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Last Five Magic Formula Stocks: What I Bought Today
Posted by: DaveinHackensack (IP Logged)
Date: August 15, 2007 04:38PM

For those of you who shared your ideas, thanks. Looks like some of us are partially on the same wavelength. I'm guessing there are also one or two stocks in this group few here would want to touch. Here's my motley group of five MF buys today: HLYS, EGY, USHS, KG, and OPMR.


Stocks Discussed: HLYS, EGY, USHS, KG, OPMR,
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Rating: 5.0/5 (1 vote)



Re: Last Five Magic Formula Stocks: What I Bought Today
Posted by: DaveinHackensack (IP Logged)
Date: August 15, 2007 06:03PM

Ravinsu,

That was one of the stocks I figured no one would want to touch. I had seen HLYS on the Magic Formula list before and passed on it, but at a 50% discount, I thought I'd give it another look.

I think Mr. Market has over-reacted here. Heelys is now trading at less than 6x earnings and less than 6x cash flow, ttm. It's trading at less than 7.5x the consensus estimate of next year's earnings ($1.27) and at less than 9x the low estimate ($1.07). It has a strong balance sheet: $53 million in cash, zero debt, and a current ratio of 12. Plus, a ridiculous 67.8% of the stock's float is sold short, leading to the possibility of a short squeeze in the event of any positive surprises in the next few months.

Also, according to Wachovia analyst John Rouleau, "We continue to believe a main driver of the recent slower growth is more a function of the expanded dis.tribution and weak macro environment rather than a change in kids' attitude toward Heelys".

Heelys will probably get pummeled a little more in this market environment, but i think there's a good chance this will be worth 30%-50% more than I bought it for a year from now. Time will tell, of course.


Stocks Discussed: HLYS, EGY, USHS, KG, OPMR,
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Rating: 4.0/5 (3 votes)



Re: Last Five Magic Formula Stocks: What I Bought Today
Posted by: John Krantz (IP Logged)
Date: August 15, 2007 09:28PM

Buying growth stocks that have fallen out of favor can be a good strategy. The growth funds have given up on HLYS, and nobody else really wants them. Could definately be a good value play when you consider the worldwide marketplace we are in. I have not studied the company but I am under the impression that their product is mostly in the US. Correct me if I'm wrong.

7-12 year old kids in my neighborhood love Heelys...You could really see another growth spurt if they become a fad in a country like Japan also. Its a risky play but it could work. With the other Magic Formula stocks I think its a worthwile risk, its not like its the only thing you bought.


Stocks Discussed: HLYS, EGY, USHS, KG, OPMR,
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Rating: 4.3/5 (4 votes)



Re: Last Five Magic Formula Stocks: What I Bought Today
Posted by: valuefan (IP Logged)
Date: August 16, 2007 07:13AM

I have been debating about adding to my KG here. MYL is so cheap I have been adding to that instead. But I will take another look at KG this morning. Offhand, I would like to see KG about
5 % cheaper in this market.


Stocks Discussed: HLYS, EGY, USHS, KG, OPMR,
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Rating: 5.0/5 (1 vote)



Re: Last Five Magic Formula Stocks: What I Bought Today
Posted by: DaveinHackensack (IP Logged)
Date: August 16, 2007 07:25AM

John Krantz:

International prospects for HLYS is an interesting angle. A lot of times things we consider fads in the U.S. end up being popular in Asia for years later -- e.g., break-dancing in Korea.

Valuefan: KG is probably the most conservative of this group of stocks. I probably could have waited a little to get a better price (same with the rest of the stocks -- today is looking to be a big sale day after the overseas markets got whacked last night).

Two other thoughts about these stocks:

1) For old Graham & Dodd types, OPMR is actually trading below book value.

2) An article in yesterday's WSJ Chinese oil companies eyeing small American companies (where there may be less regulatory resistance to a purchase) makes me think EGY might be an attractive prospect for the Chinese. The article didn't mention EGY specifically, but I know China has oil interests in Africa, and EGY is active there as well.


Stocks Discussed: HLYS, EGY, USHS, KG, OPMR,
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Rating: 3.0/5 (1 vote)



Re: Last Five Magic Formula Stocks: What I Bought Today
Posted by: ccyork (IP Logged)
Date: August 27, 2007 09:17AM


i've decided to run my taxable account using a magic formula-based strategy. i will not choose randomly, but will choose my best ideas from the magic formula list. right now i only have enough cash for 3 stocks. so today i bought:

GW - Grey Wolf
WDC - Western Digital
SPLS - Staples

as i grow the account i will be able to add more positions. i don't plan to ever add more than 10. i want to keep the account concentrated in my best ideas



Stocks Discussed: HLYS, EGY, USHS, KG, OPMR,
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Rating: 3.0/5 (1 vote)



Re: Last Five Magic Formula Stocks: What I Bought Today
Posted by: kfh227 (IP Logged)
Date: August 27, 2007 10:14AM

SPLS: I think that is a worth while consideration right now. Everyone should give it a look. I'm not as familiar with the others, but these days I'd probably not go after tech (WDC)

Thanks for keeping us all up to date! I like reading your ideas.


Stocks Discussed: HLYS, EGY, USHS, KG, OPMR,
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Rating: 3.0/5 (1 vote)



Re: Last Five Magic Formula Stocks: What I Bought Today
Posted by: DaveinHackensack (IP Logged)
Date: August 28, 2007 01:17PM

Revisiting a couple of those last five Magic Formula buys:

USHS is up a little as I write this, even though it sells home improvement materials and we got that negative housing number today. Interesting. Could this be a little like a micro cap version of USG (except with a stronger balance sheet and cheaper valuation)?

HLYS: Down today, along with everything else. Getting sued by some trial lawyers because its stock price went down. And yet, it's only trading at 8x the consensus earnings for next year and 60% of the stock's float is sold short. Can there be any bad news that hasn't already been baked into this stock's price? I still feel comfortable owning it at 9, despite the piling-on articles in the WSJ and Barron's over the last few days. I think the key question for potential HLYS investors is this: will sales of the shoes fall as precipitously as the stock price did? Or will they continue to grow, albeit at a more modest pace, after the current inventory is worked off? Analyst estimates predict 14.5% annual growth.

I'm a little suspicious of Money Chimp's Warren Buffett Intrinsic Value Calculator, but you can plug in the numbers for Heelys (or another stock) and see what comes up. If you're running HLYS, the earnings, ttm, were $1.66. You can pick your own numbers for future growth, and your own confidence level.



Stocks Discussed: HLYS, EGY, USHS, KG, OPMR,
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Rating: 1.0/5 (1 vote)



Re: Last Five Magic Formula Stocks: What I Bought Today
Posted by: ccyork (IP Logged)
Date: August 28, 2007 01:51PM

i agree that HLYS, while maybe a fad, seems to have an adequate margin of safety at these levels. i think it's a great MF portfolio choice. but of course that doesn't mean it can't go lower from here, ANYTHING can go lower at this point





Stocks Discussed: HLYS, EGY, USHS, KG, OPMR,
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Rating: 4.0/5 (1 vote)



Re: Last Five Magic Formula Stocks: What I Bought Today
Posted by: DaveinHackensack (IP Logged)
Date: August 28, 2007 08:15PM

That's true, ccyork, anything can go lower. It's also hard to pick bottoms. But I feel pretty comfortable with the price levels and margins of safety of this last group.


Stocks Discussed: HLYS, EGY, USHS, KG, OPMR,
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Rating: 1.5/5 (2 votes)



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