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MagicDiligence (< 20)

March 2011

Recs

9

Understanding Deferred Revenue Accounting

March 30, 2011 – Comments (2) | RELATED TICKERS: MDP

In this article, we'll take a look at the "Deferred Revenues" line of the balance sheet, what it refers to, and how investors can use it to get a glimpse into the future results of reported revenues, as well as detect underlying trends within a business.

So, what are "Deferred Revenues"? It is a line item in a company's balance sheet, generally under the short-term liabilities section, and often under long-term liabilities as well. Deferred revenues are received cash deposits that a company has collected, but not yet reported as revenue on the income statement. As they are reported as revenue in subsequent quarters (i.e., "amortized"), the amounts are deducted from the deferred revenue account. Amounts expected to be reported as revenue within the next 12 months fall under the short-term category, while amounts that will be amortized farther out fall into the long-term deferred revenues line item.  [more]

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3

Magic Formula Investing Weekly Roundup 3/27/2011

March 27, 2011 – Comments (0) | RELATED TICKERS: MANT , MRX , PRX.DL2

Magic Formula Investing (MFI), as described by hedge fund manager Joel Greenblatt in The Little Book that Beats the Market, consists of ranking stocks by earnings yield (cheap) and return on capital (quality), adding the rankings together, and buying from the resulting lists. Below are stocks that have moved into, and dropped out of, 3 of the MFI screens used by MagicDiligence:  [more]

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3

4 Interesting Small (but not Micro) Cap Magic Formula Stocks

March 23, 2011 – Comments (1) | RELATED TICKERS: EGY , USNA , KLIC

The Magic Formula Investing (MFI) strategy is simply a ranking system. Any particular universe of stocks can be ranked in the strategy's fashion - a composite of highest earnings yield and highest adjusted return on capital, both factors equally weighted. You can apply the strategy to rank any "basket" of stocks, ranging from entire exchange listings (or groups of exchange listings), to a pre-screened list of stocks, and so forth. The possibilities are limitless.

The official MFI site allows users to rank all U.S.-listed stocks, separated only by minimum market cap. So, for example, choosing the top 50 stocks with a minimum of $100 million market cap will produce a much different list than choosing the top 50 with a minimum $1 billion market cap. This is useful, as many investors are uncomfortable buying issues of thinly traded, micro-cap stocks that they may not familiar with (even though small-caps drastically improve performance).  [more]

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4

Magic Formula Investing Weekly Roundup 3/20/2011

March 20, 2011 – Comments (0) | RELATED TICKERS: IDCC , GME , CBST

Magic Formula Investing (MFI), as described by hedge fund manager Joel Greenblatt in The Little Book that Beats the Market, consists of ranking stocks by earnings yield (cheap) and return on capital (quality), adding the rankings together, and buying from the resulting lists. Below are stocks that have moved into, and dropped out of, 3 of the MFI screens used by MagicDiligence:  [more]

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4

Should Investors Be Fans of Team Health?

March 17, 2011 – Comments (0) | RELATED TICKERS: TMH

Team Health Holdings (TMH) is a provider of outsourced physician and administrative services to hospitals and healthcare providers, operating throughout the United States. The main focus is on emergency room staffing, although the company also contracts and employs personnel in anesthesiology, pediatrics, and general nursing. Team Health has working relationships with about 3,700 physicians, the majority of which are independent contractors, and serves well over 500 medical facilities. About 36% of revenues are from private insurance, 17% from federal Medicare payments, 11% from state-funded Medicaid programs, and the balance out-of-pocket from patients. While Team Health has a presence across the country, Florida and Tennessee each account for 16% of revenues.

This is a relatively recent IPO (December 2009). About 30% of the company was offered to the public, with the rest being retained by Ensemble, a part of Blackstone Group (BX). At the end of February, Ensemble sold another 8 million of its shares to the public in a secondary (non-dilutive) offering.  [more]

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5

Magic Formula Portfolio Statistics Tool Now Available

March 16, 2011 – Comments (0)

Since launching the MFI Statistics Calculator tool a little over a year ago, one common request has been the ability to run and compare several stocks at once by their Magic Formula statistics. Well, now you can, with the MFI Portfolio Statistics Calculator!

Using the Portfolio Stats Calculator is simple. Simply enter a comma-separated list of tickers (up to 100) and click "Go!". The tool will quickly calculate the Magic Formula earnings yield and return on capital figures and display the output in a table, along with the relative Magic Formula-style rank of each stock within the portfolio. Column headers can be clicked to quickly sort the list of stocks by name, earnings yield, return on capital, current ratio, or MFI rank. All of the calculated statistics are also color-coded to provide "Instant Diligence". Hover your mouse over any of the color-coded figures to get an idea of whether that number is good, bad, average, or suspicious (which could indicate one-time revenue windfalls or questionable numbers).  [more]

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6

Magic Formula Investing Weekly Roundup 3/13/2011

March 13, 2011 – Comments (0) | RELATED TICKERS: ADI , MRVL , PRX.DL2

Magic Formula Investing (MFI), as described by hedge fund manager Joel Greenblatt in The Little Book that Beats the Market, consists of ranking stocks by earnings yield (cheap) and return on capital (quality), adding the rankings together, and buying from the resulting lists. Below are stocks that have moved into, and dropped out of, 3 of the MFI screens used by MagicDiligence:  [more]

Recs

4

4 Points from Warren Buffett's 2011 Letter to Shareholders

March 09, 2011 – Comments (0) | RELATED TICKERS: BRK-B , WMT , AIG

It is that time of year again - the time when the "Oracle of Omaha", the "greatest investor alive", the chairman of Berkshire Hathaway (BRK-B), Warren Buffett, delivers his letter to shareholders (PDF). Whether or not an investor is a shareholder of Berkshire, Buffett's letter is always a great read, both due to his keen and focused business sense and his informal style of writing. To continue the tradition started a few years ago, it's time to look at 4 interesting points from the 2011 shareholder letter. For those interested, my talking points for 2010 and 2009 can be found at the links.

The 2011 letter is probably a little less "meaty" than some of Buffett's past letters, but there are still some nuggets of wisdom in there that are worth talking about. So, here are four sets of quotes from the letter and some discussion on them that should interest anyone who follows Magic Formula Investing (MFI):  [more]

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3

Magic Formula Investing Weekly Roundup 3/6/2011

March 06, 2011 – Comments (0) | RELATED TICKERS: GILD , GME , MRVL

Magic Formula Investing (MFI), as described by hedge fund manager Joel Greenblatt in The Little Book that Beats the Market, consists of ranking stocks by earnings yield (cheap) and return on capital (quality), adding the rankings together, and buying from the resulting lists. Below are stocks that have moved into, and dropped out of, 3 of the MFI screens used by MagicDiligence:  [more]

Recs

4

Is It Time To Etch Lam Research (LRCX) Into Your Portfolio?

March 02, 2011 – Comments (0) | RELATED TICKERS: LRCX , AMAT , TSM

Lam Research (LRCX) is a semiconductor equipment supplier, one of several currently on the Magic Formula Investing (MFI) screens. Lam focuses on two particular parts of the manufacturing process: etch and clean. The company uses a highly outsourced model of manufacturing, which allows high returns on capital and rapid response to market conditions, allowing quick ramp-up or slow-down of supply. With this model, and excellent competitive positioning, it sports some of the best operating margins in the industry.

Semiconductor manufacturing is a complex process, but let's try to break it down into something more simple for the purpose of looking at Lam. The etch and clean steps are closely related. Etch refers to removing portions of material layers placed on top of silicon wafers in order to create integrated circuit patterns. The clean step then follows, removing the leftover particles and residues from the etch step. One way to think of it is chiseling a stone tablet. Etch would be the chiseling, while clean would be brushing off the stone pieces and powder left over.  [more]

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