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MagicDiligence (< 20)

September 2011

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CTC Media Has Growth, Value, and Yield

September 29, 2011 – Comments (0) | RELATED TICKERS: CTCM

Today we're going to go off the beaten path a bit. MagicDiligence's main mission is researching, writing about, and recommending stocks off of Joel Greenblatt's "official" Magic Formula Investing (MFI) screen. However, we've recently seen changes to this official screen that have removed pretty much all firms that are domiciled in foreign countries, regardless of how they are listed on U.S. exchanges. While this is good in many cases (removing Chinese reverse take-overs, for example), it is also hiding some attractive international stocks that have non-ADR listings on American stock exchanges.

This is one thing that MagicDiligence's own MFI screener (for members) avoids. While it too throws out ADRs (because financial numbers are not reported consistently), natively listed foreign stocks that file "normal" 10-Ks and 10-Qs are included. This opens our eyes to some attractive overseas stocks we would not otherwise be exposed to. One such situation I want to discuss in this article is Russian broadcast network CTC Media (CTCM), which currently screens as #41 on my top 50 over 50 million screen.  [more]

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Magic Formula Investing Weekly Roundup 9/25/2011

September 25, 2011 – Comments (0) | RELATED TICKERS: VECO , HPQ

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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Iconix - Brand Names at a Discount

September 22, 2011 – Comments (0) | RELATED TICKERS: ICON

Iconix (ICON) is a brand management company. Currently, the company owns 18 brands outright: Candie's, Bongo, Badgley Mischka, Joe Boxer, Rampage, Mudd, London Fog, Mossimo, Ocean Pacific (OP), Danskin, Rocawear, Cannon, Royal Velvet, Fieldcrest, Charisma, Starter, Ed Hardy, and Waverly. The firm also recently entered an agreement to acquire 100% of the Zoo York brand (currently 51% owned). Additionally, Iconix owns an 80% stake in the Peanuts brand (yes, Snoopy and Charlie Brown - probably its most valuable asset), and 50% stakes in joint ventures controlling Artful Dodger, Ecko, and Material Girl. This extensive portfolio makes Iconix one of the largest pure brand management firms in existence.

This is a compelling business model. Iconix's operations consist of acquiring brands, signing licensees that want to use the brands, coordinating and ensuring a brand image, and handling marketing for the brands. There are no manufacturing operations - manufacturing is done by licensees. This means Iconix has no inventory, extremely low capital requirements, and very little employee overhead. This leads to extreme profitability - the firm's 5 year average operating margin is a lofty 67%, one of the highest I've ever seen! Also, most licensee agreements include minimum royalty stipulations, giving Iconix a near-certain baseline of revenue to plan around.  [more]

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Home Health Agencies - Buy a Dollar for 80 Cents

September 21, 2011 – Comments (1) | RELATED TICKERS: GTIV , AFAM

If someone offered to sell you a dollar for 80 cents, what would be your reply?

For me, it would be "How many can I buy?!"  [more]

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Magic Formula Investing Weekly Roundup 9/18/2011

September 18, 2011 – Comments (0) | RELATED TICKERS: LMLP.DL , MHFI , INTC

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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Lear Corporation: Sitting Pretty After Restructuring

September 14, 2011 – Comments (0) | RELATED TICKERS: LEA , JCI , GM

Lear (LEA) is a leading supplier of automobile parts to manufacturers worldwide. Specifically, Lear focuses on two areas. The Seating division (79% of 2010 sales) designs and manufactures seat frames, recliner mechanisms, tracks, trim covers, headrests, filler material, and delivers completely assembled seats. Electrical Power Management Systems (EPMS) builds electrical distribution and wiring systems for vehicles, which include harnesses, terminals, junction boxes, and control modules. This division also makes a few "select" electronic compontents, such as keyless entry systems and both interior and exterior lighting (including headlights). EPMS also designs advanced electrical systems for hybrid and electric vehicles, including the Chevy Volt. Lear is internationally diversified, with 42% of sales in Europe, 34% in North America, 16% in Asia, and 8% in the rest of the world.

Lear, like many companies in the auto industry, is enjoying a rebirth. The industry unraveled in 2009, as vehicle shipments in North America plummeted to just 8.6 million units, from over 15 million just two years earlier - a staggering 43% decline. This hit hard on the domestic auto industry, which over the years was saddled with over-capacity, excessive debt, uncompetitive labor agreements, and shifting tastes towards Asian brands, notably Toyota (TM). General Motors (GM) and Chrysler both filed for bankruptcy protection, and Ford (F) barely escaped.  [more]

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Magic Formula Investing Weekly Roundup 9/10/2011

September 10, 2011 – Comments (0) | RELATED TICKERS: MSFT , PRX.DL2 , DELL.DL

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 Cheap Blue Chip Technology Stocks

September 07, 2011 – Comments (0) | RELATED TICKERS: SNDK , MSFT , INTC

Taking a look at the large-cap screens from Joel Greenblatt's Magic Formula Investing (MFI) screen and one thing jumps out - the number of large, blue chip tech firms that show up.

To be sure, MFI can screen stocks for the wrong reasons. One-time, non-recurring revenue windfalls can distort both earnings yield and return on tangible capital, the two statistics used by the strategy to rank stocks. The strategy is not immune to screening up stocks with poor balance sheets from time to time. And, of course, some companies deserve to be priced cheaply, owing to a clearly failing business model as new trends or technologies take over for their once-attractive products or services.  [more]

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Magic Formula Investing Weekly Roundup 9/4/2011

September 04, 2011 – Comments (0) | RELATED TICKERS: LO , VCI , USNA

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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Magic Formula Links for 9/3/2011

September 03, 2011 – Comments (0) | RELATED TICKERS: DISH , GTAT , APOL

Interesting news and links from around the financial universe concerning Magic Formula Investing stocks this week:

H&R Block Drops after Q1 Report, Ahead of Anti-Trust Hearing  [more]

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