The Next Tranche - Part 2

It is time to continue my thoughts about the upcoming November 15^th, 2013 tranche.  Last time I looked at AAPL, ATVI, CALL and COH and only managed to eliminate COH.  This time I am going to look at CPIX  CSCO  DHX and EBIX.

 CPIX is Cumberland Pharmaceuticals. I have stayed away from smaller pharmas in my MFI investing as I have been on the mindset that they were not true value stocks, but rather were on the screen often for a one time royalty check. That being said, I have noted that some of these stocks have gone on to be very successful (ASTX is a recent example that I should have held on to) and Bio-Tech stocks seem to be in general favor right now.  CPIX is small, with a market cap of just $85m.  They have a book value of $77m and cash on hand of $54m, so it seems to me they can go a long time without dilution.  Reading through their last earnings call, one of their main products is a form of Ibuprofen that is administered via injection to combat pain and fevers.  One big issue with them is their main money maker now faces generic competition; so margins and profits will be eroded going forward.  At this point I am not interested.  They are not exactly a cutting edge bio tech company and they are in a serious transition phase.  Given their balance sheet, they are not overvalued, but I am not so sure they are undervalued.

 CSCO is Cisco Systems.  They probably touch us all via a router or cable box top.  They are already my 3^rd largest holding, which means I like them, but also makes me wonder whether I REALLY want them to be outsized (if they became an MFI stock they would vault to #1).  I do view CSCO, INTC, MSFT, ORCL and even AAPL as out-of-favor mature tech stocks.  All this companies just make money, but are no longer in rapid growth mode.  I can be ok with that, so long as they have good future prospects (no big disruptor technology coming along) and they are cheap.  CSCO seems to meet both hurdles.  In fact CSCO and AAPL are my two favorites on this list (though I own a lot of INTC as well).  They have $123b market cap, but only $87b enterprise value.  That tells you they have a ton of cash (over $45b!) and relatively little debt.  They are growing slow and steady, just 6 percent per year.  They pay a solid 3% dividend (which has been growing) and trade at just over 10x next year earnings.  Given all their cash, that is pretty darned cheap.  Csco will clearly make it to the next round.

DHX is Dice Holdings.  No shortage of possible puns there. They seem like kind of a Match.Com for employers and employees, like a Monster.Com.  In an environment that I think is improving in employment, this is an area of interest to me.  They are also growing the top line by 6 or 7% a year.  That may be a bit more leveraged regarding earnings as they probably do not have as many variable costs. Cash position looks fine, 40m of cash with 26m of debt. But they actually have a negative tangible book value as they have $267m of goodwill and intangible assets.  I used to just throw companies out in this case.  I am not doing that this quarter.  But to me the story is not compelling enough to overlook that.

EBIX is a stock I have had on my watch list for quite some time.  It is a stock that is under SEC scrutiny, so it is not for the faint of heart.  I am basing my analysis on their reported figures. They are a huge short stock, I show that 54% of their float is shorted.  Again, not for the faint of heart.  They provide software and e-commerce solutions to the insurance industry. I can certainly tell you they are a real company, I think the real questions from the SEC are how they book their revenues.  The stock was north of $19 when the investigation was announced.  They dropped into the $9 range.  Today they are at $11.55.  They are paying a 2.8% dividend.  At one point and affiliate of Goldman Sachs was looking at acquiring them, but withdrew when the stinky stuff hit the fan.  As I type, I realize that I may be too faint of heart and will take a pass.

 So after 8 stocks, I have pared to 4, AAPL, ATVI, CALL and CSCO.  In my next write-up, I will look at three interesting stocks, with a couple micro caps: MSN, MNDO, GTIV and NDZ.