The Next Tranche - Part 5

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

Today I will look at VCLK, WTW, AWRE, PFMT and LQDT

VCLK - this is a stock that has been going the wrong way during the 2013 overall stock rally.  It is a shade under $20, down from a 52 week high of $32.  They are behind a lot of the online advertising we all don't love.  I do think advertising is becoming less and less effective online.  Part of it is the switch to mobile, with tablets and smartphones, there is less screen real estate for advertising. But I think part of it is that we become conditioned to ignore it.  Frankly, the only time I click on an ad in Yahoo or somewhere is by mistake.  That being said there are still companies out there making newspaper circulars, and profits can still be made.  The real question is whether the price is right?   They look reasonably cheap.  Just 10x next year's earnings.  They do not have a bunch of debt (nor excess cash).  They have steadily been buying back shares.  I always look at the actual diluted share counts when I hear a company is buying back shares as I want to make sure the counts are actually decreasing.  They are here, down from 83m to 77m.  They are certainly out of favor, about 16% of their shares are shorted.  In reading through the material, I do not really see the reason why.  They are not a growth darling anymore, so perhaps that is part of it.  But at $19 a share, they do not seem "over valued" like some internet stocks I could name.  They report earnings on November 5th.  I think I will keep them on my watch list and see what I see with the earnings call. Yahoo and Google (large sellers of advertising) seem to be doing ok.  I will note that over 400m of their book value is goodwill. You know I hate that as it means they have over paid in the past for acquisitions.

WTW - when I first saw Weight Watchers on the screen, I was pretty excited. They pay a decent dividend, they have (in my mind) a competitive advantage and let's face it, the demographics in our country make this a growth business.  Reading about them, they have been struggling a bit lately with smartphone applications that have been taking business away.  I guess my view is that being in a group setting (live with real people) has got to be a motivator.  As I dug into the company a bit, I started to wonder, "where does all the money go"?  They had to have one of the worst balance sheets I have seen.  I promised not to let that sway me, but it is SO bad. Their total assets are $1.3b in total.  Of that $858m are intangible.  They have (grimace) $2.7b of long term debt.  So even including their goodwill, they have a book value (just using long term debt) of -1.4b! Puh-lease!  When you include all liabilities and just tangible assets, you get to almost -2.5b.  Not something I would race to buy.  In an average year they make about $300m, so it would take 8 or 9 years to get to a positive book value, assuming not reinvestment, no dividends etc.  Pass.

AWRE - I like the ticker, who doesn't want to be aware?  They are a smallish company (119m in market cap).  They seem pretty high tech - biometric industry.  To me that means facial recognition, fingerprint scans, iris scans (Davinci code anybody?). They have a $5.30 stock price and $3.30 in cash per share.  I like them already.  Trailing p/e is under 7.  Revenues are growing, but does not seem to be a high flier.  It is hard to find too much about them,  I do note they are owned 55% by insiders.

Getting a bit tired.  I will write more tomorrow.