Magic

I noticed today that a new stock hit the MFI screen today.. MGIC. It is an Israeli software company, very small. I don't know much about the stock, but I'd be wary about buying it. I remember a similar event with Dominos a few years ago. MGIC just paid a very large (50 cent dividend) at the end of January. They are only a $1.80 stock. If you'd have bought them before they announced the dividend, I'd say they'd have been a good buy. But x dividend, their finanicals show a bunch of cash (16m) that isn't there any more and in my calc, I remove it (along with the corresponding dividend liability). Without that excess cash, they are just a marginal MFI buy.

This does happen occasionally, where the financials are not a fair representation of where the company is currently. Not much can be done to "fix" the formula, but it helps if people are aware. Other examples include companies that pay large bonuses at year end (HSII was like that) so they appeared to have more cash than "normal" and retail firms that show higher inventory at the end of October. Also companies that have merged or sold operations may not be fairly represented.

Of course the MFI site is free, so it is not right to complain... but do your own diligence!