Tuesday, December 15, 2015

2nd Micro Portfolio

today I decided to start a second MFI micro tranche. Again, like the August tranche, these are micro cap MFIish stocks.  I intend to hold for a year. I am going in with much smaller $ per stock than my normal tranches.

1. MGIC - this is a small Israeli software company.  I bought them at $5.38. They are kind of the trifecta. They are cheap (forward p/e under 9). They have excess cash (about $1.20 per share). And they are growing (expected 8% growth in 2016).

2.  BSQR - I played around with this stock earlier this year on some trades and did pretty well.   They ran up earlier this year from under $6 per share to over $12. I am back in at $6. Their last quarter saw growth flattening and they expect that to continue in q4.  But you have a $6 stock trading at 11 x trailing earnings. They also have $2.44 cash per share with 0 debt. Lot of potential catalysts here.

3.  SPCB - I already owned this stock and am selling some shares to get down to the micro tranche level. I will book it here at 4.52 as that was the price when I started this tranche. My official buy price is 4.76.  Another Israeli software company that dropped over 50% last quarter when revenues were short of expectations. Management said that was a timing issue, so if one believes that, this is a great entry point.  Trading at just 8x next year earnings plus $2 cash per share against their $4.52 price with no debt.

4.  WLDN - this is a consulting firm. Very similar to MGIC, they have the trifecta of cheap, growth and cash on the balance sheet. I got them at 8.64.

5. MNDO - an old stand by. I made about 14% on them in a month+ earlier this year, one of my better trades. They spiked at the time all the way to $3.95, when I sold them. At my entry price of $2.58, that would be a nice move.  They just make money, then pay a rich dividend once a year.  They tend to trade up to the dividend date, we'll see if history rhymes.  They trade at 8.5x trailing earnings. They are shrinking a bit (10%) but they tend to be lumpy. They have solid balance sheet.

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