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MagicDiligence (< 20)

November 2010

Recs

5

Drilling into China North East Petroleum (NEP)

November 30, 2010 – Comments (0) | RELATED TICKERS: CNEP , PTR

China North East Petroleum (AMEX: NEP) is a small crude oil exploration and production company that operates in Northern China's Jilin Field. The company operates 292 wells as of the end of September in 4 fields, with a total of about 6.1 million barrels of proved reserves. NEP's largest field (by far) is Qian'an 112, which holds about 5.8 million barrels of reserves, and which NEP holds a 20-year exclusive lease with PetroChina (NYSE: PTR). All of the company's oil is sold to PetroChina's Jilin Refinery at the average daily rate for what Platts terms "sour, heavy Indonesian" crude. This price is lower than the more commonly stated West Texas and London Brent varieties.

In 2009, NEP purchased Tiancheng, which provides oil drilling services. Tiancheng has 8 drilling teams utilizing 8 rigs, and drills on contract from PetroChina and other private oil companies. This unit gets payed based on the depth of each well drilled. This has been a nice addition for NEP. In the 3rd quarter, Tiancheng actually contributed more revenue than oil sales ($10.1mm vs. $9.9mm, respectively), although it is a lower margin business.  [more]

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Magic Formula Investing Weekly Roundup 11/28/2010

November 28, 2010 – Comments (0) | RELATED TICKERS: CSCO , BR , MRX

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

M&A Potential of Value Stocks Highlighted by J.Crew Buyout

November 24, 2010 – Comments (0) | RELATED TICKERS: JCG.DL , STX , ARO

Who says the short week before Thanksgiving has to be boring? Yesterday J.Crew (JCG), a member of Magic Formula Investing (MFI) for the majority of the year and a current MagicDiligence Top Buy, announced a deal to be taken private for $43.50 a share, a premium of about 16% to the closing price on Monday. Many analysts, myself included, expect another 10% or so to be tacked on to that price before a deal is finalized.

It once again brings to light another advantage of investing in value stocks: the heightened possibility of being acquired.  [more]

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6

Magic Formula Investing Weekly Roundup 11/21/2010

November 21, 2010 – Comments (0) | RELATED TICKERS: HPQ , LRCX , DLX

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

8

Will Scrutiny over Menthol Cigarettes Snuff Lorillard?

November 18, 2010 – Comments (1) | RELATED TICKERS: LO , MO , RAI

Lorillard is the third largest cigarette producer in the United States. The company was spun off from conglomerate Loews (L) in June 2008. Lorillard's golden asset is the Newport menthol cigarette brand. Newport has a market share of close to 35% in the menthol cigarette category, which is good enough to earn Lorillard an 11% total market share, behind only Altria (MO) and Reynolds American (RAI) in the U.S. Newport accounts for almost 95% of sales, but the company also produces other, non-menthol branded cigarettes under the names Kent, Satin, True, and Max. Old Gold and Maverick brands round out the portfolio on the discount rack.

Newport is one fantastic asset. It is the second most popular cigarette brand in the U.S. behind Marlboro. The brand has been steadily taking market share from competitors like Altria's Marlboro Menthol, and Reynolds' Kool and Camel Menthol/Crush brands. In fact, Reynolds has recently scaled back its promotional support behind Kool, presenting even less of a barrier to continued market share gains. Newport has taken market share for an amazing 19 straight years. Lorillard can charge a premium for its product (Newport is one of the most expensive brands), earning higher margins than competitors and protecting those margins through brand loyalty. The company's operating margin is a very high 29%. The fact that Lorillard has been able to maintain those attractive margins against competitors hungry for a piece of that profit pie is a testament to the durability of competitive advantages here.  [more]

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4

Magic Formula Investing Weekly Roundup 11/14/2010

November 14, 2010 – Comments (0) | RELATED TICKERS: GILD , GME , FLR

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

5

Ranking the Forbes Best Small Companies List

November 08, 2010 – Comments (0) | RELATED TICKERS: IDCC , PPD.DL , DECK

One of the key attractive points of Magic Formula Investing (MFI) is its inclusion of small-cap stocks. In fact, it is this point that was one of the main reasons for MFI's enduring ability to outperform the market. Greenblatt's strategy worked fine for stocks over $1 billion market cap, returning 20% annually between 1988-2004 (as shown in The Little Book that Beats the Market). But when you expanded the universe of stocks to include all stocks over a $50 million market cap, the performance vastly improved, returning nearly 31% annually over the same period!

In fact, study after study has confirmed that small-caps outperform the large-caps as a group over the long run. And there are many other arguments to own them in your portfolio. Yet, investment banks, money managers, TV pundits, and research firms generally ignore them.  [more]

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Magic Formula Investing Weekly Roundup 11/6/2010

November 06, 2010 – Comments (0) | RELATED TICKERS: GD , LLY , RAI

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

5

CSG Systems' Acquisition of Intec is a Transformational Move

November 02, 2010 – Comments (0) | RELATED TICKERS: CSGS , DOX , TWC

CSG Systems (CSGS) is a provider of outsourced billing and account management, focused largely on the cable and direct broadcast satellite (DBS) market in North America. CSG's Advanced Convergent Platform (ACP) allows its clients to handle pretty much the entire lifecycle of a customer, from account setup, order processing, invoice production, billing, cancellation, etc. Over 45 million subscribers are processed through the company's systems. CSG's four largest customers account for nearly 65% of sales: Comcast (CMCSA; 24%), DISH Network (DISH; 18%), Time Warner (TWC; 13%), and Charter (CHTR; 9%).

I really like CSG's business model, and am keeping an eye on this as a future potential Top Buy pick. Let me tick off the many attractive points here:  [more]

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