The Next Tranche - Part 4

First a quick recap of my first three postings. Stocks that have made my first cut include AAPL, ATVI, CALL, CSCSO and NDZ. I said I would consider GTIV or NOC on a pullback.

Today I will look at PBI, RFIL, SIMO, TARO and UIS.

PBI is a story we have seen many times on the MFI screens. Sadly, I have never had the courage to follow up on one. They are stocks in out of favor industries, think USMO in pagers, DLX in checks, HRB in tax returns, GME in video games or BBY in electronic retail. The obituary often gets written way too early. This is a theme, and I need to act courageously next time I see it. PBI is Pitney Bowes, the largest player in office mail/postal systems. Of course everyone knows that snail mail is dying, that is why PBI dropped as low as $10.34 this year. But guess what, they are at $19.13 right now and have risen more than 80% in my MFI index in 2013. They are not too expensive. They trade at 11x next years earnings forecast. They pay a 3.9% dividend. They do have quite a bit of debt (3.6b) and they have flat revenues.  Thinking about it, while I want to play one of these down and out stocks, it feels to me that the ship has sailed here.

RFIL is a micro cap company.  Only 62 million in market cap. Unlike a couple of the others I have looked at in this space, I could buy shares in RFIL without disrupting the market. They trade 50,000 shares a day at over $7 a share. They are interesting in that they actually pay a nice dividend, 3.7%.  They sell a variety of things that you might find at a Radio Shack. The most interesting a division called cables Unlimited that seems to be doing pretty well (you can buy on amazon). They have a clean balance sheet with 1.37 in cash per share. They seem to be growing nicely, though eyes wide open, we know that can change quickly.  I think these guys look pretty tempting assuming the share price does not move up much in next month.  I actually placed them on a watch list a month ago and they are up 11.8% since then.

SIMO - this is a Taiwanese company I looked at back in May.  At the time, I did not by them as they were a bit in between product cycles. Instead, I bought RDA which has been a very satisfactory stock (up 57%).  SIMO put out a press release on Oct 4th lowering revenue expectations.  S they look to down 2.5%.  That being said, on the eighth they a new 3.0 USB controller.  As I read through their July earnings press release, it does seem like they have turned the corner and do have some decent newer products out there.  That being said, it seems like most of their products are tethered to pcs and that is a market in decline.  The balance sheet looks great, 4.70 in cash per share and they pay a 4.6% dividend.  At the end of the day, I think I need to keep on my watch list. I just said PBI was a good buy at one point despite being in a non growth industry. SIMO appears to meet that right now.

TARO - this is an Israeli pharmaceutical company that specializes in generic drugs.  They are good sized, at 3.5b.  They have over 500m in cash, so that is a big draw for me.  Like many of the other companies I am looking at, revenues are down a bit. I do not fully understand this as it seems generic drugs should be growing revenues as big pharma drugs come off patents.  The company has been under some activist pressure of late, kind of understandable as they do not seem that shareholder friendly.  I think this stock has to stay on my close watch list. I need some more exposure to the healthcare space. Probably not a super sexy stock, but seems pretty safe as well.

UIS - this is a name that I am very familiar with as they were in my August 2012 tranche.  I have included them as they are a very volatile stock and often drop or rise 15 to 20% post earnings.  They will have earnings in November and if they are "poor" (read lumpy) I might include them.

So I am bringing forward:

1. AAPL
2. ATVI
3. CALL
4. CSCO
5. NDZ
6. RFIL
7. SIMO
8. TARO

Just WTW and VCLK left, unless I add a few more.