | Income for Calculation | 21.49 |
| Diluted Shares Outstanding | 45.465 | |
| Share Price | 3.72 | |
| + | Market Cap Calc | 169.13 |
| + | Preferred Capital | - |
| + | Debt in Current Liabilities | 4.99 |
| + | Long-Term Debt | 7.81 |
| Cash and Short-Term Investments | 44.77 | |
| - | Excess Cash | 35.65 |
| = | Enterprise Value | 146.28 |
| + | Property Plant and Equipment - Net | 2.61 |
| + | Receivables | 2.46 |
| + | Inventories | - |
| + | Other Current Assests | 1.30 |
| + | Working Cash | 9.12 |
| - | Accounts Payable | 2.31 |
| - | Current Liabilities - Other | 10.58 |
| = | Invested Capital | 2.61 |
| Earnings Yield | 15% | |
| ROIC | 824% |
So you can see they have a high ROIC and they also have a strong balalnce sheet with excess cash. Revenues and income fell off the table in the 2nd quarter, with revenues down from 21m to 13m and income down from $5m to almost 0. Hard to get real fired up about that. I think their numbers are a bit deceptive. They sold off a chunk of their business (which still shows up in past income), and they get advantage of cash from sale. I will be taking a pass.
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