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Microcap Magic Formula’s May 2012 Pick Autoinfo Is Bought Out; March 2013 Pick Is Out

March 11, 2013 | About:

Last week, the microcap magic formula’s May 2012 pick, Autoinfo (AUTO), announced it was getting bought out for $1.05 per share. While I feel the buyout price is likely much too cheap, the buyout price represents a tremendous return for newsletter followers: it’s a return of just shy of 35% from where the newsletter picked up its shares, and shares were available for several months at that price.

And this buyout isn’t a unique occurrence. It’s actually the fourth buyout offer for a newsletter pick; in addition, we had another receive a buyout offer that ultimately fell through. Overall, the return for the four companies that have been offered buyouts has averaged just under 50%. Given the newsletter has, so far, only picked 22 companies (and only held 10 for more than a year!), that represents a pretty phenomenal hit rate.

And even the stocks that haven’t received buyout offers have done pretty well. So far, the newsletter has sold 10 stocks at an average gain of 25%, and we’ll sell our 11th (March 2012’s pick) next week for a gain of roughly 80%.

Put it all together and it’s evidence that our strategy of buying tiny companies with competitive advantages and cheap valuations is working extremely well.

The newsletter releases its March 2013 pick after market close last Friday (March 8th,2013). The pick is growing revenues at 75% per year and has a significant net cash balance yet trades for only 8x P/E. We think it has the potential to be acquired at more than double today’s prices sometime within the next year.

Download the March 2013 Magic Formula Newsletter

Rating: 3.8/5 (4 votes)


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