Considering my Dell 531S crashed for the 3rd time in one year and one week after its one year warranty expired (suspicious isn’t it?) , I had more than enough time to re-read one of my favorite investing books, Joel Greenblatt’s Little Book That Beats The Market. Since my computer had to be re-installed, I lost my old magic formula moves list and thus will use this week’s list as my base. Anyway, I finally received my computer back and the first site I visited was the magic formula site and started punching in numbers. I came away with one thing, some high quality names are appearing on the list which should warrant further investigation.
Small Caps vs. Large Caps
Usually, the good bargains are in the small cap arena due to institutional investor restrictions but the large cap screen (market cap of 2 billion+) currently has a hybrids of a)bargain and b) high quality. Take for example the top 25 stocks with a market cap of 2 billion, my favorite screen.
Accenture (ACN, Financial)- I held this puppy in the past and missed it when it went below $25. Is there a better IT company out there? Ok, maybe IBM. P/E 11
Coach (COH, Financial) - Do not want to be in consumer sector until things get better, but company continues to be cash flow positive in this tough environment. P/E 6
Dell (DELL, Financial)- Their computers might be worthless, but you have to admit their financials look yummy. P/E 7 (ttm)
Microsoft (MSFT, Financial)-Â Despite recent layoffs and the inability to gain ground in online advertising arena the company continues to produce tons of free cash flow. I love its balance sheet but I could not pull the trigger for some reason. P/E 9.21!
eBay (EBAY, Financial)-Â Another cash machine whose earnings were not too good. Somewhat of a moat considering the number of buyers and sellers it has. In addition, thousands , if not millions, of individuals make their living on eBay.P/E 8!!
Except for Accenture (ACN), the other four are household names with solid balance sheets. Again, these are from the top 25, if we screen for the top 50 other well known names appear such as Adobe (ADBE, Financial), Exxom (XOM, Financial), DISH Networks (DISH, Financial), Northrop (NOC, Financial),United Technologies (UTX, Financial),etc.
Again, I am not saying these stocks are cheap, in total I have done some analysis on about 3 on the above companies mentioned and only own eBay (EBAY). You should use the companies mentioned above only as a starting point.
Alex Garcia
www.contrarianvalueinvesting.com
Small Caps vs. Large Caps
Usually, the good bargains are in the small cap arena due to institutional investor restrictions but the large cap screen (market cap of 2 billion+) currently has a hybrids of a)bargain and b) high quality. Take for example the top 25 stocks with a market cap of 2 billion, my favorite screen.
Accenture (ACN, Financial)- I held this puppy in the past and missed it when it went below $25. Is there a better IT company out there? Ok, maybe IBM. P/E 11
Coach (COH, Financial) - Do not want to be in consumer sector until things get better, but company continues to be cash flow positive in this tough environment. P/E 6
Dell (DELL, Financial)- Their computers might be worthless, but you have to admit their financials look yummy. P/E 7 (ttm)
Microsoft (MSFT, Financial)-Â Despite recent layoffs and the inability to gain ground in online advertising arena the company continues to produce tons of free cash flow. I love its balance sheet but I could not pull the trigger for some reason. P/E 9.21!
eBay (EBAY, Financial)-Â Another cash machine whose earnings were not too good. Somewhat of a moat considering the number of buyers and sellers it has. In addition, thousands , if not millions, of individuals make their living on eBay.P/E 8!!
Except for Accenture (ACN), the other four are household names with solid balance sheets. Again, these are from the top 25, if we screen for the top 50 other well known names appear such as Adobe (ADBE, Financial), Exxom (XOM, Financial), DISH Networks (DISH, Financial), Northrop (NOC, Financial),United Technologies (UTX, Financial),etc.
Again, I am not saying these stocks are cheap, in total I have done some analysis on about 3 on the above companies mentioned and only own eBay (EBAY). You should use the companies mentioned above only as a starting point.
Alex Garcia
www.contrarianvalueinvesting.com
