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MagicDiligence (< 20)

August 2010

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4

Motorcar Parts of America (MPAA) is Cheap, but is it Quality?

August 31, 2010 – Comments (0) | RELATED TICKERS: MPAA , AZO , PBY

Business Summary  [more]

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14

Gainful Employment Rules Ignore Demographic Realities

August 23, 2010 – Comments (6) | RELATED TICKERS: APOL , STRA , COCO

One of the biggest risks facing publicly traded for-profit educational institutions is the Department of Education's (DoE) proposed "gainful employment" rule. Under the proposed rule, schools where less than 35% of students are repaying the principal on federal education loans would essentially become ineligible. Schools with 35-45% would face restrictions on their ability to receive these loans. There are some additional income stipulations, where if debt is 8% or less of income, then the above restrictions can be waived.  [more]

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3

Top 10 Dividend Yields, Lowest P/S, and Lowest P/B in MFI

August 18, 2010 – Comments (0) | RELATED TICKERS: COCO , LLY , RAI

Every so often, MagicDiligence compiles a list of Magic Formula stocks sorted by their dividend yield, price-to-sales ratio, and price-to-book ratio for investors that like to use those metrics. The result is a list of attractive value stocks for additional research.

Dividend Yield  [more]

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1

Magic Formula Investing Weekly Roundup 8/14/2010

August 14, 2010 – Comments (0) | RELATED TICKERS: FRX , GILD , DV

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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5

ViroPharma (VPHM) - A Tale of Two Drugs

August 13, 2010 – Comments (6) | RELATED TICKERS: VPHM , PFE

ViroPharma (VPHM) is a relatively small biotech with two drugs on the market. Its legacy drug is Vancocin (vancomycin), which was acquired in 2004 and is used for the treatment of Clostridium difficile (CDI) infections, a digestive tract problem. Vancocin accounts for about 63% of revenues and yields 90% gross margins.

ViroPharma's second drug, acquired in 2008 with the buyout of Lev Pharmaceuticals, is Cinryze. Cinryze is the first and so far only treatment approved for the prevention of hereditary angioedema (HAE), a rare genetic disorder that causes potentially dangerous swelling. Cinryze produced the remaining 47% of sales in the most recent quarter.  [more]

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3

Company Debt: 4 Questions Answering the Whats, Hows, and Whys

August 10, 2010 – Comments (0)

One of the most important things to look at when analyzing a prospective investment is the financial health of the business. Companies with a lot of debt and little cash flow are candidates for bankruptcy, leaving your investment worth nothing, regardless of how much you paid per share of stock. On the other hand, strategic debt can often help greatly improve a business's growth rate, and is almost required for start-up and early-stage companies. In this article, I'll go over 4 basic questions related to analyzing a company's debt burden, including what it is, why it is necessary, and what is good or bad debt.

1) What kinds of debt do businesses use?  [more]

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Magic Formula Investing Weekly Roundup 8/8/2010

August 08, 2010 – Comments (0) | RELATED TICKERS: LLY , RAI , MO

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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5

Are Home Health Agencies Still A Good Investment?

August 06, 2010 – Comments (0) | RELATED TICKERS: AFAM , AMED , LHCG

When a single industry becomes heavily represented in the Magic Formula Investing (MFI) screens, you know that industry is highly out-of-favor with investors. Right now, there are a few sectors that match this description. For-profit education firms and consumer apparel retail are two examples right now.

But the one I want to look at today is almost fully represented in MFI - home health agencies (HHAs). Let's take a look at the industry, the qualities that make it an attractive investment, the challenges that have led to low valuations across the sector, and then a comparison of the 3 publicly traded stocks currently in MFI.  [more]

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3

TJX Companies Inc (TJX) - Is the Stock Bargain Merchandise?

August 03, 2010 – Comments (0) | RELATED TICKERS: TJX , ROST , BBBY

TJX Companies (TJX) is a retailer of heavily discounted name brand and designer apparel and home decorations. In the United States, the company has 4 stores: T.J. Maxx (896 stores), Marshall's (817 stores), and A.J. Wright (152) are primarily focused on apparel and accessories. HomeGoods (325 stores) is a home decor and furnishings store, similar to Bed Bath and Beyond (BBBY). The firm also has a sizable presence in Europe with 272 T.K. Maxx stores and 14 HomeSense stores. In Canada, TJX runs 79 HomeSense, 208 Winners (apparel), and 3 StyleSense (a new footwear concept) units, and plans to expand Marshall's to Canada in the near future.

TJX's stores have a compelling concept. Most offer high quality and brand name merchandise at prices 20-60% below department stores. Customers are motivated to return to the stores often due to the "treasure hunt" aspect. Inventory is turned very quickly, so the assortment of product is ever-changing. TJX's buyers purchase late in the cycle, allowing the company to take advantage of unique opportunities and also allowing it to adjust quickly to fashion trends. Also, TJX's stores are built literally without walls. Not only does this keep capital expenditures on fixtures low, but is also allows tremendous flexibility in merchandising, which can quickly change based on the product assortment "du jour".  [more]

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