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June Magic Formula Newsletter: profitable yet trading below cash value

June 15, 2013

This month's stock consistently generates fantastic returns on capital. Revenue was up over 80% year over year in their most recent quarter, and profits were up over 400%.

Even better, the CEO is a value investor who owns a meaningful amount of stock, and the company is an absolute share cannibal when it comes to buying back their own shares.

Despite all of these great traits, the company trades for less than the value of the cash on its books, presenting investors a great opportunity to buy into a business that consistently throws off cash at a huge discount to its intrinsic value.

Fair value is likely 60% above today's share price. We will buy the shares on Monday.

Download this month’s Microcap Magic Formula Newsletter.

GuruFocus publishes three monthly newsletters. These newsletters are the included features for Premium Members.

1. Ben Graham: Net-Net Newsletter focuses on net-net stocks that Ben Graham would buy. It is released on the first Friday of each month.

2. Micro-Cap Magic Formula Newsletter picks companies that have high return on capital and high earnings yield. It is released on the second Friday of each month.

3. Buffett-Munger Best Bargains Newsletter recommends companies that have high business quality, but traded at undervalued prices. A younger Buffett would buy this kind of companies. It is published on the third Friday of each month.

Also don’t miss:

June Ben Graham Net-Net Newsletter

June's pick was first profiled two years ago. Recent events have made the company much more attractive, especially after the company engaged an investment bank to explore a sale, or asset divesture.

All the monthly newsletters are included in GuruFocus Premium Membership. If you are not a Premium Member, we invite you for a 7-day Free Trial.

Rating: 2.0/5 (3 votes)


DavidWX premium member - 4 years ago
Can anyone tell me why the newsletter was suspended, and when it will return?

Also, I've done well with the picks, but the part about selling losses after slightly under a year and gains after slightly over a year doesn't apply to me, since all my trades are inside a Roth IRA. Anyone have alternate timing suggestions?

I'd love to see some updates of old picks, which ones are still worth buying, which ones are possibly played out.


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