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February Magic Formula Newsletter Released

February 10, 2013
gurujx

GuruFocus

308 followers
This month's pick is barely trading above the value of its cash. Normally, these cash type bargains are reserved for companies posting massive losses and burning through their assets.

But not this company. Even through the recession, which caused a dramatic slowdown in their end market, they've posted consistently strong profits. And as the economy recovers, their profits should begin to surpass their previous peak earnings.

Even without a recovery, the company is cheap at today's prices. After backing out the cash, the stock trades for less than two times normalized earnings, and the recovery should take that multiple even lower. Their ROIC is over 40% even in down years.

In other words, this is just the type of stock this newsletter looks for — strong business trading at a cheap price, with low risk and high upside.

We will buy the shares on Monday.

Download this month’s Microcap Magic Formula Newsletter.

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Comments

earningsyield
Earningsyield premium member - 1 year ago
Nice pick. Only risk I see is how illiquid the company trades. Seems like a classic Graham pick.

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