Cubic Corp (NYSE:CUB)

Can a random number generator (www.random.org) produce the best 100 stock picks that will beat the market over the years? Let’s find out. :)

My process, for those interested:
I use www.random.org number generator to produce a number between 1 and 7,801. There are 7,801 stocks available to choose on the Motley Fool CAPS Game. Once I get a number, I go to the list, find that stock, and select that stock to outperform for the next five years.

Cubic is best known as a small defense contractor, so wouldn't they be hurt if the US Defense Dept. cuts its budget? No. First, Cubic's business is support services, logistics, and training, areas where DoD is less likely to be able to cut back (and Cubic's training simulations save money over live training). Second, Cubic also has a third of its business doing transportation systems (farecard equipment for public transit) in major cities around the world. Third, Cubic does business in over 50 different countries, hedging against declines in revenue from the US government.

Value

Sales, revenue and earnings have grown consistantly over the past few years, and the share price has grown faster than the S&P.

MFI Screen

I do not own

93 is the new 80.

Aggressive new acquisitions. Strong government contracts.

Timing looks good now for an upswing.

CUB has been unfairly punished by the market in recent months. Thus, I initiated a position today at 32.90. The company has a strong balance sheet, a solid business model and good earnings growth capacity. Look for CUB to bounce back to 40 in 2010.

Significant insider ownership. Strong cash flow. Recently initiated a dividend. A narrow miss on earnings for a number the company does provide gives a good entry point at a 15% drop to pick up this TMF best buy now.

Electronics will be BIG Forever!

CUB should benefit form the surge of troops in Afgan.

we will always be at war with someone...

Because D&T said so!

Long-tenured management (doesn't even begin to describe it!) and very large insider ownership, plus a two-pronged business with large barriers to entry. Minimal debt and a balance sheet that doesn't seem to have been hit too hard by the prolonged downturn.
I've just bought in the real world so every time I'm forced to endure the frustrations of travelling by the London tube I will try to console myself with the fact that a large proportion of the people hemmed around me and making my journey uncomfortable might just have put a few pence into my pocket...:-)

They just recieved a $40 million order to train U.S. military officers.

This two-horned beast has a long record of giving shareholder a return on their investment. As our education system continues to fail our youth, military training will be more and more important. I also expect that a smaller US military will induce the military of other countries to expand. Further, few soldiers means more training per soldier so they are more effective. The other horn of CUB will continue to thrive as the public expects more and more automated was for the government to take our money for services. I suspect that if the Olympics come to Chicago that CUB(s) will get the ticketing franchise.

Thou shalt now be promoted to a Five Star Stock.

You are welcome.