Yesterday, I talked all about the work involved in finding attractive investment ideas. While I strongly believe in teaching a man how to fish as opposed to catching the fish for him, part of the advantages of coming to Real Money is to get a peek at some investment ideas. Not to mention, it's easy for me to simply tell you what you already know; I should also be able to back it up. So here goes.
As I pour through dozens of securities each week, 90% are dismissed within the first 10 minutes. What makes the cut and constitutes the other 10%?
Well, one such name is small-cap Sizmek (SZMK), a technology company that provides a comprehensive online advertising solution. I have previously talked about the qualitative merits. In addition, what jumps out is that the company is trading at 70% of book value, has no debt and half of its market value consists of cash. It's a $6 security with $3 in net cash per share, implying an enterprise value of $90 million. Free cash flow in 2013 was $12 million and that was a very depressed figure. I believe you can figure out the math.
Utah Medical Products (UTMD) is another name that I found from flipping page after page inValue Line. I still need to look closer but on the surface, there's a lot to like. The company makes and sells medical products that support intensive care, obstetrics and other critical medical needs. The company has a market cap of $216 million, $6 million in debt and $18 million in cash. Profit margins are a juicy 28% and return on equity is 20%. The company churns out healthy free cash flows each year with little to no capital expenditures. I aim to find out more.
I would estimate that I had to look at more than 200 securities before finding these two names. One came from an investor's 13F and one came at the very end of an edition of Value Line (the good stuff is usually at the very end). They never come to you when you have have only looked at two securities. It's not a bad time to look closer.
