When Irish Cows Are Smiling

This Week at MANIFEST (3/20/2015)

“There is little value in the single cow.” — Irish Proverb

“Any man who owns a cow can always find a woman to milk her.” — Irish Saying

Happy St. Patrick’s Day, Daniella!

After spending last weekend in Chicago with some Badgers, Spartans, Buckeyes and various other varmints, I was reminded that Chicago starts St. Patrick’s Day early with a parade on Saturday. The streets were packed with throngs of green-clad celebrants and we watched as the Chicago River was dyed green in compliance. I’m not sure I understand the difference between an Irish proverb and an Irish saying … or what is the meaning behind the bovine suggestions here. But given a choice, I think every portfolio needs more than one cow to avoid the adverse effects of cow tipping.

Chicago also honors a famous cow with a play every March, “When Irish Cows Are Smiling.” Set in March 1872, five months since the Great Chicago Fire, the MOO-morial service, held at the Diggum, Deepe & Dye Funeral Parlour, pays tribute to Mrs. O’Leary’s cow, Daniella Joy, the infamous firebug.

Companies of Interest: Value Line

The average Value Line low total return forecast for the companies in this week’s update batch is 3.9% — slightly higher than the 3.7% for the Value Line 1700.

Materially Stronger: Gentex (GNTX), Synaptics (SYNA), Drew Industries (DW)

Materially Weaker: Avon Products (AVP), Windstream (WIN), Titan International (TWI), Cincinnati Bell (CBB)

Standard Coverage Initiated: Balchem (BCPC)

Discontinued:

Market Barometer

Value Line Low Total Return (VLLTR) Forecast. The long-term low total return forecast for the 1700 companies featured in the Value Line Investment Survey is 3.7%, up slightly from 3.6% last week. For context, this indicator has ranged from low single digits (when stocks are generally overvalued) to approximately 20% when stocks are in the teeth of bear markets like 2008-2009.

Stocks to Study (3/20/2015)

  • LKQ Corp (LKQ) – Highest MANIFEST Rank (100)
  • Neustar (NSR) – Highest Low Return Forecast (VL)
  • Express Scripts (ESRX) – Lowest P/FV (Morningstar)
  • Neustar (NSR) – Lowest P/FV (S&P)
  • Bioscrip (BIOS) – Best 1-Yr Outlook (ACE)
  • Neustar (NSR) – Best 1-Yr Outlook (S&P)

Breaking News: Rite-Aid (RAD) actually has a financial strength rating (2%). While Value Line maintains its “C” (0%) rating on Rite-Aid, Morningstar checks in with a “C” … and the effective interest rate is still steep at 6.8% but it is better than it was!

Red October: Forbes Best Small Cos (2013)

It’s that time of year again. Red October. Some people refer to small company stocks as Red Chips and we take our annual look at one of our favorite shopping lists — a tradition that has bagged a number of extremely rewarding investments over the years.

Forbes is out with their annual list of spooky small companies, the Best Small Companies for 2013.

This year’s headliner is Questcor Pharmaceuticals (QCOR). Questcor is among eleven healthcare companies in this year’s list. Acthar is the company’s main drug, used in the treatment of multiple sclerosis, infantile spasms and rheumatic disorders. The drug accounted for the bulk of QCOR’s annual sales total.

The companies featured at the top of Forbes list are:

1. Questcor Pharma (QCOR)
2. Grand Canyon Education (LOPE)
3. Proto Labs (PRLB)
4. Invensense (INVN)
5. Sturm, Ruger (RGR)

We’ll audit, confirm, study and whittle the list down to identify our favorites and see how they compare.

But these potential future titans don’t have to be scary. As we’ve hunted down buying opportunities from this annual listing over the last several years, we’ve discovered that the best returns tend to come from the entrants with the highest quality ratings.

Dashboards Past

http://www.manifestinvesting.com/dashboards/public/forbes-best-small-2012
http://www.manifestinvesting.com/dashboards/public/forbes-best-small-2011
http://www.manifestinvesting.com/dashboards/public/forbes-best-small-2010
http://www.manifestinvesting.com/dashboards/public/forbes-best-small-2009
http://www.manifestinvesting.com/dashboards/public/forbes-best-small-2008
http://www.manifestinvesting.com/dashboards/public/forbes-best-small-2007
http://www.manifestinvesting.com/dashboards/public/forbes-best-small-2006

We obviously still like to talk about the companies featured in 2008. These are the selections we bring up at the hair salon or barber shop. There are lessons to be learned (and celebrated) in companies like Neogen (2006), DXP Enterprises (2007), Stratasys (2008), Middleby (2008), Dril-Quip (2008), Boston Beer (2008), Bio-Reference Labs (2008 & 2011), Buffalo Wild Wings (2007-2011), Carbo Ceramics (2012), FactSet Research (2008), Mesa Labs (2012), NIC (2012), Peet’s Coffee (2009), Portfolio Recovery (2007,2010-2011), SolarWinds (2011) and SS&C Technologies (2012).

We note that Bio-Reference Labs (BRLI) is now the second most widely-followed company by MANIFEST subscribers, having first appeared on this list back in 2008.

It’s interesting to see Grand Canyon Education (LOPE) near the top of the list because of the damage done by the likes of from the educational services stocks like Strayer and Capella in recent years … and Quality Systems (2006-2008,2010-2011) — a multiple selection that’s done considerable damage to the all-time results.

It’s been a good year for our Forbes Best Small Company tracking portfolios. All in all, the outperformance accuracy is 51.4% and the relative return since 2006 is +2.3% (17.4% vs. 15.1%).

Halloween: Our Cue To Haunt Some Studies

Ken Kavula noticed that Forbes had released the 2013 listing earlier this week. I hope you’re not surprised that Ken is all over this as one of our favorite small company advocates.

So we start whittling with all 100 thanks to Ken:

http://www.manifestinvesting.com/dashboards/public/forbes-best-100-small-2013

We’ll require a minimum growth forecast of at least 10%, a quality ranking of 80 or better, and a return forecast greater than 11%. The screening results will be maintained here:

http://www.manifestinvesting.com/dashboards/public/forbes-best-small-2013?sort=proj_ann_ret

Here’s the results of auditing the 100 candidates … a short list of companies with small company growth characteristics, exceptional quality … that appear to be attractively priced.

The difference between tricks and treats? Quality.