Portfolio Manager`s Review

Transcription

PORTFOLIO MANAGER’S REVIEW
A Monthly Publication of BeyondProxy LLC

www.manualofideas.com

editor@manualofideas.com

June 30, 2010
When asked how he became so successful, Buffett answered: “we read hundreds and hundreds of annual reports every year.”
Edited by the
Manual of Ideas
Research Team
“If our efforts can further the
goals of our members by giving
them a discernible edge over
other market participants, we
have succeeded.”
Top Five Ideas In This Report
CA Technologies
(Nasdaq: CA) ………………….. p. 17
THE “MAGIC FORMULA” ISSUE
► Snapshot of 100 “cheap” and “good” companies
► 20+ companies profiled by MOI research team
► Proprietary selection of Top 5 candidates for investment
► Plus: Superinvestor holdings update
► Plus: Exclusive interview with Michael van Biema
Dell
(Nasdaq: DELL) ………………. p. 20
Eli Lilly
(NYSE: LLY) …………………… p. 24
GigaMedia
(Nasdaq: GIGM) ……………… p. 28
PRGX Global
(Nasdaq: PRGX) ……………… p. 30
Also Inside
Editor’s Commentary …………….. p. 4
Superinvestor Holdings Update … p. 7
Interview: Michael van Biema ….. p. 8
Other “Magic Formula” Profiles .. p. 34
Snapshot of 100 “MF” Stocks …. p. 85
Background on the “MF” ………p. 103
Value-oriented Stocks Screens p. 106
About Portfolio Manager’s Review
Our goal is to bring you investment
ideas that are compelling on the
basis of value versus price. In our
quest for value, we analyze the top
holdings of top fund managers. We
also use a proprietary methodology
to identify stocks that are not widely
followed by institutional investors.
Our research team has extensive
experience in industry and security
analysis, equity valuation, and
investment management. We bring a
“buy side” mindset to the idea
generation process, cutting across
industries and market capitalization
ranges in our search for compelling
equity investment opportunities.
“Magic Formula” companies mentioned in this issue include
Aeropostale, Allied Healthcare, Almost Family, Altria Group, Amedisys,
America's Car-Mart, Amerigroup, AmerisourceBergen, AmSurg, AOL,
Apollo Group, Bridgepoint Education, CA, Career Education, Carter's,
Cass Information, Centene, Cephalon, CF Industries, Charter Communications,
Chicago Bridge, Continucare, Corinthian Colleges, Cornerstone,
CSG Systems, Cubic, Cumberland Pharma, Dell, Dun & Bradstreet,
EarthLink, Eli Lilly, Endo Pharma, ePlus, Expedia, Fluor, Forest Labs,
Foster Wheeler, GameStop, Garmin, General Dynamics, Genoptix,
GigaMedia, Gilead Sciences, GT Solar, Gulf Resources, H&R Block,
Hansen Natural, Hewitt Associates, Hewlett-Packard, Hi-Tech Pharmacal,
Immunomedics, Impax Labs, Imperial Sugar, InterDigital, ITT Educational,
j2 Global Comms, KBR, L-3 Comms, Lear, Lender Processing, LHC Group,
Lincoln Educational, Local.com, Lorillard, M & F Worldwide, McAfee,
McGraw-Hill, McKesson, Metropolitan Health, Microsoft, Nat.-Oilwell Varco,
Net1 UEPS, Omnicom, Oshkosh, Pioneer Southwest, PMC-Sierra,
Pre-Paid Legal, PRGX Global, Primoris Services, Providence Service,
Raytheon, Reynolds American, SAIC, Santarus, Seagate Technology,
Sharps Compliance, Sohu.com, Synta Pharma, Terra Nova Royalty,
The Gap, TSYS (Total System), Unisys, United Online, Universal Travel,
USA Mobility, Valassis Comms, Value Line, ViroPharma, Vonage,
Western Digital, Wright Express, and more.
(profiled companies are underlined)
Copyright Warning: It is a violation of federal copyright law to reproduce all or part of this publication for any purpose without the prior written consent of
BeyondProxy LLC. Email support@manualofideas.com if you wish to have multiple copies sent to you. © 2008-2010 by BeyondProxy LLC. All rights reserved.
Table of Contents
EDITOR’S COMMENTARY .............................................................................4
SUPERINVESTOR HOLDINGS UPDATE ......................................................7
EXCLUSIVE INTERVIEW WITH MICHAEL VAN BIEMA ..............................8
TOP FIVE “MAGIC FORMULA” SELECTIONS .......................................... 17
CA TECHNOLOGIES (CA) – OWNED BY NWQ, PZENA, LEGG MASON ......................................... 17
DELL (DELL) – OWNED BY SOUTHEASTERN, T ROWE .............................................................. 20
ELI LILLY (LLY) – OWNED BY CAP WORLD, PRIMECAP ............................................................. 24
GIGAMEDIA (GIGM) – OWNED BY MARTIN CURRIE, ACADIAN ................................................... 28
PRGX GLOBAL (PRGX) – OWNED BY BLUM, JANA, RENTECH ................................................ 30
OTHER “MAGIC FORMULA” CANDIDATES ............................................. 34
AEROPOSTALE (ARO) – OWNED BY HUSSMAN, VINIK ............................................................... 34
AMERICA’S CAR-MART (CRMT) – OWNED BY ALYDAR, RANGER, ROYCE .................................. 38
AMSURG (AMSG) – OWNED BY FENIMORE, DREMAN ............................................................... 42
AOL (AOL) – OWNED BY DODGE & COX, CAP RE.................................................................... 44
CASS INFORMATION (CASS) – OWNED BY RIVERBRIDGE, KAYNE .............................................. 48
CHARTER COMMUNICATIONS (CCMM) – OWNED BY OAKTREE, FRANKLIN ................................. 50
EPLUS (PLUS) – OWNED BY HOVDE, HEARTLAND, ACADIAN..................................................... 53
FOSTER WHEELER (FWLT) – OWNED BY ALTRINSIC, GREENLIGHT ........................................... 56
HEWLETT-PACKARD (HPQ) – OWNED BY DODGE & COX, CAP RE............................................. 59
LEAR (LEA) – OWNED BY LASRY, GS, PAULSON...................................................................... 63
LOCAL.COM (LOCM) – OWNED BY ESSEX, BRIDGEWAY ........................................................... 66
MCGRAW -HILL (MHP) – OWNED BY CAP W ORLD, T ROWE, MORGAN STANLEY ......................... 70
OSHKOSH (OSK) – OWNED BY ARONSON, DFA....................................................................... 74
UNISYS (UIS) – OWNED BY MCM, ASTON, ACADIAN ................................................................ 77
UNITED ONLINE (UNTD) – OWNED BY BLAIR, LSV, DFA .......................................................... 80
VALUE LINE (VALU) – OWNED BY ARNOLD BERNHARD ............................................................ 84
SNAPSHOT OF 100 “MAGIC FORMULA” COMPANIES .......................... 86
IN ALPHABETICAL ORDER ....................................................................................................... 86
BY MARKET VALUE ................................................................................................................ 88
BY SECTOR – OVERVIEW ....................................................................................................... 90
BY SECTOR – CAPITAL EMPLOYED IN BUSINESS ...................................................................... 92
STOCK PRICE PERFORMANCE ................................................................................................ 94
FREE CASH FLOW ................................................................................................................. 96
P/E MULTIPLES ..................................................................................................................... 98
PERCENTILE RANK WITHIN INDUSTRY .................................................................................... 100
INSIDER BUYING AND OWNERSHIP ........................................................................................ 102
BACKGROUND ON “MAGIC FORMULA” INVESTING ........................... 104
FAVORITE STOCK SCREENS FOR VALUE INVESTORS ...................... 107
“MAGIC FORMULA,” BASED ON TRAILING OPERATING INCOME ................................................. 108
“MAGIC FORMULA,” BASED ON THIS YEAR’S EPS ESTIMATES ................................................. 109
“MAGIC FORMULA,” BASED ON NEXT YEAR’S EPS ESTIMATES ................................................ 110
CONTRARIAN: SHUNNED BY THE MARKET, NOT BY INSIDERS ................................................. 111
CONTRARIAN: BIGGEST YTD LOSERS (DELEVERAGED & PROFITABLE) ..................................... 112
VALUE WITH CATALYST: CHEAP REPURCHASERS OF STOCK ................................................... 113
PROFITABLE DIVIDEND PAYORS WITH DECENT BALANCE SHEETS............................................ 114
DEEP VALUE: LOTS OF REVENUE, LOW ENTERPRISE VALUE ................................................... 115
DEEP VALUE: NEGLECTED GROSS PROFITEERS .................................................................... 116
ACTIVIST TARGETS: POTENTIAL SALES, LIQUIDATIONS OR RECAPS ......................................... 117
© 2009-2010 by BeyondProxy LLC. All rights reserved.
June 30, 2010 – Page 3 of 120
Editor’s Commentary
We are back with a new report on equity ideas that score highly based on the
Joel Greenblatt-style “magic formula” quantitative stock screening methodology
(popularized in Greenblatt’s The Little Book That Beats The Market). The “magic
formula” looks for companies that are both “cheap,” as measured by trailing
operating income to enterprise value, and “good,” as measured by trailing operating
income to capital employed in running the business. The goal, of course, is to pay a
low price for companies that will reinvest capital at high rates of return.
Unlike Greenblatt’s original methodology, which took into account last twelve
months’ EBIT only, we consider stocks that rank highly based on one or more of the
following inputs: last twelve months’ EBIT, consensus EPS estimates for the current
year, and consensus EPS estimates for next year. Since EPS numbers, unlike EBIT
numbers, do not normalize for the effects of leverage, our forward EPS-based
methodology only includes companies with modest or no net financial leverage.
The reason we keep coming back to the “magic formula” as a way of generating
investment ideas is simple: It works. In fact, we are unaware of any other replicable,
quantitative investment approach that has outperformed as impressively. Consider
the following partial track record (more data available later in this report):
Magic Formula Performance vs. S&P 500 Index, 1999-2009 *
(performance in %)
Magic Formula
S&P 500 Index
‘99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09
16
9 36 -21 52 28 22 13 15 -36 46
15 -9 -12 -22 29 11
5 16
6 -37 19
CAGR
14.5
-0.2
* MF data reflects performance of Formula Investing Model Portfolio, net of fees. 1999 data is from
October 1, 1999 to December 31, 1999. 2009 data is through September 30, 2009.
Source: Formula Investing, www.formulainvesting.com
It makes intuitive sense that an investment approach that focuses on paying
relatively little for businesses that can deploy incremental capital at relatively high
rates of return should work over time. There are other reasons why the “magic
formula” has worked and appears likely to continue working in the future. One of
those is that the companies that rank highly on “magic formula” criteria tend to have
something obviously “wrong” with them.
For example, a recent screen throws up the following ideas: McGraw-Hill
(MHP), Apollo Group (APOL), Eli Lilly (LLY), National-Oilwell Varco (NOV),
and Raytheon (RTN). It’s easy to see what’s wrong with each of these: McGrawHill’s credit ratings business may be changed forever, lowering the earning power
and predictability of the company. Apollo Group has grown aggressively thanks to
government-funded programs, and Steve Eisman recently presented a lucid argument
for caution with regard to investments in this and other for-profit education providers
(read it by clicking here, here and here in the PDF version of this report). Eli Lilly
suffers from patent expiration issues and the uncertain effects of U.S. healthcare
reform. Oil services company National-Oilwell Varco’s normalized earning power
has become considerably less certain in a post-Gulf of Mexico oil spill environment.
Finally, Raytheon’s earnings may be negatively affected by the eventual cessation of
hostilities in Iraq and Afghanistan as well as potential Pentagon budget cuts.
June 30, 2010 – Page 4 of 120
None other than Joel Greenblatt has discussed the difficulty of implementing a
“magic formula”-based investment approach, despite the obvious long-term rewards.
In a presentation at the Value Investing Congress last October, Greenblatt went down
a list of “magic formula” companies, demonstrating that an investor would have a
relatively easy time rejecting virtually all the companies on the list. A video of
Greenblatt’s speech is available by clicking here in the PDF version of this report, or
by visiting http://bit.ly/2lZAdT We highly recommend viewing Greenblatt’s speech.
With the appropriate caveats in mind, we present the following five “magic
formula” companies for your consideration:
CA Technologies (CA) is a software and IT solutions company that long-time
investors may know better as Computer Associates, a company founded by Charles
Wang with three employees in 1976 and grown through dozens of acquisitions.
While Wang resigned amid controversy in 2000, the stock has not recovered even as
revenue and profits have grown in recent years. CA has a defensible position in
enterprise IT management software due to competitive products and a large installed
base. The company’s software generally helps large organizations manage their
disparate technology assets in order to improve business processes and lower costs.
Although competition and technological change present challenges, the need for
better utilization of technology infrastructure for business purposes should remain a
long-term growth driver. With a consensus EPS estimate of $1.90 for the year ending
March 2011, and earnings expected to keep growing, the stock appears quite cheap at
roughly $20 per share.
Dell (DELL) is no newcomer to this report but warrants revisiting. The
company is expected to earn $1.27 per share in the fiscal year ending January 2011
and $1.47 per share in the year ending January 2012. These earnings expectations
would make most companies trading at $13 per share worthy of closer consideration,
but this is especially so in the case of this global technology brand with capable,
properly incentivized management, a capital-light business model, and a net cash
position of $6+ billion (more than 20% of recent market value). The company is
addressing challenges in the consumer products business amid slowing growth and
greater competition. Some have questioned Dell’s direct model, and the company has
felt a need to partner with retailers to expand distribution. Nonetheless, we like
Dell’s long term-oriented business approach, strong FCF generation, share buybacks,
cost leadership, and prospects in enterprise/services markets. Accordingly, we are
not surprised that Dell’s largest outside shareholder continues to be superinvestor
Mason Hawkins’ Southeastern Asset Management, which owns 7% of the company.
Pharma company Eli Lilly (LLY) faces near-term patent expiration issues, not
unlike pharma giants Pfizer (PFE) and AstraZeneca (AZN). In the case of Lilly, 22%
of Q1 revenue came from schizophrenia drug Zyprexa, which faces U.S. patent
expiry in October 2011. An additional concern is U.S. health care reform, which
should impact 2010 EPS by 5-10%. Nonetheless, EPS should grow this year to
$4.50, making Lilly an interesting prospect at roughly $34 per share. Given a deep
new drug pipeline, cost-cutting efforts and potential positive aspects of U.S. health
reform (broader access to drugs), the market may be too pessimistic regarding Lilly’s
ability to sustain and grow earnings in the long term. After all, one of the much-cited
“megatrends” back when major pharma stocks were in favor was the impending
retirement of post-WWII “baby boomers.” Unfortunately, a “youth potion” has yet to
be discovered, and this megatrend remains firmly intact.
June 30, 2010 – Page 5 of 120
Hong Kong-based online gaming company GigaMedia (GIGM) has become
more of a “special situation” investment than a bona fide “magic formula” stock, but
we find it more compelling than ever. The company’s latest published balance sheet
does not reflect the receipt of $100 million in May, which represents partial proceeds
for the sale of a 60% stake in GigaMedia’s online poker software business to
European company Mangas Gaming. GigaMedia will recognize a $60-70 million
gain due to this sale in Q2. The pro forma net cash balance, which exceeds recent
market value, could put the company on the radar screen of value-seeking investors.
While GigaMedia is redeploying the large cash balance into strategic investments in
Asia, raising the risk of bad capital allocation, we believe the potential rewards far
outweigh the risks in this asymmetric investment opportunity.
Recovery audit specialist PRGX Global (PRGX) has historically aided retailers
in recovering overpayments resulting from complex purchasing processes and human
error. More recently, the company has expanded into other verticals, especially
health care. PRGX is also a subcontractor to CMS, the U.S. agency administering
Medicare, with management expecting “meaningful” revenue related to Medicare to
commence in the second half of this year. The company generated adjusted EBITDA
of $27 million in 2009, yet trades at an enterprise value of roughly $100 million. We
find this quite attractive given the low capital intensity of the business, recurring
revenue characteristics, and sizable long-term growth prospects. One of the major
conceptual risks is that PRGX could become a victim of its own success, i.e., clients’
need for PRGX services may diminish as the company assists clients in improving
their payment processes. However, this risk may be a bit akin to the “paperless
office,” which has failed to materialize despite a seemingly sound conceptual basis.
We have a special bonus for you in this report — an exclusive interview with
Michael van Biema and the team at van Biema Value Partners, one of few funds of
funds that can legitimately claim to create value for investors. Michael holds a Ph.D.
in electrical engineering from Columbia University and was on the faculty of
Columbia Business School from 1992 to 2004. There, he taught securities analysis
and value investing, among other subjects. van Biema has created a firm that looks
for small but established value managers and seeks to build long-term relationships.
We think you’ll enjoy reading about van Biema’s approach. Sometimes hearing from
those who judge and select talent can be one of the best ways of refining one’s own
approach to managing an investment operation. (We thank Jeffrey Hamm for his
exceptional contribution to researching and transcribing this interview.)
You may notice that we have added stock screens to this report. The latter used
to be a part of 10x45 Bargain Hunter. We will also be adding new screens over time.
I want to reiterate our commitment to making this monthly report an essential
part of your equity idea generation process. We have streamlined our idea-oriented
publications to focus exclusively on this report. This gives our team more resources
to keep making this publication better by adding more in-depth analysis, expanding
our superinvestor coverage, and even giving me a bit more leeway in steering you
toward off-the-beaten-path ideas in occasional special features.
Sincerely,
John Mihaljevic, CFA
and The Manual of Ideas research team
June 30, 2010 – Page 6 of 120
Superinvestor Holdings Update
In the May issue of Portfolio Manager’s Review, we profiled the top holdings of more than twenty top investors, based on
then-available Schedule 13F-HR filings with the SEC. On this page, we provide an update on the latest disclosed purchase
and sale activity by the same set of investment managers. This information is based on Schedule 13G or 13D filings and
Form 3 or 4 filings made by investors when changes in holdings require disclosure with the SEC.
Increases in Superinvestor Holdings
Trade/
Filing
Date
1
Filing
Type
1
5/28/10
13G
5/25/10
13G
Investor
Company / Ticker
Third Point
Roomstore / ROOM
Third Point
Xerium Tech / XRM 2
Market
Value
($mn)
Stock Price ($)
Latest Filing ∆ since
Date
Date
Filing
Shares Owned
Latest ∆ since
(mn)
3/31/10
Holdings
as % of
Company
7
0.75
0.65
15%
0.2
new
2%
217
14.42
20.00
-28%
1.3
new
9%
13G filed jointly with Ian Wallace’s River Run Management, which owns 13% of Roomstore.
2
On March 30, 2010, Xerium filed under Chapter 11. The Company emerged from bankruptcy on May 25, 2010. As part of the emergence, the company’s lenders,
including Third Point, were issued 83% of the common stock, and the holders of the old common stock received 17% of the newly outstanding shares.
Source: SEC filings, The Manual of Ideas compilation and analysis.
Decreases in Superinvestor Holdings
Trade/
Filing
Date
Filing
Type
6/24/10
Market
Value
($mn)
Stock Price ($)
Latest
Filing
∆ since
Date
Date
Filing
Shares Owned
Latest ∆ since
(mn)
3/31/10
Holdings
as % of
Company
Investor
Company / Ticker
13D
Southeastern
Telephone & Data / TDS
3,320
31.49
31.26
1%
11.2
-18%
11%
6/10/10
13G
Fairholme
Hertz / HTZ
4,110
9.98
10.39
-4%
35.0
-38%
8%
6/4/10
13G
Fairholme
TAL International / TAL
783
25.49
22.35
14%
1.9
-11%
6%
6/1/10
4
ESL
AutoZone / AZO
9,220
196.13
191.46
2%
18.3
-5%
39%
5/18/10
13D
Third Point
Nabi Biopharma / NABI
244
5.46
5.77
-5%
4.7
-21%
11%
Portfolio Manager’s Review follows the portfolio moves of the following investment managers: William Ackman, Pershing Square; Zeke Ashton, Centaur;
Brian Bares, Bares Capital; Bruce Berkowitz, Fairholme; Richard Breeden, Breeden Capital; Warren Buffett, Berkshire Hathaway; Ian Cumming & Joe
Steinberg, Leucadia; David Einhorn, Greenlight; Glenn Greenberg, Brave Warrior; Tom Gayner, Markel Gayner; Mason Hawkins, Southeastern; Chris
Hohn, Children’s Investment Fund; Carl Icahn, Icahn; Seth Klarman, Baupost; Eddie Lampert, RBS (ESL); Dan Loeb, Third Point; Steve Mandel, Lone
Pine; Mohnish Pabrai, Pabrai Funds; David Tepper, Appaloosa; Prem Watsa, Fairfax; and Wally Weitz, Weitz Funds.
June 30, 2010 – Page 7 of 120
Exclusive Interview with Michael van Biema
We recently visited the offices of van Biema Value Partners in New York,
where we spoke with the firm’s members, including Michael van Biema, Chris
Kehoe and Sam Klier. van Biema Value Partners specializes in investing in
funds managed by value-oriented investors, many of whom are managers
investing relatively small amounts of capital. van Biema’s firm manages
portfolios of hedge funds in the U.S., Europe and Asia. Michael van Biema is
co-author of Value Investing: From Graham to Buffett and Beyond.
The Manual of Ideas: Tell us about your investment approach and the genesis
of your firm.
“…the great value investor of
[Buffett’s] generation had a
couple of things in common.
The first one was that they
produced terrific long-term
track records. The second
was that they all had periods
of big drawdowns (somewhat
less attractive). Finally, and
one of the key things for us,
was that when he looked at
the historical performance,
their performance didn’t
correlate strongly.”
Chris Kehoe: Michael started the firm five plus years ago after teaching at
Columbia for twelve years. It was there that he developed a value philosophy
and a great network of up-and-coming and established money managers.
Michael thought he could create an investment vehicle that took advantage of
the best niche value managers. His thinking was to find managers of smaller
size, but not necessarily managers that lacked experience. He realized that there
are some managers that have been managing money for many years that
purposely want to stay small. Michael gathered some of the current board
members [of van Biema Value Partners] and brought them the idea. They liked
it and decided to put their own capital to work as an experiment. That
experiment was successful and they decided to launch the firm. The first fund
launched in the U.S. in 2004 and concentrated on domestic fund managers. In
2008 an international fund was launched and, most recently, an Asia-focused
fund.
So the basic investment thesis was to invest in smaller managers that
can be flexible, can invest across different capital structures, are willing to short
on an opportunistic basis, with the ability to provide diversified exposure to the
value style of investing.
Michael van Biema: The funds have a relative simple concept. The concept
came from reading Warren Buffett’s “The Superinvestors of Graham-andDoddsville,” where he wrote that the great value investor of his generation had a
couple of things in common. The first one was that they produced terrific longterm track records. The second was that they all had periods of big drawdowns
(somewhat less attractive). Finally, and one of the key things for us, was that
when he looked at the historical performance, their performance didn’t correlate
strongly.
A thought occurred to me that there were a number of small value
shops out there that I was aware of, and that it would be interesting to see if
what Buffett had observed in his generation of value managers held true for the
current small value managers of today. So we pooled some of our own money
— my own and from our board — and ran the fund for awhile as, more or less, a
social experiment to see if Buffett’s theory still held true.
June 30, 2010 – Page 8 of 120
One of our first big concerns was whether we could find enough highquality small managers to populate a reasonably sized fund. That question was
answered quickly as I went around to the members of the board to ask for
names. I got over one hundred names of small value shops that had been around
for awhile or in which our board members had already invested. We had a list of
managers among whom many had already closed their funds. From my
perspective this was a good sign because it meant that the board was picking out
guys that were disciplined, controlled and closed their funds with relative
modest sizes. Of the ones that were not closed, which was somewhere between
35 and 45 managers, we picked 20 managers to start the portfolio.
We discovered the exact same thing Buffett mentioned: the managers’
performance didn’t correlate strongly. We didn’t know if they were going to
produce above-average long-term returns, but there was a decent amount of
evidence that suggested they would. The other big hypothesis we had was that
the portfolio would provide significant downside protection. We really had to
wait until 2008 to see if our hypothesis was correct.
“…this strategy takes small,
highly concentrated
managers, and puts them
together in a portfolio where
you get, to a certain extent,
the best of all worlds,
because you have a group of
highly focused managers
without getting the risk and
volatility…”
Basically, when I watched the fund from a quasi-theoretical point of
view, it was my belief that the fund would be able to capture about 75% of
strong upside markets and less than 25% of strong downside markets. To date
the fund has captured 75% or more of strong upside markets and has captured
less than 50% of strong downside markets. So it hasn’t done as well as I thought
it would in down markets. However, the statistics may be slightly skewed by the
events of 2008.
What’s extremely reassuring to me is that these funds — at least the
ones that were in existence at the beginning of 2008 — showed the same
pattern, which was a pattern I had predicted: They followed the market down at
the beginning of the drawdown, but leveled out long before the market leveled
out, which makes sense intuitively. If you’re buying stuff that’s already cheap,
there is a certain point where it becomes absurdly cheap, and even guys who are
panicked will quit selling, because they’re just going to say, “I might as well
hold onto this.” And that’s exactly what happened. So in the beginning of 2008
we followed the market down and then we leveled off nicely.
MOI: The fact that value portfolios tend to be more concentrated and more
volatile in the short term seems to fit well with what you are doing as opposed to
other funds of hedge funds, which look through to vehicles that themselves are
trying to have low volatility. It seems that what you’re essentially doing is
grouping guys who are going to be volatile and, hopefully, not very correlated,
and therefore there’s a value created in the process…
van Biema: If you care about volatility, and certainly a number of our investors
do, this strategy takes small, highly concentrated managers, and puts them
together in a portfolio where you get, to a certain extent, the best of all worlds,
because you have a group of highly focused managers without getting the risk
and volatility that comes with investing in a highly concentrated manager.
June 30, 2010 – Page 9 of 120
MOI: Do your managers employ short selling as part of their investment
strategy?
van Biema: They do, but our underlying managers are strongly long biased, as
you would expect for true value managers. Yet, they all are allowed to short
securities. Some of them choose to short, while some seem to do it infrequently,
but they all seem to do it if opportunities arise. Their short positions are
generally not for hedging purposes or insurance on their portfolios, but are
opportunistic — what we would call moneymaking shorts. They may come
across a short idea when they’re searching for new long ideas, where some
obscene comparative values don’t make sense and shorting the company makes
sense.
Shorting is not a huge component of our returns, and we don’t expect it
to be a big component of returns. We don’t expect shorting to protect us
significantly on the downside. What protects us is that these guys are buying
cheap stocks; we do expect that shorting will add a little extra return.
“We don’t expect shorting to
protect us significantly on the
downside. What protects us is
that these guys are buying
cheap stocks…”
Our managers are very opportunistic. To give you an example, at the
beginning of 2009 they moved dramatically out of equities and into fixed
income securities. They were ahead of or leading the curve. In talking to some
institutional investors, the lament I got was they started to understand that this
was a huge opportunity in March or April of 2009 when it really began in
October 2008. It took them several months to figure out there was money laying
in the street. Then it took them another two or three months to implement the
strategy, and by the time they got around to it, it was the fall and the greater part
of the opportunity had disappeared. Our guys started to get there at the end of
2008, and for them it was a no brainer. The managers were out there buying
fixed income securities generating “equity-plus” returns, 30% to 40% in some
cases, and at a minimum 20%. The fixed income securities were short-term
money good, these were companies that had many, many times coverage, if you
picked the right one. At the beginning of 2009, no really knew how to predict
anyone’s earnings, and so why were you going to buy equity in the company if
you thought it was a good company, and even if you thought it was cheap. If you
could go out and buy debt and get a guaranteed return, you didn’t really need to
be concerned about earnings over the next year.
MOI: You also didn’t need to worry about catalysts. As Seth Klarman has
discussed with regard to fixed income, you have a time table, so if you’re right,
you’re going to be proven right on a specific date. Meanwhile, with equities,
you’re a little more dependent on the market…
van Biema: One of the things that we think a lot about is how we can generate
returns for our investors with the lowest possible risk. I’ll give you a wonderful
example from our global fund. We have a Dutchman, who is one of our
managers and lives in England. The only things he invests in are English “net
net” securities — that’s his niche. He has a tiny little fund and has been running
it for 14 years and has produced high-teen returns over the period. There are
times when he doesn’t find a lot of net nets, and he may have 60% cash. There
are other times, like in 2008 or the beginning of 2009, where he finds a ton of
net nets, and he’s close to fully invested. He made a 65-70% return in 2009. You
can sit around and twiddle your thumbs for a few years if you get a return like
June 30, 2010 – Page 10 of 120
that every once in awhile. We like these small niche managers that have a
specialized investment strategy. It helps our fund in terms of our manager
correlation.
Our domestic fund has been running at a 7% positional overlap — very
low, if you consider that you are hiring a set of guys who are focused on the
same universe of stocks. They’re small, dedicated value managers picking U.S.
equities, which for the most part are small- and mid-cap U.S. equities. You
would think there would be substantial overlap in holdings, and it was one of
our fears when setting up the business. But in reality we have consistently run in
the 7-8% positional overlap range. This is partially because value managers in
general are idiosyncratic in nature, but it is also in part because we try to pick
managers who are in the Graham-Buffett spectrum of managers. Some of our
guys are much closer to being more Buffett-like, while others have investment
styles that follow Graham.
MOI: Can you tell us what information you receive from your managers, and
how you track them?
“We made a mistake early on
and hired a manager outside
the mold — he had worked
for a large institution. He
was a pretty good investor,
but once you took the large
institution out of the picture,
he just wasn’t able to
function well.”
van Biema: We basically have full positional transparency with our managers.
It comes in slightly different flavors, but we will not keep a manager over the
long term who won’t open his positions to us. The reason for that is very simple.
Our investment team, Chris Kehoe and Alan Kahn and myself, could be
practicing fund managers themselves, and they know how to pick and analyze
stocks — it’s a check to make sure that our managers are investing in the “real
thing.” If we discover that one of our managers is investing in stuff we don’t
understand, and we call him to have it explained, and if we still don’t
understand, then we usually have a problem with the manager. We’ll then call
the manager in front of the board to help point the manager in a more fruitful
direction. Sometimes this works, sometimes it doesn’t.
MOI: Are you typically one of the biggest investors in the funds you invest in?
van Biema: Yes, we are. Unlike many institutional investors, we don’t have a
problem with being a large percentage of a particular fund. To some extent, it
makes for a strong relationship. Our managers have relatively low operational
risk even though they’re small businesses. The reason is that our managers have
either been doing this for a long time and demonstrated that fact, or that they
have come out of shops like Klarman’s [Baupost Group], which are “grade A”type shops. They’ve been seen a shop running properly, and if we’re hiring
them, they’re smart. We made a mistake early on and hired a manager outside
the mold — he had worked for a large institution. He was a pretty good investor,
but once you took the large institution out of the picture, he just wasn’t able to
function well.
Now we exclusively invest in two types of managers. We either invest
in a class of managers I call the “Wizard of Oz” managers or the “apprentice”
managers. The “Wizard of Oz” managers are guys who like to stay behind the
curtain. They don’t really like to talk to investors very much and would prefer to
stay behind the curtain and pull all the levers — they are really obsessed with
running the investment business. They’ll grow to reasonable size — a few
hundred million dollars — and then they’ll stop. If you ask them why they
stopped, they say, “I’m making more money than I ever thought I would make. I
know all my investors by first name. If I took on another billion dollars, I’d be
June 30, 2010 – Page 11 of 120
richer, but it wouldn’t really change my lifestyle, except that it might make it a
little worse because I’d have to deal with all these people who run funds of
funds and are a pain.” That’s one class, and the operational risk is very low. I
used to say that the reputational risk was very low, but Bernie [Madoff] has
given me a pause. The value investing community is a community that is very
tight, and it is I believe less likely that you would have a rogue trader in the
community.
The other types of managers that we invest in are what I call the
“apprentice managers.” Basically, the model is from the European guild system,
whereby the managers have been trained by a “grandmaster,” be it Seth
Klarman, Marty Whitman, Chuck Royce or whoever it might be, and they’re
smart enough to stay in those shops for a good period of time — at least four
years, in many cases eight to ten years. One of our managers worked for Seth
Klarman for about ten years. He was a full partner, and then decided to go out
on his own. Usually, when they leave, they leave with the blessing of the
grandmaster, or at least in a graceful way. The guy that tutors them may give
them some money to run; obviously, that is a positive sign. Luckily for us, we
have a strong network, and if there’s someone that leaves one of these shops,
they’ll call me up and say, “So-and-so is leaving,” and then tell me whether or
not they’re giving the manager money or not. That’s a strong indication of the
quality of manager.
“We basically ask the
managers we interview how
they want to be remembered
and what their goal is in
running their business. The
primary thing we want to
hear is something along the
lines of, ‘I want to have a
thirty-year track record I’m
proud of.’ If they say
anything other than that, and
in particular anything like
being the biggest, it’s usually
a huge red flag.”
So we think that by sticking to these two profiles we greatly reduce the
overall risk of our managers, and we think that we get guys who are terrific
investors.
MOI: This approach seems quite differentiated, especially in the fund-of-funds
world, so it’s no wonder you have found there to be a good opportunity for your
approach…
van Biema: And it’s a lot of fun, too. Our managers are almost always a real
pleasure to deal with. They’re all smart guys, they may be relatively young or
relatively old, they’re passionate about investing, and most importantly, they’re
passionate about generating a good return for themselves and their investors.
Unfortunately, in our industry this has become more and more rare. It’s
shouldn’t be about making money by raising huge amounts of assets, but about
making money because you have your own money invested alongside that of
your investors, and you’re looking to a 20-to-30-year career generating mid- to
high-teen returns. If you can do that, you don’t have to worry about your
finances.
MOI: In addition to having managers in the two buckets you described, are
there other things you insist upon, perhaps in terms of having a big piece of the
managers’ net worth in the fund, in terms of the fee structure, or other aspects of
the fund?
van Biema: It’s almost natural for our managers to have a huge percentage of
their net worth invested in their funds. If that’s not the case, then it’s definitely a
source of concern to us.
We basically ask the managers we interview how they want to be
remembered and what their goal is in running their business. The primary thing
we want to hear is something along the lines of, “I want to have a thirty-year
June 30, 2010 – Page 12 of 120
track record I’m proud of.” If they say anything other than that, and in particular
anything like being the biggest, it’s usually a huge red flag.
“…adding value on a few
hundred stocks, each of
which has 10 or 20 analysts
— and one or two of them
may actually be very
competent — makes things
much more difficult, than
adding value on a stock that
no one covers or few people
have heard of.”
The other thing is that value outperforms over the long term, we don’t
need to convince you of that. But many people don’t realize how true it is that
“small is beautiful.” We want our managers small. It is a lot easier to make a
great return with a few hundred million dollars than it is to make a great return
with a few billion dollars. That’s why guys like Royce are so remarkable,
because he has managed to continue to generate great returns with $20-30
billion, and that is rare. And frankly, we don’t even pretend that we’ll be able to
pick a bunch of Chuck Royces or Marty Whitmans or Seth Klarmans. The
probability of us picking a manager that is that good is probably relatively small.
It would be great if all of our managers were that good, but it’s not likely to
happen. But since they are managing modest amounts of money, we think they
will be able to generate attractive returns for us. They have a large universe of
stocks to pick from. The thing that the big guys will tell you is how much more
difficult business gets if you’re successful. It’s a curse of our industry: If you are
good and successful, you naturally tend to increase the size of your asset base,
unless you’re disciplined. For those guys that are comfortable in growing a
larger business, you also have to be comfortable with the fact that that your
universe of stocks in the U.S. is going to shrink from 8,000 to a few hundred.
And adding value on a few hundred stocks, each of which has 10 or 20 analysts
— and one or two of them may actually be very competent — makes things
much more difficult, than adding value on a stock that no one covers or few
people have heard of.
Kehoe: The other thing we look for [in managers], as an overall theme, is being
opportunistic. This includes managers who view cash as a strategic alternative,
don’t look at being fully invested, are market cap agnostic, and focus on
absolute returns.
MOI: Can you talk about your global and Asia funds and the similarities
between the managers. How are they implementing the value strategy, and what
differences do you see between your U.S. managers and your foreign managers?
van Biema: There’s definitely a difference. Value in the U.S. is a well-known
flavor, whereas in Asia a lot of our managers don’t even know they’re value
managers, or certainly didn’t know it before they met us. It’s a funny thing
because you’ll walk into a manager’s office in Hong Kong or Singapore, and
there on his shelf is a copy of Ben Graham’s Security Analysis or The Intelligent
Investor, or even in a couple of cases a copy of my own book, Value Investing:
From Graham to Buffett and Beyond. I don’t know whether they did a Google
search and went out and bought a copy, and prominently displayed it where I
could see it when I walked in, or it was just a coincidence.
In certain countries like India, Warren Buffett is a national hero, so in
India value investing is extremely well known. For many parts of Asia, no one
has really heard of him or paid that much attention to him.
What you’ll find in Asia is that you have these old families that have
been in business for many generations and have accumulated a lot of wealth.
They have a lot of different businesses; they’re basically small conglomerates.
Typically there’s one scion of the family with a bunch of sons, and he will
delegate one son to run the shipping business, another son to run the
June 30, 2010 – Page 13 of 120
construction business and there will be one son that will be in charge of
managing the assets. And what happens is that if this person is particularly
talented, other friends of the family have taken note and asked if they can add to
the family’s portfolio. Some of our money is with such organically grown
money management businesses. The family may be half or more of a fund, there
is some friends-of-the-family money, and in most cases we are the only investor
from the U.S.
We find these people through our network, and would not have found
them if we didn’t have such a strong network across the globe. These guys are
value investors, not because they went to Columbia or they were trained or read
Security Analysis, but they grew up running one of the family businesses from a
fundamental perspective. They understand how to run a good business, they
understand the capital structure and the management of cash flows. When they
start investing, they look for the things that U.S. value investors look for as well.
It’s kind of reassuring and neat to find these people because they have
organically grown into being value investors.
“These [Asian] guys are
value investors, not because
they went to Columbia or
they were trained or read
‘Security Analysis,’ but they
grew up running one of the
family businesses from a
fundamental perspective.
They understand how to run
a good business, they
understand the capital
structure and the
management of cash flows.”
The other thing about Asia, and why we think it is such a wonderful
opportunity, is that the entire world focuses on Asia as a growth opportunity,
including most Asian-based managers. So everyone is out there screening for
companies that growing at 15-20% or more. If a company is not growing at 1520% percent or more, it doesn’t even show up on people’s radar screens. What
we see with our managers is that there are these strong franchise-type businesses
growing at a miserable eight, ten or twelve percent — not bad if you’re sitting in
Europe or the U.S. Usually, those companies are the more established and better
managed companies. It is open territory for our managers. Last year those
companies were selling at 1x, 2x or 3x free cash flow; now they are selling
around 5x or 6x free cash flow. So they’re still great investments today.
MOI: What kinds of allocations are you targeting in your funds, for example in
terms of equity versus fixed income exposure? Do you seek out managers who
may apply a value mindset to other asset classes, such as real estate?
van Biema: Our managers invest in all publicly tradable securities, but their
focus is on equity and fixed income securities. There are certainly a lot of
opportunities out there, and there will be a opportunities to grow our business in
some of those niche areas. But at the moment we’ve chosen to diversify across
different geographies.
The next thing we’ll probably do is look at different asset classes and
interesting ways of putting small managers together in portfolios that are not
differentiated by geography alone. We have some other ideas on how to find
managers that would generate good returns, not just on a geographic basis. At
this point we still have a lot of geography to cover. Currently, we covering Asia,
the U.S. and developed Europe. We have been seriously looking at South
America. There is interest in some emerging markets as well.
We don’t want to have the same problem we try to avoid with our
current managers — we don’t want our funds to grow too big. We want to have
small managers, with reasonably sized funds. We don’t want to flood our
managers with capital because that’s self-defeating. So rather than building
bigger funds, we’ll close our funds and hopefully try to find other interesting
ways to invest our client money.
June 30, 2010 – Page 14 of 120
MOI: Do you ever take an equity stake in your managers?
van Biema: No, we don’t. We carefully examined going into the “seed”
business when we started. It might look like an attractive business, it’s exciting,
and a good marketing ploy, but if you’re trying to sell people on the concept of
“small,” then it’s a contradiction. The only way you make money with a seed
fund is by growing the managers’ asset size. The other problem is it takes a lot
of time and effort, and there are a lot of issues if the manager is successful. We
decided our way was a clean way to do things and not complicate the business
with seeding funds. We are frequently approached by individuals that want us to
seed them, which we don’t do.
MOI: Do you ever lend a hand to your managers who may not have the
infrastructure or may have questions about how they should comply with
regulations?
“One of the big concerns I’ve
heard from our Asian
managers is about inflation
throughout a number of the
Asian economies. One issue
when trying to predict
bubbles and understand the
macroeconomics of the
larger countries — China
certainly falls into this group
— is that you have so much
government intervention, you
can’t really make any
fundamental judgment.”
Sam Klier: It’s not so much compliance they are asking about, as most of their
operations are relatively small. We do insist on best practices when we do
operational due diligence calls or meetings. Our managers understand that we
have exposure to the way many other managers operate, and can therefore offer
valuable guidance. Couple this with the fact that we are typically a large part of
their investor base, these managers are very receptive to our ideas and
suggestions.
Kehoe: I think there’s one point that hasn’t been stressed enough — it’s
importance of the board [of advisors]. We have a board that consists of the most
successful and, perhaps, most long-standing value managers on the planet.
They’re not a titular board; they are fairly active. In the beginning they certainly
provided manager ideas — and still do in the vetting process and the ongoing
due diligence process.
MOI: Your view into the managers probably gives you insight into where value
guys are finding opportunities at any given time. About 30% of the “lookthrough” portfolio was in financials at yearend 2009. Can you give us any
insight into what your managers are seeing and where they are finding value?
Kehoe: The opportunity set has certainly thinned. The exposure to financials is
one where in the first quarter of 2009 and the last quarter of 2008, there were
some amazing opportunities, particularly on the fixed income side. Those
opportunities, in many respects, are still ongoing, perhaps toward the tail end,
but still ongoing. So that’s where some of the exposure is. There is also some
exposure to the equities of those financials. The opportunity set in general has
narrowed significantly since the first quarter.
van Biema: Your question is a good one because you have to be very careful
when you look at the sector charts. The financials number is typically one of the
most misleading numbers in terms of exposure. For example, we used to have
even more exposure to financials going into 2008, but most of those financials
were actually SPACs [special purpose acquisition vehicles]. So it looks like they
were in financials, but in reality they were in a cash-equivalent type of vehicle.
June 30, 2010 – Page 15 of 120
MOI: More recently there has been talk about a bubble in China. How do your
Asia managers view this risk and what steps are they taking to protect their
portfolios on the downside?
van Biema: One of the big concerns I’ve heard from our Asian managers is
about inflation throughout a number of the Asian economies. One issue when
trying to predict bubbles and understand the macroeconomics of the larger
countries — China certainly falls into this group — is that you have so much
government intervention, you can’t really make any fundamental judgment. To
the extent macroeconomics provided much insight in the past, it provides less
insight today. In terms of the way we approach these markets is very simple. We
watch carefully how invested our managers are and what they tell us in terms of
how easy or hard it is to find value opportunities. When value opportunities start
drying up, as they did at the end of 2007, it’s usually a pretty good indicator that
the market is overvalued. I don’t think that has happened quite yet in China, but
it is certainly moving in that direction.
“Typically, if a market is
overvalued, the regional
managers will be moving out
of that market. The local
manages will also be moving
to either more of a hedged or
cash position. If we see those
two things not lining up, then
we’ll start talking to the
managers, trying to figure
out why one manager might
be moving into Thailand
while the other is moving out
of Thailand.”
We make regular trips over there, and that will certainly be something
that we’ll be talking to our managers about as we make our circuit through Asia.
We’re fortunate to have several extremely experienced investors in Hong Kong
and Singapore who have spent a lot of time investing in those markets. We don’t
currently have any interest in the A share market. We don’t have any mangers
on the ground in mainland China. All of the managers that provide us with
Chinese exposure are either in Hong Kong or Singapore.
MOI: You’ve talked about the fact that you have the skill set in-house to
actually add value to your managers. Do you ever develop a macro view and
then ask your managers how they are positioning their portfolios?
van Biema: We’re mostly observers and would comment more on individual
positions. We actually look to our managers to give us local market intelligence.
In Asian markets, you have to be more cognizant of the macro environment than
you might in the U.S. It’s important to keep good information flow in local
markets. We have some country managers and some regional managers, and it
gives us two different perspectives on what’s going on within local markets.
Typically, if a market is overvalued, the regional managers will be moving out
of that market. The local manages will also be moving to either more of a
hedged or cash position. If we see those two things not lining up, then we’ll start
talking to the managers, trying to figure out why one manager might be moving
into Thailand while the other is moving out of Thailand. It’s a terrific source of
regional and local intelligence. And that’s one of the things we can bring to our
clients — give them insight into some of those markets, which are pretty
difficult for an outsider to understand.
MOI: Thank you very much for your time and insight.
June 30, 2010 – Page 16 of 120
Top Five “Magic Formula” Selections
CA Technologies (CA) – Owned by NWQ, Pzena, Legg Mason
Islandia, NY, 800-225-5224
www.ca.com
Technology: Software & Programming, Member of S&P 500
Trading Data
Price: $20.11 (as of 6/18/10)
52-week range: $16.12 - $24.15
Market value: $10.3 billion
Enterprise value: $9.3 billion
Shares out: 513.9 million
Consensus EPS Estimates
Month
Latest
Ago
This quarter
$0.43
$0.43
Next quarter
0.47
0.47
FYE 3/31/11
1.90
1.90
Ownership Data
Insider ownership: 25%
FYE 3/30/12
FYE 3/30/13
Insider buys (last six months): 0
LT growth
Insider sales (last six months): 2
Institutional ownership: 66%
EPS Surprise
5/13/10
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Cash from operations
Capex
Free cash flow
Cash & investments
Total current assets
Intangible assets
Total assets
Short-term debt
Total current liabilities
Long-term debt
Total liabilities
Common equity
3/31/04
3,332
3,107
2
(28)
(0.15)
580
1,279
126
1,153
1,902
3,388
5,411
10,709
2
2,485
2,298
5,999
4,710
# of
Ests
12
12
13
2.03
2.16
2.05
2.19
12
3
9.2%
14.0%
3
Actual
$0.34
Estimate
$0.36
Operating Performance and Financial Position
Fiscal Years Ended
3/31/05 3/31/06 3/31/07 3/31/08 3/31/09
3/31/10
3,583
3,772
3,943
4,277
4,271
4,353
3,361
3,273
3,360
3,637
3,666
3,794
140
166
214
854
1,127
1,247
24
159
118
474
663
763
0.05
0.27
0.22
0.92
1.28
1.47
588
581
544
514
513
515
1,527
1,380
1,068
1,103
1,212
1,360
608
1,238
447
256
288
884
919
142
621
847
924
476
3,125
1,865
2,280
2,796
2,712
2,583
4,164
2,738
3,956
4,468
4,149
3,990
5,660
6,352
6,122
5,522
6,089
6,817
11,396
10,520
11,517
11,756
11,241
11,838
826
28
11
361
621
15
4,031
3,357
4,007
4,278
4,002
3,588
1,810
1,838
2,572
2,221
1,287
1,530
6,354
5,766
7,863
8,047
6,879
6,855
5,042
4,754
3,654
3,709
4,362
4,983
Valuation
P/E FYE 3/31/10
P/E FYE 3/31/11
P/E FYE 3/30/12
P/E FYE 3/30/13
EV/ LTM revenue
14x
11x
10x
9x
2.1x
EV/ LTM EBIT
P / tangible book
7x
n/m
Greenblatt Criteria
LTM EBIT yield
LTM pre-tax ROC
13%
n/m
LTME
3/31/10
4,353
3,794
1,247
763
1.47
515
1,360
884
476
2,583
3,990
6,817
11,838
15
3,588
1,530
6,855
4,983
FQE
3/31/10
1,103
949
232
100
0.20
512
636
491
145
2,583
3,990
6,817
11,838
15
3,588
1,530
6,855
4,983
FQE
3/31/09
1,035
894
180
63
0.13
514
648
68
580
2,712
4,149
6,089
11,241
621
4,002
1,287
6,879
4,362
Ten-Year Stock Price Performance and Trading Volume Dynamics
$60
$50
$40
$30
$20
$10
$0
May 01
May 02
May 03
May 04
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 17 of 120
BUSINESS OVERVIEW
SELECTED OPERATING DATA
CA provides IT management and security software and
services to enterprise and government customers.
INVESTMENT HIGHLIGHTS
•
•
•
•
•
•
•
•
•
•
Largest independent vendor of “mainframe”
infrastructure software – CA’s core strength. The
software is designed to help customers manage and
secure their mainframes, i.e. powerful computers
used by big organizations for critical data processes.
Served market size expected to increase by $11
billion between 2008 and 2013. The $41 billion
forecast software market size in 2013 splits roughly
into a quarter each for the following applications:
mainframe (2008-13 CAGR: 1%), virtualization and
service automation (8% CAGR), identity and access
(9% CAGR), and service assurance (9% CAGR).
Blue-chip customer base includes the majority of
the Forbes Global 2000. 85% of revenue is
attributable to enterprises with $2+ billion revenue.
Smaller businesses represent a growth opportunity.
Independent vendor, which means CA does not
have a preferred hardware, software or operating
system platform. This may reduce technology risk
and ease customer acceptance for CA’s products.
400+ issued patents and 700 pending patent
applications in the U.S. and the European Union.
$8.2 billion revenue backlog at March 31, up 8%
y-y in constant currency ($4.6 billion of contracts
and $3.6 billion deferred revenue). FY10 bookings
were $5.0 billion (-6% y-y in constant currency).
Guiding for FY11 revenue, EPS, and cash from
operations growth of 3-5%, 5-11%, and 2-7% y-y,
based on constant currency and no material M&A.
$1.0 billion of net cash as of March 31.
Authorized $500 million share buyback in May.
Shares trade at 11% trailing FCF yield.
•
•
•
2
3
2006
5%
5%
3.8
2007
5%
-9%
3.9
2008
8%
-6%
4.3
2009
0%
-4%
4.3
2010
2%
5%
4.4
86%
8%
5%
88%
9%
3%
88%
9%
3%
88%
8%
3%
89%
7%
4%
7%
29%
-38%
6%
11%
-35%
9%
9%
-1%
0%
-7%
7%
3%
-18%
23%
53%
30%
17%
54%
29%
17%
52%
30%
18%
54%
30%
17%
55%
28%
17%
7%
2%
2%
6%
1%
6%
4%
15%
12%
3%
-3%
-6%
5%
-5%
3%
87%
15%
4%
4%
15%
6%
16.0
-1%
86%
14%
5%
3%
13%
6%
14.5
-6%
85%
12%
20%
11%
6%
5%
13.7
-6%
86%
11%
26%
16%
6%
5%
13.2
0%
87%
11%
29%
18%
7%
6%
13.8
0%
Stated after costs of licensing, maintenance and professional services.
Includes amortization of capitalized software costs.
Includes capitalized software development costs.
COMPARABLE PUBLIC COMPANY ANALYSIS
IBM
ORCL
HPQ
SYMC
BMC
CA
MV
($mn)
163,010
113,730
107,200
11,520
6,650
10,000
EV
($mn)
175,350
109,920
110,690
10,350
5,560
8,960
EV /
Rev.
1.8x
4.1x
.9x
1.7x
2.9x
2.1x
P/
Tang.
Book
n/m
78.3x
49.2x
n/m
n/m
n/m
This
FY
P/E
11x
12x
10x
10x
13x
10x
Next
FY
P/E
10x
11x
9x
8x
12x
10x
MAJOR HOLDERS
INVESTMENT RISKS & CONCERNS
•
1
FYE March 31
∆ revenue
∆ employees, ending
Revenue ($bn)
% of revenue by type:
Subscription and maintenance
Professional services
Software fees and other
Revenue growth by type:
Subscription and maintenance
Professional services
Software fees and other
% of revenue by geography:
U.S.
Europe
Other
Revenue growth by geography:
U.S.
Europe
Other
Selected items as % of revenue:
Gross profit 1
R&D
EBIT
Net income
D&A 2
Capex 3
Employees, ending (k)
∆ shares out (avg)
Key competitors are technology heavyweights
IBM, HP, Oracle, BMC and Symantec.
Software markets for distributed systems and
application management are more competitive
than CA’s traditional mainframe software market.
Rapid technological change, evolving industry
standards, and changes in customer requirements
and delivery methods represent challenges.
Succession planning. CA named Arthur Weinbach
chairman in May. Weinbach, a former chairman and
CEO of ADP, took over from Bill McCracken, who
retains his CEO position. Both are 67 years old.
Insiders <1% | Walter Haefner/Careal 24% | BlackRock 8% |
NWQ 7% | Hotchkis & Wiley 5% | T. Rowe 3% | Pzena 3%
RATINGS
VALUE Intrinsic value materially higher than market value?
DOWNSIDE PROTECTION Low risk of permanent loss?
MANAGEMENT Capable and properly incentivized?
FINANCIAL STRENGTH Solid balance sheet?
MOAT Able to sustain high returns on invested capital?
EARNINGS MOMENTUM Fundamentals improving?
MACRO Poised to benefit from economic and secular trends?







THE BOTTOM LINE
CA has a defensible position in enterprise IT management software markets due to competitive products and a large installed
base. The company’s software generally helps large organizations manage their technology assets to improve business
processes. Although competition and technological change present challenges, the need for better utilization of technology
infrastructure for business purposes should remain a long-term growth driver. Shares are cheap on an 11% trailing FCF yield.
June 30, 2010 – Page 18 of 120
…additional insight into CA:
SLIDES FROM COMPANY PRESENTATION, MAY 2010
June 30, 2010 – Page 19 of 120
Dell (DELL) – Owned by Southeastern, T Rowe
Round Rock, TX, 512-338-4400
www.dell.com
Technology: Computer Hardware, Member of S&P 500
Trading Data
Price: $14.04 (as of 6/18/10)
52-week range: $11.84 - $17.52
Shares out: 1,958.3 million
Month
Latest
Ago
This quarter
$0.30
$0.29
Next quarter
0.32
0.32
FYE 1/31/11
1.27
1.23
Ownership Data
FYE 1/31/12
FYE 1/30/13
LT growth
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
EBIT/capital employed
EPS Surprise
5/20/10
1/30/04
41,444
7,552
3,544
2,645
1.01
2,565
3,670
965
2,705
5,152
10,633
0
19,311
0
10,896
505
13,031
0
6,280
n/m
# of
Ests
30
29
32
1.47
1.46
1.45
1.49
31
5
11.8%
10.9%
3
Actual
$0.30
Estimate
$0.27
Fiscal Years Ended
1/28/05
2/3/06
2/2/07
2/1/08 1/30/09
1/29/10
49,121 55,788 57,420 61,133
61,101
52,902
9,018
9,891
9,516 11,671
10,957
9,261
4,206
4,382
3,070
3,440
3,190
2,172
3,018
3,602
2,583
2,947
2,478
1,433
1.18
1.47
1.14
1.31
1.25
0.73
2,509
2,403
2,255
2,223
1,980
1,954
5,821
4,751
3,969
3,949
1,894
3,906
515
747
896
831
440
367
5,306
4,004
3,073
3,118
1,454
3,539
9,807
9,070 10,298
7,972
9,092
11,008
16,897 17,794 19,939 19,880
20,151
24,245
0
0
155
2,428
2,461
5,768
23,215 23,252 25,635 27,561
26,500
33,652
0
65
188
225
113
663
14,136 16,173 17,791 18,526
14,859
18,960
505
625
569
362
1,898
3,417
16,730 19,205 21,196 23,732
22,229
28,011
0
0
0
0
0
0
6,485
4,047
4,439
3,829
4,271
5,641
n/m
n/m
n/m
n/m
n/m
n/m
Valuation
P/E FYE 1/29/10
P/E FYE 1/31/11
P/E FYE 1/31/12
P/E FYE 1/30/13
EV/ LTM revenue
19x
11x
9x
10x
0.4x
EV/ LTM EBIT
P / tangible book
9x
n/m
Greenblatt Criteria
LTM EBIT yield
LTM pre-tax ROC
11%
n/m
LTME
4/30/10
55,434
9,609
2,277
1,484
0.75
1,956
3,383
333
3,050
10,882
24,784
5,839
34,241
1,079
18,980
3,582
28,363
0
5,878
n/m
FQE
4/30/10
14,874
2,516
519
341
0.17
1,961
238
46
192
10,882
24,784
5,839
34,241
1,079
18,980
3,582
28,363
0
5,878
n/m
FQE
5/1/09
12,342
2,168
414
290
0.15
1,949
761
80
681
10,125
19,910
2,426
26,189
101
14,141
2,396
21,959
0
4,230
n/m
$60
$50
$40
$30
$20
$10
$0
May 01
May 02
May 03
May 04
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 20 of 120
BUSINESS OVERVIEW
SELECTED OPERATING DATA1
Dell provides IT products and services.
•
•
•
•
•
•
•
•
•
#1 supplier of PCs in the U.S. and the #2 supplier
globally, behind H-P. Dell also has strong positions
in other IT products (e.g. cloud infrastructure, iSCSI
storage), and is expanding into IT services markets.
Focused on growing higher-margin services,
which represented 17% of FY10 revenue (including
software-related services), up from 12% in FY08.
Dell uses the client business as an “anchor tenant,”
allowing it to win incremental services business
over time. Acquisitions, including Perot Systems in
2009, have also advanced its services footprint.
Michael Dell (45) returned as CEO in 2007 and
remains largest shareholder with 12%. Dell founded
his namesake company in 1984.
Long-term targets: 5-7% revenue CAGR, 7%+
EBIT CAGR and cash from operations>net income.
Guiding for revenue to increase 14-19% y-y in
FY11 “driven by the refresh of PCs in commercial
and public segments” and more enterprise offerings.
Non-GAAP EBIT is forecast to be up 18-23% y-y.
Maintains strong cash cycle dynamics. Cash
conversion cycle was -36 days in F1Q11 and FY10.
$6.2 billion of net cash as of April 30.
Bought 12 million shares for $200 million in F1Q.
Shares trade at 12% trailing FCF yield. Trailing
EBIT-to-enterprise value yield is also 12%.
•
•
•
•
Turnaround still ongoing, more than three years
after Michael Dell took over as CEO. Even with a
recent recovery in IT demand, gross margin
declined 70bps y-y in F1Q to 16.9%. Consumer
EBIT margin remains stuck around 1%.
Component market “is still pretty tight,” based
on CEO comment in June. Dell has suffered from
higher costs for memory components and LCDs.
Competition in IT services and enterprise
markets. Rivals include IBM, H-P, and CA.
Direct model evolving as Dell enters stores and
notebooks, as well as other gadgets, gain share
(consumers like to “touch” before buying).
MAJOR HOLDERS
CEO Dell 12% | Other insiders <1% | Southeastern 7% |
BlackRock 6% | Vanguard 3% | Mackenzie 2%
1
FYE January 31
∆ revenue
Revenue ($bn)
% of revenue by segment:
Large enterprise
Public
Small & medium business
Consumer
EBIT margin by segment:
Large enterprise
Public
Small & medium business
Consumer
Corporate
Total EBIT margin
% of revenue by product group:
Desktop PCs
Mobility
Software and peripherals
Servers and networking
Services
Storage
Revenue growth by product group:
Desktop PCs
Mobility
Software and peripherals
Servers and networking
Services
Storage
% of revenue from U.S.
Gross profit
R&D
Net income
D&A
Capex
Cash conversion cycle (days)
2008
6%
61.1
2009
0%
61.1
2010
-13%
52.9
YTD
4/30/11
21%
14.9
31%
24%
26%
19%
29%
25%
24%
21%
27%
27%
23%
23%
29%
26%
24%
22%
7%
9%
8%
1%
-1%
6%
6%
8%
9%
2%
-1%
5%
6%
9%
9%
1%
-2%
4%
7%
8%
9%
1%
-3%
3%
32%
29%
16%
11%
8%
4%
28%
30%
17%
11%
9%
4%
24%
31%
18%
11%
11%
4%
24%
31%
17%
12%
13%
4%
-2%
16%
10%
12%
-2%
8%
53%
-10%
4%
7%
0%
7%
10%
52%
-25%
-11%
-10%
-7%
5%
-18%
53%
13%
18%
11%
39%
53%
4%
n/a
19%
1%
5%
1%
1%
-36
-1%
18%
1%
4%
1%
1%
-25
-11%
18%
1%
3%
2%
1%
-36
-1%
17%
1%
2%
2%
0%
-36
1%
Dell changed its segment reporting structure in FY10. Figures reflect
acquisition of Perot Systems in November 2009.
IBM
HPQ
SNE
DELL
RATINGS
MV
($mn)
163,010
107,200
27,430
25,330
EV
($mn)
175,350
110,690
21,240
19,110
EV /
Rev.
1.8x
.9x
.3x
.3x
P/
Tang.
Book
n/m
49.2x
1.2x
n/m
This
FY
P/E
11x
10x
29x
10x
Next
FY
P/E
10x
9x
12x
9x







THE BOTTOM LINE
Dell is a globally recognized technology brand with capable, properly incentivized management. The company is addressing
challenges in the consumer products business amid slowing growth and greater competition. Some have questioned Dell’s
direct model, and the company has felt a need to partner with retailers to expand distribution. Nonetheless, we like Dell’s
long-term focus, strong FCF generation, share buybacks, cost leadership and growth prospects in enterprise/services markets.
June 30, 2010 – Page 21 of 120
…additional insight into Dell:
SLIDES FROM THE COMPANY’S ANALYST DAY PRESENTATION, JUNE 24, 2010
June 30, 2010 – Page 22 of 120
FY 2011 Outlook:
June 30, 2010 – Page 23 of 120
Eli Lilly (LLY) – Owned by Cap World, Primecap
Indianapolis, IN, 317-276-2000
www.lilly.com
Health Care: Major Drugs, Member of S&P 500
Trading Data
Price: $34.61 (as of 6/18/10)
52-week range: $32.02 - $38.00
Month
Latest
Ago
This quarter
$1.10
$1.11
Next quarter
1.13
1.14
FYE 12/31/10
4.50
4.54
Ownership Data
FYE 12/31/11
FYE 12/30/12
LT growth
EPS Surprise
4/19/10
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
12/31/03
12,583
9,907
3,262
2,561
2.37
1,077
3,647
1,707
1,940
3,713
8,769
110
21,688
197
5,561
4,688
11,924
0
9,765
52%
# of
Ests
17
16
20
4.46
3.88
4.43
3.86
19
16
-4.1%
-4.0%
9
Actual
$1.18
9x
8x
8x
9x
1.9x
EV/ LTM EBIT
P / tangible book
8x
6.2x
Greenblatt Criteria
Estimate
$1.10
Fiscal Years Ended
12/31/04 12/31/05 12/31/06 12/31/07 12/31/08
13,858
14,645
15,691
18,634
20,372
10,634
11,171
12,145
14,385
15,995
2,942
2,718
3,418
3,877
(1,308)
1,810
1,980
2,663
2,953
(2,072)
1.66
1.83
2.45
2.71
(1.89)
1,084
1,089
1,086
1,090
1,095
2,870
1,914
3,976
5,155
7,296
1,928
1,298
1,078
1,193
1,069
942
616
2,898
3,961
6,226
7,464
5,038
3,891
4,831
5,926
12,836
10,796
9,754
12,316
12,453
140
130
130
2,455
3,929
24,867
24,581
22,042
26,875
29,213
2,021
735
219
414
5,846
7,594
5,716
5,254
5,437
13,110
4,492
5,764
3,494
4,594
4,616
13,947
13,789
11,222
13,371
22,477
0
0
0
0
0
10,920
10,792
10,820
13,504
6,735
43%
34%
39%
39%
-14%
Valuation
P/E FYE 12/31/09
P/E FYE 12/31/10
P/E FYE 12/31/11
P/E FYE 12/30/12
EV/ LTM revenue
LTM EBIT yield
LTM pre-tax ROC
12/31/09
21,836
17,589
5,358
4,329
3.94
1,098
4,336
855
3,481
4,498
12,487
3,700
27,461
27
6,568
6,635
17,937
0
9,524
61%
LTME
3/31/10
22,275
17,721
5,545
4,264
3.88
1,100
5,206
823
4,383
4,758
12,252
4,032
27,198
20
5,658
6,661
16,738
0
10,460
57%
FQE
3/31/09
5,047
4,231
1,683
1,313
1.20
1,097
88
157
(69)
3,508
10,260
3,858
26,597
1,603
7,358
6,871
18,876
0
7,721
n/m
13%
57%
FQE
3/31/10
5,486
4,363
1,708
1,248
1.13
1,103
958
125
833
4,758
12,252
4,032
27,198
20
5,658
6,661
16,738
0
10,460
n/m
$120
$100
$80
$60
$40
$20
$0
May 01
May 02
May 03
May 04
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 24 of 120
BUSINESS OVERVIEW
SELECTED OPERATING DATA 1
Eli Lilly is a branded pharmaceutical company.
•
•
•
•
•
Strong neuroscience franchise includes Zyprexa, a
schizophrenia treatment (23% of 2009 revenue), and
Cymbalta, a drug for depression and other disorders
(14%). Other key franchises include endocrinology
(includes diabetes drug Humalog) and oncology
(incl. cancer drugs Alimta, Gemzar and Erbitux).
New drug pipeline includes three molecules at
regulatory review/pre-launch stage: Arxxant
(diabetic retinopathy), Axiron (testosterone
deficiency), and Livalo (lipidemia). Another eight
and 22 molecules are in phase 3 and 2, respectively.
Aims to save $1 billion in costs by yearend 2011,
including a cut in global headcount to 35,000 (down
13% from yearend 2009 headcount of 40,360).
Guiding for EPS of $4.35-4.50 in 2010 (up 1014% y-y) on “volume-driven revenue growth in the
mid-single digits.” Non-GAAP EPS is expected at
$4.40-4.55 (up 0-3% y-y), after adjusting for asset
impairments, restructuring and acquired R&D costs.
Shares trade at 13% earnings yield based on the
midpoint of 2010 GAAP EPS guidance. Dividend
yield is 6% based on the Q1 annualized dividend.
•
•
•
•
46% of Q1Q revenue from drugs with U.S.
patent expiry by 2013, including Zyprexa (October
2011), Cymbalta (2013), and Humalog (2013).
Faces U.S. patent litigation related to Alimta,
Cymbalta, Evista, Gemzar, and Strattera with
possibility of loss of “effective exclusivity for one
or more of these products prior to the end of 2012.”
U.S. health care reform “could negatively impact
revenue by $600-700 million” in 2011. 2010 EPS
guidance assumes a $0.35 negative reform impact,
including $0.27 due to higher governmental rebates.
Proposed changes to the taxation of non-U.S.
income may negatively affect Lilly.
PFE
GSK
AZN
LLY
EV
($mn)
146,020
103,260
65,580
41,060
EV /
Rev.
2.6x
2.4x
1.9x
1.8x
P/
Tang.
Book
n/m
n/m
n/m
6.1x
This
FY
P/E
7x
11x
7x
8x
2007
12%
16%
19%
-2%
18.6
2008
5%
6%
9%
0%
20.4
2009
7%
10%
7%
0%
21.8
1Q10
4%
6%
9%
-2%
5.5
42%
29%
13%
9%
5%
1%
41%
29%
14%
9%
5%
1%
41%
27%
16%
9%
6%
1%
41%
27%
17%
9%
5%
1%
54%
46%
54%
46%
56%
44%
55%
45%
26%
11%
5%
8%
6%
45%
23%
13%
6%
9%
7%
42%
23%
14%
8%
9%
7%
39%
22%
15%
10%
9%
7%
37%
9%
60%
40%
13%
430%
-1%
28%
35%
18%
26%
5%
14%
48%
13%
8%
8%
13%
57%
12%
14%
77%
19%
4%
22%
16%
6%
6%
24%
40.6
0%
79%
19%
24%
3%
-10%
6%
5%
n/m
40.5
0%
81%
20%
0%
29%
20%
6%
4%
19%
40.4
0%
80%
19%
1%
30%
23%
5%
2%
27%
39.4
1%
Acquisitions include Icos in January 2007 and ImClone in November 2008.
2008 figure mainly reflects the in-process research and development expense
of $4.69 billion associated with the ImClone acquisition.
3
Excludes special items such as restructuring and asset impairment charges,
but includes acquired in-process R&D expenses.
2
MAJOR HOLDERS
Insiders <1% | Lilly Endowment 12% | Cap World 7% |
Primecap 6% | Wellington 6% | Vanguard 3% | Cap Re 2%
RATINGS
MV
($mn)
118,090
89,860
64,640
39,140
1
FYE December 31
2005 2006
3%
3%
∆ volume
5%
7%
∆ revenue, ex. currency
6%
7%
∆ revenue
-4%
-3%
Revenue ($bn)
14.6
15.7
% of revenue by category:
Neuroscience
42%
43%
Endocrinology
32%
32%
Oncology
12%
13%
Cardiovascular
4%
3%
Animal health
6%
6%
Other pharmaceuticals
4%
3%
U.S.
53%
55%
International
47%
45%
% of revenue by major product:
Zyprexa
29%
28%
Cymbalta
5%
8%
Alimta
3%
4%
Humalog
8%
8%
Cialis
1%
1%
Other
54%
50%
Revenue growth by major product:
Zyprexa
-5%
4%
Cymbalta
624%
94%
Alimta
225%
32%
Humalog
9%
8%
Cialis
30%
27%
Gross profit
76%
77%
R&D
21%
20%
Acq. in-process R&D 2
0%
0%
EBIT 3
25%
26%
Net income
14%
17%
D&A
5%
5%
Capex
9%
7%
Effective tax rate
26%
22%
Employees, ending (k)
42.6
41.5
0%
0%
Next
FY
P/E
6x
11x
7x
8x







THE BOTTOM LINE
Similar to other branded pharma companies such as Pfizer (PFE) or AstraZeneca (AZN), Eli Lilly faces near-term patent
expirations on key drugs. An additional concern is the negative impact from U.S. health care reform, which should reduce
2010 EPS by an estimated 5-10%. Despite this negative impact, 2010 EPS should grow year-on-year, putting the shares on a
13% earnings yield. Given a deep new drug pipeline, cost-cutting efforts and potential positive aspects of U.S. health reform
(broader access to drugs), the market may be too pessimistic regarding Eli Lilly’s ability to sustain earnings at current levels.
June 30, 2010 – Page 25 of 120
…additional insight into Eli Lilly:
SLIDES FROM COMPANY PRESENTATION, APRIL 2010
June 30, 2010 – Page 26 of 120
…additional insight into Eli Lilly:
The following slide reflects the new molecular entities that comprise Eli Lilly’s development pipeline. Included is the lead
indication for each molecule; excluded are earlier indications for pipeline molecules and new indications or line extensions of
currently-marketed products. For competitive reasons, some pipeline molecules are not identified; instead, the therapeutic
area in which the molecule is being evaluated is listed on the slide.
Abbreviations:
ASO
antisense oligonucleotide
BPH
benign prostatic hyperplasia
CRD
chronic renal disease
DLBCL diffuse large b-cell lymphoma
DR
diabetic retinopathy
NHL
non-Hodgkin’s lymphoma
NSCLC non small cell lung cancer
RA
rheumatoid arthritis
Other information:
• A green or red arrow indicates a change since the company’s last pipeline update.
• “Achieved milestone” means that first patient visit has occurred in a trial at the given phase or that a molecule has
been submitted for regulatory review.
• “Attrition” means that a molecule is no longer in clinical development.
• There is no significance to the position a molecule occupies in a column or set of columns within a phase.
Source:
Eli Lilly, http://www.lilly.com/pdf/Pipeline_Slide.pdf
June 30, 2010 – Page 27 of 120
GigaMedia (GIGM) – Owned by Martin Currie, Acadian
Taipei, Taiwan, 886-2-351-1107
www.gigamedia.com.tw
Technology: Software & Programming
Trading Data
Price: $2.19 (as of 6/18/10)
52-week range: $2.00 - $6.02
Market value: $119 million
Enterprise value: $46 million
Month
Latest
Ago
This quarter
$0.01
n/a
Next quarter
0.04
n/a
FYE 12/31/10
0.10
n/a
# of
Ests
2
2
2
Valuation
P/E FYE 12/31/08
P/E FYE 12/31/10
P/E FYE 12/31/11
P/E FYE 12/30/12
EV/ LTM revenue
4x
22x
8x
n/a
0.3x
Ownership Data
FYE 12/31/11
FYE 12/30/12
1
n/a
EV/ LTM EBIT
P / tangible book
5x
1.1x
LT growth
EPS Surprise
5/27/10
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
12/31/02
2,556
235
(895)
(638)
(12.72)
50
(5)
305
(310)
2,097
2,878
267
4,696
93
800
0
1,076
0
3,620
-110%
0.28
n/a
n/a
n/a
10.0%
10.0%
Actual
$0.02
Greenblatt Criteria
2
Estimate
n/a
Fiscal Years Ended
12/31/03 12/31/04 12/31/05 12/31/06 12/31/07
3,280
33
44
74
152
413
17
27
62
126
(575)
2
4
18
37
(485)
2
6
31
39
(9.67)
0.02
0.12
0.29
0.63
50
50
50
51
53
218
2
12
30
56
66
3
3
3
5
152
(0)
9
27
51
2,183
48
62
36
80
2,640
68
70
64
115
211
38
32
79
111
4,069
126
114
183
284
0
0
0
13
33
819
23
11
45
92
0
0
0
0
0
1,000
30
13
49
103
0
0
0
0
0
3,070
96
101
134
181
-117%
3%
43%
>100%
n/m
LTM EBIT yield
LTM pre-tax ROC
12/31/08
190
155
38
44
0.58
54
51
9
42
99
129
116
317
15
76
0
88
0
229
n/m
LTME
9/30/09
164
127
10
12
0.17
54
n/a
n/a
n/a
96
130
122
330
22
85
0
97
0
233
n/m
FQE
9/30/08
46
37
6
12
0.07
54
n/a
n/a
n/a
104
146
115
326
30
98
0
106
0
220
n/m
22%
n/m
FQE
9/30/09
37
28
(3)
(2)
(0.04)
55
n/a
n/a
n/a
96
130
122
330
22
85
0
97
0
233
n/m
$30
$25
$20
$15
$10
$5
$0
May 01
May 02
May 03
May 04
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 28 of 120
BUSINESS OVERVIEW
GigaMedia provides software to the online gaming industry
and operates online games in the Greater China region.
GigaMedia was incorporated in Singapore in 1999, went
public on Nasdaq in 2000 and is headquartered in Taiwan.
FYE December 31
∆ revenue
Revenue ($mn)
Gaming software2
Online games
Revenue growth by segment:
Gaming software
Online games
Gross margin by segment:
Gaming software
Online games
Total gross margin
% of revenue by server location:
Canada
Taiwan
China/Hong Kong
S&M
R&D
G&A
EBIT3
Net income
D&A
Capex4
•
•
•
•
•
•
•
Sold 60% interest in software business for $100
million to French-based Mangas Gaming in May.
GigaMedia “will continue to hold the remaining
40%” with a put option to sell all or part to Mangas
beginning in 2013. It will report the unit’s results
under equity accounting beginning in 2Q10.
Mangas deal to enable GigaMedia’s Everest
Poker platform to “capture long-term growth
opportunities in Europe.” Mangas, which is partly
owned by the Monaco government, offers gambling
to over four million users in 25+ countries. Everest
recently received online poker licenses in France
and is expected to start operating there in June 2010.
Virtually 100% of gaming software revenue is
derived from license agreement with UIM, an
online gaming provider offering poker and casino
games, including the popular Everest platform.
GigaMedia earns fees based on UIM’s receipts
from using the licensed software mainly in Europe.
Online games revenue is mainly sourced from
Freestyle and Mahjong. Freestyle is an online
sports game available in China, while Mahjong is
offered in Taiwan and Hong Kong.
Recent momentum in online games includes
partnerships with Blizzard Entertainment and
Viacom. Game launches are planned for 2010/11.
Strong balance sheet, with $84 million of cash and
marketable securities, and $23 million of debt at
March 31 (excluding $100 million from Mangas).
Valuation implies negative enterprise value,
adjusted for cash received from Mangas deal.
•
•
•
Use of cash. Management has made no indication
of returning cash to shareholders. Reinvestment into
growing the online games business in Asia appears
to be the preferred strategy. This carries the risk of
value destruction, especially given recent poor
results in online games, including write-downs.
Low barriers to entry business, with changing
consumer preferences related to games’ popularity.
This is especially true for the online games segment.
UIM dependence. The worldwide, nonexclusive
license agreement with UIM represents the majority
of GigaMedia profits. The contract expires in 2014.
2006
227%
74
2007
106%
152
2008
25%
190
2009
-16%
160
YTD
3/31/10
-17%
37
75%
25%
78%
22%
76%
24%
71%
29%
70%
30%
144%
n/m
116%
75%
22%
39%
-22%
3%
-19%
-11%
86%
80%
84%
86%
72%
83%
84%
73%
82%
82%
64%
77%
84%
66%
79%
75%
23%
2%
78%
12%
10%
76%
11%
13%
59%
13%
12%
n/a
n/a
n/a
38%
7%
15%
24%
24%
8%
7%
1%
40%
5%
14%
25%
25%
4%
6%
4%
39%
7%
13%
21%
18%
4%
9%
2%
50%
9%
19%
-1%
-30%
6%
9%
1%
40%
10%
19%
10%
4%
3%
9%
1%
1
Based on U.S. GAAP figures.
Ultra Internet Media (UIM) represents virtually 100% of gaming software
revenue. Although GigaMedia does not have an equity interest in UIM, it
consolidates it in its financials in accordance with FASB Interpretation No. 46R.
3
Excludes impairment losses. 4 YTD figure is an estimate.
2
•
Majority of online games are licensed, which
makes GigaMedia dependent on third parties for
such popular titles as Freestyle in China.
MAJOR HOLDERS
CEO Wang 4% | Other insiders 4% | Best Method 20% |
Martin Currie 6% | Acadian 4% | RenTech 2%
NTES
SNDA
GA
PWRD
GIGM
RATINGS
MV
($mn)
4,050
2,500
1,610
1,150
110
EV
($mn)
2,920
860
870
870
40
EV /
Rev.
4.8x
1.1x
4.8x
2.5x
.2x
P/
Tang.
Book
3.6x
2.1x
1.8x
3.2x
1.0x
This
FY
P/E
13x
16x
13x
7x
20x
Next
FY
P/E
10x
13x
11x
6x
7x







THE BOTTOM LINE
GigaMedia closed a major deal with French gaming company Mangas in May, which partly monetized its gaming software
business, while giving it a strong partner in Europe. The shares’ low valuation likely overstates reinvestment risk related to
~$150 million of net cash (greater than market cap), which is being used for growing the online games business in Asia.
June 30, 2010 – Page 29 of 120
PRGX Global (PRGX) – Owned by Blum, JANA, RenTech
Atlanta, GA, 770-779-3900
www.prgx.com
Services: Business Services
Trading Data
Price: $4.43 (as of 6/18/10)
52-week range: $2.48 - $6.98
Month
Latest
Ago
This quarter
$0.05
$0.11
Next quarter
0.11
0.14
FYE 12/31/10
0.23
0.38
# of
Ests
1
1
1
Valuation
P/E FYE 12/31/09
P/E FYE 12/31/10
P/E FYE 12/31/11
P/E FYE 12/30/12
EV/ LTM revenue
7x
19x
7x
n/a
0.5x
Ownership Data
FYE 12/31/11
FYE 12/30/12
2
n/a
EV/ LTM EBIT
P / tangible book
6x
10.3x
LT growth
EPS Surprise
5/3/10
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
12/31/03
367
142
(189)
(161)
(26.31)
6
29
12
17
27
124
202
426
32
122
122
253
0
173
-523%
0.61
n/a
0.62
n/a
20.0%
20.0%
Actual
-$0.09
Greenblatt Criteria
1
Estimate
-$0.02
Fiscal Years Ended
12/31/04 12/31/05 12/31/06 12/31/07 12/31/08
351
252
226
227
196
134
84
64
87
70
9
(203)
(7)
8
26
(72)
(208)
(22)
13
19
(12.23)
(34.03)
(3.78)
(0.62)
0.83
6
6
7
12
22
9
(10)
23
28
17
12
5
1
4
3
(3)
(15)
22
24
13
13
12
30
42
27
124
107
127
83
63
201
29
28
26
24
359
162
179
122
99
0
1
1
8
5
118
116
122
66
53
123
140
148
38
14
255
265
283
120
76
0
0
0
0
0
104
(102)
(105)
2
23
33%
-2413%
n/m
n/m
n/m
LTM EBIT yield
LTM pre-tax ROC
12/31/09
180
63
21
15
0.65
23
18
6
13
33
68
29
111
3
50
11
69
0
41
n/m
LTME
3/31/10
182
62
17
10
0.42
23
14
6
8
24
56
29
100
3
42
11
61
0
39
>100%
FQE
3/31/09
39
13
3
2
0.08
22
0
1
(0)
25
53
23
88
5
41
13
62
0
25
n/m
18%
>100%
FQE
3/31/10
41
11
(1)
(3)
(0.15)
24
(4)
2
(5)
24
56
29
100
3
42
11
61
0
39
n/m
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
May 01
May 02
May 03
May 04
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 30 of 120
BUSINESS OVERVIEW
PRGX Global provides recovery audit services to companies
and government agencies with large transaction volumes.
•
•
•
•
•
•
•
•
“Pay-for-performance” model. Under its recovery
audit contracts, PRGX receives a percentage of
overpayments it identifies and clients recover
(average of $1+ billion p.a. identified in 2006-09).
Existing clients include mainly retailers and
wholesalers. PRGX serves over 70% of top 50
global retailers. According to the company, retailers
represent a $3 billion market opportunity across
recovery audit, analytics and consulting services.
Expanding into “profit discovery services” which
include business analytics and advisory services.
These are grouped under the “new services”
segment, which also includes the healthcare vertical.
U.S. healthcare recovery audit is $0.9-1.5 billion
market. The company is a subcontractor to CMS
(federal agency administering Medicare), but does
not expect “any meaningful revenue” from
Medicare auditing until the “second half of 2010.”
“Most client relationships are longer than five
years.” Barriers to entry are higher in contract
compliance auditing versus simpler disbursement
audits for duplicate payments and statement errors.
JANA Partners filed a 13D in 2009 “to reserve its
right to take steps to bring about changes to increase
shareholder value, which may include changes in
the board composition, strategy and future plans” of
PRGX. JANA initially reported a stake in 2006.
Strong balance sheet with $9 million of net cash.
PRGX also has $47 million of federal NOLs which
expire through 2029 and have certain usage limits.
Shares trade at 17% trailing EBIT-to-EV yield.
•
2007
1%
227
2008
-14%
196
2009
-8%
180
YTD
3/31/10
5%
41
63%
26%
11%
71%
27%
2%
68%
29%
3%
60%
36%
4%
n/a
n/a
-4%
-9%
-12%
-2%
-11%
47%
31%
8%
56%
-8%
20%
36%
14%
-152%
-8%
19%
33%
12%
-65%
-9%
15%
22%
15%
-74%
-10%
6%
38%
29%
8%
-3%
3%
2%
84%
36%
22%
13%
10%
3%
2%
79%
35%
24%
11%
9%
3%
3%
5%
28%
31%
-3%
-8%
5%
4%
6%
Based on continuing operations. Segment data prior to 2007 is not available
in comparable reporting structure because of a change in reporting in 4Q09.
2
Recovery audit businesses involve the review of client accounts payable
disbursements to identify and recover overpayments (excluding for the
healthcare industry). “New services” represents services to healthcare firms.
3
Excludes stock-based compensation, restructuring and other special items.
4
The company converted preferred shares and convertible debt into common
stock which led to the rise in average shares outstanding in 2007/08.
•
•
•
•
Competes against clients’ internal recovery audit
departments, which can increase recoveries via
process improvements and installation of software.
Management turnover. Romil Bahl (41) is the
fourth CEO since 2005. The CFO changed in 2009.
Weak retail industry represents headwind. 1Q10
revenue was down 1% on constant currency basis.
Wal-Mart represented 12% of revenue in 2009.
MAJOR HOLDERS
•
1
FYE December 31
∆ revenue
Revenue ($mn)
% of revenue by segment: 2
Recovery audit - Americas
Recovery audit - Europe/Asia-Pacific
New services
Adjusted EBITDA margin by segment: 3
New services
Corporate
Total adjusted EBITDA margin
Gross profit
SG&A
EBIT
Net income
D&A
Capex
∆ shares out (avg) 4
Will ambitious growth plan create value? PRGX
aims to double EBITDA over next five years, driven
in part by acquisitions, as it expands into the
healthcare industry and consulting services. The
plan calls for $15-20 million of incremental
investment (half of which expensed) over next 18
months. Higher SG&A contributed to lower 1Q10
EBIT. Potential M&A raises execution risk.
Risk of becoming a victim of its own success. As
client relationships mature, the dollar volume of
overpayments recovered typically begins to decline.
CEO 2% | Other insiders 3% * | Blum 15% | Weintraub 9% |
Discovery Group 8% | Jana 7% | RenTech 5% | Prescott 3%
*
Excludes shares attributable to director Lind who represents Blum Capital.
RATINGS







THE BOTTOM LINE
Recovery audit specialist PRGX Global has historically aided retailers in recovering overpayments resulting from complex
purchasing processes and human error. More recently, the company has expanded into other verticals, especially health care.
PRGX is also a subcontractor to CMS, the U.S. agency administering Medicare, with management expecting “meaningful”
revenue related to Medicare to commence in the second half of this year. The company generated adjusted EBITDA of $27
million in 2009, yet trades at an enterprise value of roughly $100 million. We find this quite attractive given the low capital
intensity of the business, recurring revenue characteristics, and sizable long-term growth prospects.
June 30, 2010 – Page 31 of 120
…additional insight into PRGX Global:
CALCULATION of EBITDA and ADJUSTED EBITDA, 2008-2009
Source: PRGX Global, http://bit.ly/cGkEU4
U.S. CLAIM CATEGORY BREAKDOWN, 2004 vs. 2007
MARKET OPPORTUNITY IN POST-PAYMENT HEALTHCARE RECOVERY AUDIT
June 30, 2010 – Page 32 of 120
…additional insight into PRGX Global:
SLIDES FROM COMPANY PRESENTATION, MARCH 2010
June 30, 2010 – Page 33 of 120
Other “Magic Formula” Candidates
Aeropostale (ARO) – Owned by Hussman, Vinik
New York, NY, 646-485-5410
www.aeropostale.com
Services: Retail (Apparel), Member of S&P MidCap 400
Trading Data
Price: $29.68 (as of 6/18/10)
52-week range: $19.10 - $32.24
Month
Latest
Ago
This quarter
$0.48
$0.47
Next quarter
0.75
0.74
FYE 1/31/11
2.83
2.77
Ownership Data
FYE 1/31/12
FYE 1/30/13
LT growth
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Common equity
1/31/04
735
230
88
54
0.41
123
104
36
68
138
212
0
307
0
72
0
121
186
93%
EPS Surprise
5/20/10
# of
Ests
29
29
28
3.07
3.45
3.02
3.34
30
6
14.4%
14.2%
9
Actual
$0.48
Estimate
$0.46
Fiscal Years Ended
1/29/05 1/28/06
2/3/07
2/2/08 1/31/09
964
1,204
1,413
1,591
1,886
320
362
455
553
654
136
135
168
203
248
84
84
107
129
149
0.65
0.67
0.88
1.15
1.47
125
124
120
111
100
137
144
177
171
202
48
58
45
82
83
89
86
133
89
119
182
225
276
112
229
280
339
399
285
394
3
3
1
0
0
406
504
581
514
658
0
0
0
0
0
97
126
165
197
175
0
0
0
0
0
168
219
269
317
303
238
285
312
197
355
>100%
100% >100% >100%
>100%
1/30/10
2,230
847
383
230
2.27
100
334
54
281
347
530
0
792
0
242
0
358
435
>100%
Valuation
P/E FYE 1/30/10
P/E FYE 1/31/11
P/E FYE 1/31/12
P/E FYE 1/30/13
EV/ LTM revenue
13x
10x
10x
9x
1.1x
EV/ LTM EBIT
P / tangible book
6x
6.1x
Greenblatt Criteria
LTM EBIT yield
LTM pre-tax ROC
LTME
5/1/10
2,286
882
404
243
2.45
98
322
60
262
313
486
0
758
0
193
0
305
453
>100%
FQE
5/2/09
408
148
53
32
0.31
101
20
9
11
248
414
0
677
0
153
0
280
397
n/m
16%
>100%
FQE
5/1/10
464
183
75
45
0.48
94
7
15
(8)
313
486
0
758
0
193
0
305
453
n/m
$35
$30
$25
$20
$15
$10
$5
$0
May 03
May 04
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 34 of 120
BUSINESS OVERVIEW
Aeropostale is a mall-based retailer of casual apparel and
accessories selling own-brand merchandise solely through
two store concepts (including related e-commerce sites):
Aeropostale stores target 14-17 year-old kids. As of January
30, 2010, there were 894 stores in the U.S. and 44 in Canada.
P.S. from Aeropostale stores target 7-12 year-old kids. As of
January 30, 2010, there were 14 stores in the U.S.
•
•
•
•
•
•
•
•
•
•
•
*
#1 share of specialty apparel for 14-17 year-old
girls and #3 for 14-17 year-old guys in 2009, up
from #5 and #8 in 2005, respectively.* Girls’ share
is ahead of Forever 21 (private) and American Eagle
(AEO). Guys’ share is behind American Eagle and
Abercrombie & Fitch-owned Hollister (ANF).
Proven retailing concept. FY10 marked the 13th
consecutive year of positive same-store sales
growth. Recent returns on tangible equity are 50%+.
Potential to raise existing store productivity? 170
stores, representing less than 20% of store base,
operate at $800+ sales per square foot compared to
total chain average of “only” $624 per square foot.
Launched “P.S. from Aeropostale” concept for
“tweens” (7-12 year-olds) in 2009. Management
sees 500+ store potential in the U.S., a $14+ billion
“tween” market growing faster than total market.
New store investment averages $463k, based on
Aeropostale stores opened in FY10 (capex adjusted
for landlord contributions and initial inventory at
cost, net of payables). Average size is 3,600 sq ft.
Signed first international licensing agreement in
FY09, covering five Aeropostale-branded stores
opened by a licensee in the United Arab Emirates.
E-commerce revenue increased 42% y-y in
F1Q11 to $24 million (5% of company revenue).
Guiding for EPS of $0.45-0.48 (up 18-26% y-y) in
F2Q11. FY11 capex is expected at $90 million
(including 25 new Aeropostale and 30 P.S. stores).
$313 million of cash and no debt as of May 1.
Repurchased 1.3 million shares for $37 million in
F1Q11 ($28/share). As of May 1, $166 million
remains under the $850 million share buyback plan.
Shares trade at 16% trailing EBIT-to-EV yield
and 9% trailing free cash flow yield.
Source: NPD, August 2009.
MAJOR HOLDERS
Insiders <1% | Barclays 13% | BlackRock 9% | FMR 7% |
Vanguard 6% | Hussman 6% | State Street 3% | Vinik 3%
FYE January 31
2006
4%
∆ same-store sales
20%
∆ stores, ending
2%
∆ sales / avg sq ft
-6%
∆ inventory / sq ft, ending
25%
∆ revenue
Revenue ($bn)
1.2
Women’s
72%
Men’s
28%
Gross profit
30%
EBIT
11%
Net income
7%
D&A
2%
Capex
5%
Selected operational metrics:
Stores, ending
671
Avg square footage (mn)
2.4
Sales/avg square foot ($)
534
Return on tangible equity 1
32%
Tangible equity to assets
57%
-1%
2007
2%
11%
2%
0%
17%
1.4
2008
3%
12%
0%
20%
13%
1.6
2009
8%
10%
5%
-17%
19%
1.9
2010
10%
4%
9%
-2%
18%
2.2
YTD
5/1/10
8%
5%
6%
-11%
14%
0.5
72%
28%
72%
28%
71%
29%
70%
30%
71%
29%
32%
12%
8%
2%
3%
35%
13%
8%
2%
5%
35%
13%
8%
2%
4%
38%
17%
10%
2%
2%
39%
16%
10%
3%
3%
742
2.6
543
36%
55%
-3%
828
2.8
545
51%
46%
-7%
914
3.1
572
54%
47%
-10%
952
3.4
624
58%
54%
-1%
962
3.5
125
43%
59%
-7%
•
•
•
•
“P.S.” brand success uncertain. A previous
attempt to enter a new age segment failed: The
Jimmy’Z brand, launched in 2005, was shut in ‘09.
Record margins may not be sustainable given
fickle fashion trends, competition, and low barriers.
Dependence on mall traffic may hurt if economic
challenges persist and mall traffic remains sluggish.
Meads (58) and Johnson (52) became co-CEOs in
February after CEO Geiger (64) resigned. Geiger
remains chairman, a role he has held since 1996.
GPS
ANF
AEO
PLCE
ARO
RATINGS
MV
($mn)
13,140
2,860
2,500
1,280
2,770
EV
($mn)
10,660
2,340
1,970
1,060
2,460
EV /
Rev.
.7x
.8x
.6x
.6x
1.1x
P/
Tang.
Book
2.8x
1.6x
1.7x
2.0x
6.1x
This
FY
P/E
11x
18x
12x
14x
10x
Next
FY
P/E
10x
12x
10x
13x
10x







THE BOTTOM LINE
Aeropostale has come a long way since Macy’s established the brand as a department store private label initiative in the early
1980s. This is a well-managed teen apparel retailer with consistently positive same-store sales growth and high returns on
capital employed. A key area of risk (and opportunity) is the company’s entry into the “tween” market through aggressive
expansion of “P.S.” brand stores. While some may be enticed by a mid-teens EBIT-to-EV yield, we are concerned about both
reinvestment risk and sustainability of recent record-high financial results in an inherently fickle fashion industry.
June 30, 2010 – Page 35 of 120
…additional insight into Aeropostale:
STORE COUNT, as of January 31, 2010
Aéropostale Stores
P.S. from Aéropostale Stores
Total Number of Stores
16
8
17
77
15
10
4
54
27
2
5
34
23
12
8
10
15
26
19
4
33
16
8
16
3
26
4
5
7
25
3
7
47
38
7
7
54
4
2
15
2
22
72
12
2
26
20
6
18
1
—
—
—
1
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
7
—
—
4
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
16
8
17
78
15
11
4
54
27
2
5
34
23
12
8
10
15
26
19
4
33
17
8
16
3
26
4
5
7
32
3
7
51
38
7
7
54
4
2
15
2
22
72
12
2
26
20
6
18
1
6
4
1
1
1
31
938
—
—
—
—
—
—
14
6
4
1
1
1
31
952
United States:
Alabama
Arkansas
Arizona
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Massachusetts
Maryland
Maine
Michigan
Minnesota
Mississippi
Missouri
Montana
North Carolina
North Dakota
Nebraska
New Hampshire
New Jersey
New Mexico
Nevada
New York
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Canada
Alberta
British Columbia
New Brunswick
Newfoundland
Nova Scotia
Ontario
Total
Source: Company.
June 30, 2010 – Page 36 of 120
…additional insight into Aeropostale:
SLIDES FROM COMPANY PRESENTATION, JUNE 2010
June 30, 2010 – Page 37 of 120
America’s Car-Mart (CRMT) – Owned by Alydar, Ranger, Royce
Bentonville, AR, 479-464-9944
www.car-mart.com
Services: Retail (Specialty Non-Apparel)
Trading Data
Price: $24.99 (as of 6/18/10)
52-week range: $17.21 - $27.32
Month
Latest
Ago
This quarter
$0.65
$0.65
Next quarter
0.62
0.62
FYE 4/30/11
2.62
2.57
Ownership Data
FYE 4/29/12
FYE 4/29/13
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
4/30/04
176
91
25
16
1.31
11
5
2
3
1
0
0
102
1
0
26
36
0
66
>100%
# of
Ests
5
5
5
3.03
3.12
2.89
3.12
4
1
LT growth
15.0%
15.0%
2
EPS Surprise
6/3/10
Actual
$0.62
Estimate
$0.59
Fiscal Years Ended
4/30/05 4/30/06 4/30/07 4/30/08 4/30/09
4/30/10
205
234
240
275
299
339
103
115
115
130
143
166
29
27
6
23
28
42
18
17
4
15
18
27
1.49
1.39
0.35
1.26
1.52
2.27
12
12
12
12
12
12
4
(2)
(10)
8
3
14
1
6
5
3
3
3
3
(8)
(15)
6
1
12
1
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
117
144
178
174
201
220
1
1
2
0
3
2
0
0
0
0
0
0
23
29
44
41
40
30
33
40
58
50
63
63
0
0
0
0
0
0
85
103
119
124
137
157
>100%
>100%
39%
>100%
>100%
>100%
Valuation
P/E FYE 4/30/10
P/E FYE 4/30/11
P/E FYE 4/29/12
P/E FYE 4/29/13
EV/ LTM revenue
11x
10x
8x
8x
0.9x
EV/ LTM EBIT
P / tangible book
7x
1.6x
Greenblatt Criteria
LTM EBIT yield
LTM pre-tax ROC
14%
>100%
LTME
4/30/10
339
166
45
40
2.26
12
n/a
n/a
n/a
0
0
0
249
0
0
35
70
0
178
>100%
FQE
4/30/10
89
44
11
7
0.62
12
n/a
n/a
n/a
0
0
0
249
0
0
35
70
0
178
n/m
FQE
4/30/09
78
37
8
5
0.43
12
6
1
6
0
0
0
218
0
0
36
66
0
153
n/m
$30
$25
$20
$15
$10
$5
$0
May 01
May 02
May 03
May 04
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 38 of 120
BUSINESS OVERVIEW
America’s Car-Mart operates 98 used-car dealerships mainly
in small cities (<50,000 population) in the south-central U.S.
•
•
•
•
•
•
•
•
•
•
Focuses on “buy here/pay here” segment of the
used car market. The company sells older model
used vehicles and provides financing for customers.
Customers typically have limited financial resources
and do not qualify for conventional financing.
Decentralized business model with each dealership
responsible for buying and selling vehicles, making
credit decisions, and collecting loans. Corporate
office establishes standards and exercises oversight.
Average car sales price is ~$8,000-9,000. At this
price, the company is able to keep customer loans
short (average of 28 months) and periodic payments
low (made weekly in person at the dealership).
Purchases vehicles mainly through wholesalers,
individuals and from auctions. Purchased vehicles
generally cost $3,000-6,000 and are 5-10 years old.
Typical models: Ford (Taurus, Explorer, Ranger),
Pontiac Grand Prix, and Dodge Ram Pickup.
Associate incentive compensation is tied to loan
collection results. Loans have average down
payments of ~7% and annual interest charges
ranging from 6-19% (average of 13% at April 30).
FY10 was “best year in the company's history.”
Performance through the economic downturn has
been impressive with tangible book value per share
up ~50% from FY-end 2006 through FY-end 2010.
“Expect to open new dealerships at approximate
10% rate in FY11 and for the next several years.”
CEO William Henderson (46) joined the
company in 1987. Chairman Falgout (60), who is
also general counsel, was CEO from 2002 to 2007.
Repurchased 487,000 shares since February,
representing 4% of outstanding shares.
Shares trade at 9% trailing earnings yield and
1.6x tangible book. Tangible book is 70% of assets.
•
•
•
2006
14%
10%
8%
5%
234
2007
3%
-3%
-8%
8%
240
2008
14%
13%
8%
7%
275
2009
9%
8%
5%
4%
299
2010
13%
11%
12%
1%
339
92%
8%
90%
10%
91%
9%
91%
9%
91%
9%
n/a
n/a
n/a
n/a
90%
6%
4%
0%
89%
6%
4%
1%
88%
5%
4%
3%
89%
5%
4%
3%
7%
2%
44%
178
84%
2%
1%
42%
174
80%
5%
1%
42%
201
81%
6%
1%
43%
220
83%
8%
2%
44%
251
82%
85
27.4
28
7.5
92
25.2
23
8.1
91
27.2
24
8.7
93
28.7
26
9.1
97
32.2
28
9.1
185
19%
4%
24%
12%
15%
69%
1%
179
22%
3%
33%
13%
3%
69%
0%
208
22%
3%
26%
13%
12%
70%
0%
231
22%
3%
24%
11%
12%
70%
-1%
261
22%
3%
22%
12%
16%
71%
-1%
KMX
AN
GPI
SAH
CRMT
MV
($mn)
4,760
3,370
610
460
270
EV
($mn)
8,650
4,320
1,620
1,800
310
EV /
Rev.
1.1x
.4x
.3x
.3x
.9x
P/
Tang.
Book
2.4x
3.3x
6.7x
n/m
1.5x
This
FY
P/E
15x
14x
10x
9x
9x
Next
FY
P/E
14x
12x
8x
7x
8x
MAJOR HOLDERS
Chairman Falgout 7% | CEO Henderson 1% | Other insiders
7% | Alydar 7% | Ranger 6% | Thompson 6% | Royce 5%
•
FYE April 30
∆ revenue
∆ same-store sales
∆ used cars sold
∆ avg sales price
Revenue ($mn)
Car sales
Interest income
% of car sales by category:
Sales – used cars
Wholesales – third party
Service contracts
Payment protection plans
Net income
Capex (net of D&A)
Car sales gross margin
Assets ($mn)
Net finance receivables / assets
Selected car sales metrics:
Dealerships, ending
Used cars sold (k)
Avg used cars sold/store/month
Avg used car sales price ($000s)
Selected finance metrics:
Gross finance receivables ($mn)
Loss allowance (% of receivables)
Accounts over 30 days past due
Net charge-offs / receivables
Receivables average yield
Return on tangible equity
Tangible equity to assets (avg)
Will growth plan add value? While management
has done a good job allocating capital, rapid growth
may dilute focus and heighten execution risks.
Credit risk related to provision of financing to
customers with poor or no credit histories.
Competitive used car market in the U.S.
Geographic concentration. 37% of dealerships are
in Arkansas, 21% in Oklahoma and 14% in Texas.
RATINGS







THE BOTTOM LINE
Since its founding in 1981, America's Car-Mart has grown into a major seller of used cars to customers with poor credit in
states such as Arkansas and Oklahoma. The company’s integrated retail and financing model has created value even in the
recent weak economy. Management’s plan to accelerate new dealership growth may prove timely as less credit availability to
its target demographic should make for less competition. While we wouldn’t bet against this capable management, expansion
carries material capital reinvestment risk. At the current valuation, investors may not be adequately compensated for this risk.
June 30, 2010 – Page 39 of 120
…additional insight into America’s Car-Mart:
RETAIL UNIT ECONOMICS (PER VEHICLE SOLD) – What is (potentially) wrong with this picture?
Sales price
$9,267
100.0%
Cost of sale
($5,237)
56.5%
Operating expenses
($1,705)
18.4%
High average credit loss percentage means
the company must mark up cars by more
Credit loss
($2,011)
21.7%
than 75%, selling vehicles that cost $5,237,
on average, for $9,267, on average.
Interest income
$1,029
11.1%
Pretax profit per car
$1,343
14.5%
Paying a 75%+ premium may be a good
Related data: $519 down payment, $171 bi-weekly payment,
12.98% interest rate, term of 27.6 months
deal for a deadbeat, but it’s a bad deal for a
buyer who will pay the loan off on time.
Source: The Manual of Ideas analysis, Company presentation,
http://www.car-mart.com/ir/Investor_Presentation_May_2010.pdf
Key long-term concerns:
Will the bad money drive out the good?
What credit loss percentage would
constitute the “tipping point,” at which the
good money decides to shop elsewhere,
thereby accelerating the increase in credit
losses and destroying the company’s
business model?
June 30, 2010 – Page 40 of 120
…additional insight into America’s Car-Mart:
June 30, 2010 – Page 41 of 120
AmSurg (AMSG) – Owned by Fenimore, Dreman
Nashville, TN, 615-665-1283
www.amsurg.com
Health Care: Healthcare Facilities, Member of S&P SmallCap 600
Trading Data
Price: $19.51 (as of 6/18/10)
52-week range: $18.47 - $23.61
Month
Latest
Ago
This quarter
$0.43
$0.43
Next quarter
0.43
0.43
FYE 12/31/10
1.71
1.71
Ownership Data
FYE 12/31/11
FYE 12/30/12
LT growth
EPS Surprise
4/22/10
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
12/31/03
284
252
106
30
0.91
30
48
21
27
14
63
230
356
2
17
53
123
0
233
>100%
# of
Ests
18
17
19
1.83
2.10
1.83
2.10
18
3
11.7%
12.1%
7
Actual
$0.42
11x
11x
11x
9x
1.3x
EV/ LTM EBIT
P / tangible book
4x
n/m
Greenblatt Criteria
Estimate
$0.42
Fiscal Years Ended
12/31/04 12/31/05 12/31/06 12/31/07 12/31/08
327
379
441
518
600
290
337
390
458
530
125
139
155
181
211
40
35
38
44
47
1.09
1.17
1.17
1.34
1.55
30
30
30
31
32
56
63
72
183
210
23
23
19
25
18
33
41
54
158
191
15
21
20
30
32
73
88
94
118
122
269
350
403
557
672
425
528
590
782
906
1
2
3
6
7
17
27
27
34
36
87
106
124
217
266
171
233
247
370
446
0
0
0
0
0
254
295
343
411
460
>100%
>100%
>100%
>100%
>100%
Valuation
P/E FYE 12/31/09
P/E FYE 12/31/10
P/E FYE 12/31/11
P/E FYE 12/30/12
EV/ LTM revenue
LTM EBIT yield
LTM pre-tax ROC
12/31/09
669
586
225
52
1.71
31
233
20
213
29
123
824
1,059
6
42
289
554
0
505
>100%
LTME
3/31/10
678
592
225
52
1.73
30
228
16
212
33
128
862
1,101
6
42
301
581
0
520
>100%
FQE
3/31/09
163
144
55
13
0.40
31
59
7
52
31
123
698
932
6
38
272
470
0
462
n/m
26%
>100%
FQE
3/31/10
173
150
54
13
0.42
30
54
4
51
33
128
862
1,101
6
42
301
581
0
520
n/m
$35
$30
$25
$20
$15
$10
$5
$0
May 01
May 02
May 03
May 04
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 42 of 120
BUSINESS OVERVIEW
AmSurg owns and operates ambulatory surgery centers
(ASCs) in partnership with physicians in the U.S. It owned a
majority interest in 203 ASCs as of March 31, 2010.
•
•
•
•
•
1
#1 operator of ambulatory surgery centers based
on number of centers. According to Centers for
Medicare and Medicaid Services (CMS), there were
5,300 Medicare-certified ASCs at yearend 2009.
Provides high-volume surgical procedures at a
low-cost structure, which enables charging of fees
“generally less than those charged by hospitals for
similar services performed on an outpatient basis.”
Business model: AmSurg owns majority interests
(mainly 51%) in centers via LP or LLC structures.
Physicians, who are minority partners, perform
surgeries at centers. AmSurg’s revenue is derived
from facility fees charged for surgical procedures.
Growth drivers include: 1) cost-effective
alternative to hospital-based surgery (lower facility
development costs and more efficient staffing); 2)
physician and patient preference (faster turnaround,
less institutionalized); and 3) technology (expands
types of procedures that can be performed in ASCs).
Leading share in gastrointestinal/ophthalmology,
based on operating 15% and 5%, respectively, of
Medicare-certified centers in each specialty. 70% of
AmSurg’s centers are GI and 18% ophthalmology.
•
•
Guiding for same-center revenue down 1-2% y-y
in 2010 due to the economic outlook, “which we
believe will result in reduced patient visits.”
Lower Medicare reimbursement rates for ASCs
are expected to cut 2010 and 2011 EPS by $0.06 in
each year. CMS may change rates again in future.
Medicare represented ~32% of 1Q10 revenue.
FYE December 31
2005
3%
∆ same center revenue
19%
∆ revenue
21%
∆ centers, ending
22%
∆ procedures
Revenue ($mn)
361
EBIT
37%
Net income 1
10%
D&A
4%
Capex
6%
Acquisitions
18%
Selected operational metrics:
Centers, ending
133
New centers added
24
Centers in development2
5
Centers under LOI
0
Procedures (000s)
684
FCF pre-M&A ($mn)
116
FCF post-M&A ($mn)
50
-1%
2006
5%
22%
8%
18%
439
2007
4%
18%
17%
19%
518
2008
3%
16%
12%
16%
600
2009
0%
11%
7%
12%
669
YTD
3/31/10
-2%
6%
6%
2%
173
35%
9%
4%
4%
13%
35%
9%
4%
5%
31%
35%
8%
3%
3%
20%
34%
8%
3%
3%
14%
31%
7%
3%
2%
16%
144
11
5
10
804
144
87
1%
168
24
2
4
952
55
-108
3%
188
20
3
5
1,109
73
-46
3%
202
14
1
1
1,238
82
-14
-3%
203
1
1
4
308
21
-7
-3%
After non-controlling interests.
Deemed to be under development when a limited partnership or limited
liability company has been formed with physician partners to develop an ASC.
2
•
•
•
Competes against other companies for center
acquisitions and developments (e.g. privately-held
Symbion and United Surgical) as well as against
hospitals and other ASCs in recruiting physicians.
Execution/balance sheet risk due to debt-financed
growth. 13-16 new centers are planned in 2010.
$273 million of net debt. In June, AmSurg
completed a $75 million debt placement at 6% (due
2020) and signed a new $375 million revolver (due
2015), which extended debt maturities.
NOVAD
AMSG
MV
($mn)
70
580
EV
($mn)
170
850
EV /
Rev.
1.1x
1.3x
P/
Tang.
Book
n/m
n/m
This
FY
P/E
9x
11x
Next
FY
P/E
8x
10x
MAJOR HOLDERS
CEO Holden <1% | Other insiders 7% | FMR 15% |
Neuberger 8% | Wellington 7% | Fenimore 5% | Dreman 4%
RATINGS







THE BOTTOM LINE
AmSurg is the largest operator of ambulatory surgery centers in the U.S. The concept has good growth drivers as it offers
compelling value to payors, physicians, and patients. Sustainability of returns on capital, however, appears at the mercy of
healthcare legislation including changes in Medicare reimbursement. Debt-financed growth, meanwhile, raises reinvestment
and balance sheet risk. On balance, valuation may compensate for the risks as shares trade at a mid-teens trailing FCF yield.
June 30, 2010 – Page 43 of 120
AOL (AOL) – Owned by Dodge & Cox, Cap Re
New York, NY, 212-652-6400
corp.aol.com
Technology: Computer Services, Member of S&P MidCap 400
Trading Data
Price: $22.74 (as of 6/18/10)
52-week range: $19.61 - $29.45
Month
Latest
Ago
This quarter
$0.41
$0.39
Next quarter
0.33
0.33
FYE 12/31/10
1.41
1.36
Ownership Data
FYE 12/31/11
FYE 12/30/12
LT growth
EPS Surprise
4/28/10
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
# of
Ests
9
9
10
1.58
1.55
1.58
1.55
9
8
-11.6%
-13.4%
2
Actual
$0.32
Estimate
$0.70
Fiscal Years Ended
12/31/06
12/31/07
12/31/08
7,787
5,181
4,166
3,658
2,528
1,887
1,168
1,854
(1,168)
750
1,396
(1,526)
6.78
11.49
(14.42)
106
106
106
1,142
1,017
934
387
280
172
755
736
761
152
135
1,276
740
3,923
2,531
6,863
4,861
74
25
1,169
630
352
411
1,596
1,125
0
0
5,267
3,736
>100%
-135%
12/31/09
3,257
1,359
458
249
2.35
106
908
136
772
147
687
2,409
3,963
32
751
42
902
0
3,061
70%
Valuation
P/E FYE 12/31/09
P/E FYE 12/31/10
P/E FYE 12/31/11
P/E FYE 12/30/12
EV/ LTM revenue
10x
16x
14x
15x
0.7x
EV/ LTM EBIT
P / tangible book
6x
3.2x
Greenblatt Criteria
LTM EBIT yield
LTM pre-tax ROC
LTME
3/31/10
3,058
1,279
397
201
1.96
106
1,071
165
906
262
712
2,337
3,918
33
701
38
834
0
3,084
>100%
FQE
3/31/09
864
380
142
83
0.78
106
196
35
161
0
0
0
0
0
0
0
0
0
0
n/m
18%
>100%
FQE
3/31/10
664
300
81
35
0.39
106
163
30
134
262
712
2,337
3,918
33
701
38
834
0
3,084
n/m
$30
$25
$20
$15
$10
$5
$0
Feb 10
June 30, 2010 – Page 44 of 120
BUSINESS OVERVIEW
AOL provides dial-up Internet access and operates Internetbased content, communications, and other businesses.
AOL was spun off from Time Warner in December 2009.
•
•
•
•
•
•
•
•
Owns valuable Internet brands including AOL
(~50% share of U.S. dial-up Internet access market
with 5 million subscribers; #4 U.S. search engine
with 2.1% share*), MapQuest (#2 Internet mapping
service with ~40% share), AIM (instant messaging),
Moviefone (entertainment portal), and other brands.
Strategy: grow advertising revenue by expanding
online content offerings to retain and attract visitors.
AOL properties had ~100 million monthly unique
visitors in 1Q10. Legacy dial-up access is managed
as a cash cow and content distribution channel.
Chairman and CEO Tim Armstrong (39) joined
in April 2009. Armstrong, an ex-Google executive,
and other insiders received 4.2 million options and
3.4 million restricted shares at exercise prices and
fair values of $23-25 per share through April 2010.
Restructuring efforts include asset sales (ICQ for
$188 million in April, Bebo in June), gross staff
reductions by “nearly one-third,” lower presence in
non-U.S. markets, and exit of unprofitable business.
Expects to record a deferred tax asset of $275325 million in 2Q10 related to the sale of Bebo.
Generated $125 million of FCF in 1Q10.
$192 million of net cash at March 31.
Trades on 15% EBIT-to-EV yield and 0.8x EVto-revenue, on 1Q10 annualized EBIT and revenue.
•
•
•
*
Internet access business is in secular decline with
subscribers halving since yearend 2007. Loss of this
high-margin, subscription-based income stream may
be difficult to replace by cyclical ad revenue.
Content-based Internet advertising market is
crowded. AOL faces additional risk as many of its
existing “eyeballs” are dial-up access users (likely
to drop off). Ad revenue declined 19% y-y in 1Q10.
Depends on third-party search provider Google,
for most of search/contextual advertising revenue.
Existing contract expires in December 2010.
Source: Nielsen MegaView Search, May 2010.
MAJOR HOLDERS
CEO Armstrong 1% | Other insiders <1% | Dodge & Cox
11% | CapRe 8% | Axa 6% | BlackRock 4% | Vanguard 4%
1
FYE December 31
2007
2008
-33% -20%
∆ revenue
n/a -26%
∆ U.S. Internet-access subscribers
Revenue ($bn)
5.2
4.2
Advertising
43%
50%
Subscription
54%
46%
Other
3%
3%
Advertising
18%
-7%
Subscription
-52% -31%
% of advertising revenue by source:
AOL properties - display
40%
35%
AOL properties - search/contextual
29%
35%
Third-party network
30%
30%
Advertising revenue growth by source:
AOL properties - display
n/a -19%
AOL properties - search/contextual
n/a
10%
Third party network
n/a
-7%
U.S.
88%
87%
International
12%
13%
Gross profit
49%
45%
EBIT 2
26%
26%
Net income
23% -37%
D&A
10%
11%
Capex
5%
4%
U.S. average monthly unique visitors by property (mn): 3
AOL
n/a
110
AOL and third-party network
n/a
171
Selected U.S. Internet-access subscriber metrics:
Subscribers, ending (mn)
9.3
6.9
Monthly subscriber ARPU ($)
n/a 18.38
Monthly subscriber churn (avg)
n/a
3.6%
2009
-22%
-27%
3.2
YTD
3/31/10
-23%
-26%
0.7
54%
43%
4%
53%
43%
4%
-17%
-28%
-19%
-28%
35%
35%
30%
35%
34%
30%
-17%
-15%
-17%
-13%
-27%
-17%
88%
12%
90%
10%
42%
15%
8%
12%
4%
45%
12%
5%
18%
4%
104
179
100
186
5.0
18.46
3.4%
4.7
18.31
3.0%
Certain data is not available due to spin-off from Time Warner in 2009.
Excludes charges related to securities litigation/government investigations,
gains on sale of European access businesses and goodwill impairment.
3
Based on Media Metrix estimates “panel-only” methodology.
2
YHOO
ELNK
LOCM
AOL
RATINGS
MV
($mn)
20,510
880
120
2,340
EV
($mn)
17,400
410
110
2,150
EV /
Rev.
2.7x
.6x
1.7x
.7x
P/
Tang.
Book
2.4x
1.4x
25.0x
3.1x
This
FY
P/E
22x
10x
10x
16x
Next
FY
P/E
19x
12x
9x
14x







THE BOTTOM LINE
It’s not surprising that AOL is a “Magic Formula” company – this high return-on-capital business has significant EBIT
relative to enterprise value. The problem is that EBIT is rapidly declining as a result of a disappearing Internet dial-up access
business. Although management is more incentivized following the recent spin-off from Time Warner, the strategy to build a
content-based advertising model to make up for lost dial-up revenue will be a challenge. Despite execution and reinvestment
risk, the market may be taking a too pessimistic view on monetization prospects for AOL’s unique set of Internet brands.
June 30, 2010 – Page 45 of 120
…additional insight into AOL:
QUARTERLY REVENUE BREAKDOWN, Q1 2008 – Q1 2010
Source: Company presentation, April 28, 2010, http://bit.ly/dfAruX
METRICS RELATED TO SUBSCRIPTION REVENUE – CHURN AND AVERAGE REVENUE PER ACCESS SUBSCRIBER
June 30, 2010 – Page 46 of 120
QUARTERLY ADJUSTED OIBDA AND RESTRUCTURING COSTS, Q1 2008 – Q1 2010
1
Adjusted OIBDA is defined as operating income before depreciation and amortization excluding the impact of gains and losses on all disposals of assets
(including those recorded in costs of revenues) and non-cash asset impairments.
RECONCILIATION OF OPERATING INCOME TO ADJUSTED OIBDA 1
1
Adjusted OIBDA is defined as operating income before depreciation and amortization excluding the impact of gains and losses on all disposals of assets
(including those recorded in costs of revenues) and non-cash asset impairments.
June 30, 2010 – Page 47 of 120
Cass Information (CASS) – Owned by Riverbridge, Kayne
Bridgeton, MO, 314-506-5500
www.cassinfo.com
Technology: Computer Services
Trading Data
Price: $31.90 (as of 6/18/10)
52-week range: $27.46 - $36.19
Month
Latest
Ago
This quarter
$0.48
$0.48
Next quarter
0.48
0.48
FYE 12/31/10
1.96
1.96
Ownership Data
FYE 12/31/11
FYE 12/30/12
LT growth
EPS Surprise
4/19/10
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
12/31/03
28
0
26
8
0.85
9
12
1
11
62
0
5
646
0
0
0
581
0
65
n/m
# of
Ests
1
1
1
1.99
2.28
1.99
2.28
1
1
n/a
n/a
n/a
Actual
$0.50
18x
16x
16x
14x
4.2x
EV/ LTM EBIT
P / tangible book
5x
2.4x
Greenblatt Criteria
Estimate
$0.47
Fiscal Years Ended
12/31/04 12/31/05 12/31/06 12/31/07 12/31/08
31
38
47
49
44
0
0
0
0
0
27
33
39
40
39
7
12
15
18
19
1.07
1.21
1.66
1.90
2.03
9
9
9
9
9
11
13
16
24
22
1
3
3
2
1
9
10
13
22
21
88
150
197
176
29
0
0
0
0
0
6
5
9
8
8
717
819
859
903
885
0
0
0
0
0
0
0
0
0
0
4
4
4
4
3
647
743
775
804
779
0
0
0
0
0
70
75
84
100
106
n/m
n/m
n/m
n/m
n/m
Valuation
P/E FYE 12/31/09
P/E FYE 12/31/10
P/E FYE 12/31/11
P/E FYE 12/30/12
EV/ LTM revenue
LTM EBIT yield
LTM pre-tax ROC
12/31/09
44
0
37
16
1.73
9
19
1
18
79
0
8
1,013
0
0
0
883
0
130
n/m
LTME
3/31/10
45
0
37
17
1.82
9
20
1
19
111
0
8
1,073
0
0
0
939
0
135
n/m
FQE
3/31/09
11
0
9
4
0.42
9
6
0
5
21
0
8
887
13
0
3
773
0
114
n/m
20%
n/m
FQE
3/31/10
12
0
10
5
0.50
9
6
0
6
111
0
8
1,073
0
0
0
939
0
135
n/m
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
May 01
May 02
May 03
May 04
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 48 of 120
BUSINESS OVERVIEW
Cass provides business process outsourcing focused on
invoice processing, auditing and payment services.
The company also owns Cass Commercial Bank, which was
founded in 1906 and has five branches in the St. Louis
metropolitan area and one in Southern California.
•
•
•
•
•
•
Largest U.S. provider of freight bill payment and
audit services. From this core expertise, Cass has
expanded into utilities and telecom payables
outsourcing. Clients are typically large corporations
looking to cut their freight, utility and telecom costs.
Disbursed $24 billion on behalf of customers in
2009 based on 35 million transactions. Cass has
expertise in payables processing that is 1) complex
(e.g. due to pricing structures); 2) has high tendency
for errors (e.g. small-dollar mistakes that add up);
and 3) has high value (e.g. business intelligence).
Has bank holding company status as a result of
ownership of Cass Commercial Bank. The Bank’s
focus is to support the company’s payment business
and provide commercial banking services to private
businesses, churches and church-related ministries.
CEO Eric Brunngraber (53) joined the company
in 1979. Chairman Collett (67), who served as CEO
from 1990 to 2008, has been with Cass since 1963.
Strong record of value creation and conservative
management. Return on tangible equity has been in
the 15-20%+ range since 2006. The Bank avoided
subprime and other pitfalls and remains wellcapitalized (9.6% tier I ratio on average assets).
“Record performance during the first quarter”
of 2010 including a 19% EPS increase y-y on
transportation and utility dollar volume up 11% and
5%, respectively. Operating expenses were down
1% y-y as Cass maintained good cost control.
•
•
2007
2%
35%
89
2008
20%
23%
92
2009
-20%
3%
88
YTD
3/31/10
11%
5%
23
83%
17%
83%
17%
79%
21%
76%
24%
10%
-2%
4%
1%
-10%
24%
-1%
28%
20%
23%
20%
903
21%
21%
21%
885
16%
27%
18%
1,013
17%
33%
21%
1,073
55%
19%
19%
7%
30%
57%
2%
11%
66%
22%
3%
9%
31%
54%
3%
12%
63%
22%
8%
7%
43%
42%
2%
13%
61%
21%
10%
7%
41%
45%
1%
13%
72%
6%
20%
1%
70%
9%
20%
1%
73%
12%
15%
1%
74%
9%
16%
1%
5.5%
1.3%
0.8%
5.3%
1.1%
0.2%
4.8%
1.3%
0.3%
4.8%
1.4%
0.2%
4%
39%
13%
21%
10%
0%
10%
14%
11%
20%
11%
0%
-11%
9%
-4%
15%
12%
0%
12%
8%
7%
16%
12%
2%
Provides freight/utility/telecom invoice processing & payment to large firms.
Provides banking services mainly to privately-held businesses and churches.
Presented on a tax-equivalent basis assuming a tax rate of 35%.
4
Excludes parcel shipments. 5 YTD figure based on annualized net income.
2
3
MAJOR HOLDERS
•
1
FYE December 31
2006
∆ freight invoice dollar volume
19%
∆ utility transaction dollar volume
28%
Revenue ($mn)
82
Information services1
81%
Banking services2
19%
Information services
20%
Banking services
-4%
Net income margin by segment:
Information services
17%
Banking services
28%
Total net income margin
19%
Assets ($mn)
858
Selected items as a % of assets:
Loans, net
58%
Securities available-for-sale
12%
Cash and cash equivalents
23%
Other assets
7%
Deposits
34%
Accounts and drafts payable
55%
Other liabilities
2%
Shareholders’ equity
10%
% of gross loans by type:
Commercial/church - mortgage
70%
Commercial/church - construction
6%
Commercial/industrial
22%
Other
2%
Selected Cass Commercial Bank metrics:
Net interest margin3
5.5%
Loss allowance / gross loans
1.3%
Nonperforming loans / avg loans
0.2%
Selected Information services metrics:
∆ core freight transaction volume4
8%
∆ utility transaction volume
18%
∆ payment and processing fees
12%
Return on tangible equity5
21%
9%
1%
Conglomerate structure. We are not convinced
shareholder value is maximized by keeping business
process outsourcing under one roof with lending.
Risk of becoming a victim of its own success.
Cass’ audit work reminds us of PRGX Global’s
(PRGX) dilemma: as client engagements mature,
the potential to identify more cost savings recedes.
Credit risk. The Bank had $665 million of gross
loans outstanding as of March 31.
CEO Brunngraber <1% | Other insiders 7% | Jake Nania 10%
Riverbridge 6% | Kayne Anderson 5% | Vanguard 3%
RATINGS







THE BOTTOM LINE
Cass is peculiar in that houses a business process outsourcer and a commercial bank under one roof. While management
stresses the synergies between the two businesses, we suspect the rationale has more to do with history. The outsourcing
business grew out of the services originally offered by Cass Commercial Bank, which pioneered bank freight payment in
1956. The company’s long-tenured leadership has a track record of value creation. While this appears to be largely reflected
in the valuation, the market may be wrong on the attractive opportunity for capital reinvestment in both businesses: in lending
because of high net interest margins, and in payables outsourcing given corporations’ ongoing need to lower operating costs.
June 30, 2010 – Page 49 of 120
Charter Communications (CCMM) – Owned by Oaktree, Franklin
St. Louis, MO, 314-965-0555
www.charter.com
Services: Broadcasting & Cable TV
Trading Data
Price: $35.25 (as of 6/18/10)
52-week range: $29.10 - $39.99
Month
Latest
Ago
This quarter
$0.59
$0.59
Next quarter
0.43
0.43
FYE 12/31/10
1.85
1.85
Ownership Data
FYE 12/31/11
FYE 12/30/12
LT growth
EPS Surprise
5/6/10
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
12/31/03
4,819
2,867
783
(242)
(0.82)
295
765
854
(89)
127
350
13,680
21,364
0
1,286
18,647
21,484
55
(175)
13%
# of
Ests
1
1
1
2.10
3.09
2.10
3.09
1
1
n/a
n/a
n/a
Actual
$0.21
Estimate
$0.70
Fiscal Years Ended
12/31/04 12/31/05 12/31/06 12/31/07 12/31/08
4,760
5,033
5,504
6,002
6,479
2,766
2,830
3,066
3,382
3,687
(1,973)
825
468
548
(614)
(4,345)
(970)
(1,370)
(1,534)
(2,451)
(11.47)
(3.24)
(4.78)
(4.17)
(6.56)
300
310
332
368
373
472
260
323
327
399
924
1,088
1,103
1,244
1,202
(452)
(828)
(780)
(917)
(803)
650
21
60
75
960
922
327
339
336
1,218
9,878
9,826
9,223
8,942
7,482
17,673
16,431
15,100
14,666
13,882
0
0
0
0
155
1,217
1,191
1,298
1,332
1,465
19,464
19,437
19,119
19,973
21,586
22,024
21,347
21,315
22,553
24,388
55
4
4
5
0
(4,406)
(4,920)
(6,219)
(7,892)
(10,506)
-35%
16%
10%
13%
-15%
12/31/09
6,755
3,860
10,851
11,366
99.48
112
594
1,134
(540)
709
1,071
8,749
16,658
70
968
13,252
14,743
0
1,915
>100%
Valuation
P/E FYE 12/31/09
P/E FYE 12/31/10
P/E FYE 12/31/11
P/E FYE 12/30/12
EV/ LTM revenue
n/m
19x
17x
11x
2.4x
EV/ LTM EBIT
P / tangible book
2x
n/m
Greenblatt Criteria
LTM EBIT yield
LTM pre-tax ROC
LTME
3/31/10
6,828
3,895
10,905
11,595
100.23
112
937
1,175
(238)
221
546
8,668
16,199
0
958
12,762
14,436
0
1,763
>100%
66%
>100%
FQE
3/31/09
1,662
949
193
(205)
(0.54)
378
187
269
(82)
836
1,138
7,377
13,650
11,774
13,096
0
24,364
0
(10,714)
n/m
FQE
3/31/10
1,735
984
247
24
0.21
113
530
310
220
221
546
8,668
16,199
0
958
12,762
14,436
0
1,763
n/m
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
May 10
June 30, 2010 – Page 50 of 120
BUSINESS OVERVIEW
Charter provides cable TV, Internet, and phone services to
5.3 million residential and business customers in the U.S.
Charter filed for Chapter 11 in March 2009 and emerged
from bankruptcy in November 2009.
•
•
•
•
•
•
4th-largest U.S. cable TV operator, with 5.3
million customers. Charter ranks behind Comcast
(24+ million customers), Time Warner Cable (15
million), and Cox Communications (6+ million).
Existing fiber/coaxial cable network reaches 12
million homes. Low penetration (40% in video/TV,
28% in high-speed Internet and 16% in phones)*
suggests Charter may grow revenue without having
to spend capex to expand network infrastructure.
“Bundled” residential customers grew 5% y-y to
3.0 million as of March 31. As “bundled” customers
receive at least two different types of service, they
may have lower churn than single-service clients.
$6.3 billion of federal NOLs, resulting in a gross
deferred tax asset of $2.2 billion as of yearend 2009
(NOLs expire in 2014-2028). Charter has booked
valuation allowances against most of the tax assets.
Applied for Nasdaq listing. Charter aims to list
“upon filling a vacancy on its audit committee.”
Generated $220 million of FCF in 1Q10.
1
•
•
•
*
Penetration=customers as percentage of connected homes for each service.
CMCSA
TWC
CVC
CCMM
EV /
Rev.
2.1x
2.2x
2.4x
2.4x
53%
23%
11%
7%
3%
2%
57%
37%
14%
1%
21%
18%
4.8
3.3
3.2
1.6
12.9
5.3
3.0
$68
42
42
Effective December 2009, Charter applied fresh-start accounting after exiting
bankruptcy. Figures prior to that date are based on the predecessor business.
Revenue-generating units (RGUs) represent the sum total of all basic video,
digital video, high-speed Internet and telephone customers.
3
Based on average monthly revenue per basic video customer.
4
Stated after "operating costs” (as reported) excluding D&A.
5
Excludes stock compensation expense, restructuring and other special items.
6
2009 figure reflects bankruptcy-related one-time gains.
P/
Tang.
Book
n/m
n/m
n/m
n/m
This
FY
P/E
14x
16x
16x
19x
MAJOR HOLDERS
Shares outstanding: 112.5 million class A shares
(CCMM.OB; entitled to 65% of votes) and 2.2 million class
B shares (not listed; 35% of votes). Microsoft co-founder P.
Allen controls Charter by owning 100% of class B shares.
Economic stake: Insiders <1% * | Apollo 31% | Franklin 19%
Oaktree 18% | Encore 10% | Paul Allen 7%
* Excludes directors representing Apollo and Oaktree.
RATINGS
EV
($mn)
77,260
40,290
18,290
16,620
YTD
3/31/10
4%
-2%
3%
9%
1.7
2
Customers are in decline since 2006. While
Charter has managed to upgrade legacy video
customers to digital, and bundle Internet/phone
services, customer growth remains a challenge.
High leverage post-bankruptcy. Despite reducing
debt by about $8 billion in bankruptcy, Charter had
$12.5 billion of net debt as of March 31 (4.9x 1Q10
adjusted, annualized EBITDA). 1Q10 adjusted
EBITDA to cash interest is 4.2x. After refinancing
in April, only 16% of debt is due through 2013.
Rising programming costs. Like other content
distributors, Charter faces a rise in retransmission
fees charged by owners of broadcast stations.
MV
($mn)
49,860
19,210
7,370
4,080
FYE December 31
2005 2006 2007 2008
2009
2%
9%
9%
8%
4%
∆ revenue
-1%
-8%
-1%
-3%
-2%
∆ customers
4%
1%
6%
5%
2%
∆ RGUs 2
8%
14%
13%
11%
8%
∆ ARPU 3
Revenue ($bn)
5.0
5.5
6.0
6.5
6.8
% of revenue by service offering:
Video
65%
61%
57%
53%
51%
Internet
17%
19%
21%
21%
22%
Telephone
1%
2%
6%
9%
11%
Commercial
5%
6%
6%
6%
7%
Advertising sales
6%
6%
5%
5%
4%
Other
6%
6%
6%
6%
6%
Gross profit 4
56%
56%
56%
57%
57%
Adj. EBITDA 5
38%
35%
35%
36%
37%
EBIT
6%
7%
9%
-9%
-14%
Net income 6
-19% -26% -26% -38% 168%
D&A
29%
25%
22%
20%
19%
Capex
22%
20%
21%
19%
17%
Revenue-generating units (RGUs) by service offering (mn):
Basic video
5.9
5.4
5.2
5.0
4.8
Digital video
2.8
2.8
2.9
3.1
3.2
Residential Internet
2.2
2.4
2.7
2.9
3.1
Residential telephone
0.1
0.4
1.0
1.3
1.6
Total RGUs
11.0
11.1
11.8
12.4
12.7
Total customers (mn)
6.2
5.7
5.6
5.4
5.3
Bundled cust’ers (mn)
1.9
2.2
2.5
2.7
2.9
Average monthly revenue by relevant customer ($):
Video
$38
$53
$56
$59
$62
Internet
37
39
41
40
41
Telephone
40
42
42
41
43
Next
FY
P/E
13x
13x
13x
17x







THE BOTTOM LINE
Cable operator Charter is off to a good start after exiting bankruptcy in late 2009. It generated $220 million of free cash flow
in Q1 2010, extended debt maturities in April, and recently applied to list shares on Nasdaq. However, returns on capital may
be pressured as a result of existing and emerging competition and the negotiating power of programming suppliers. Owners
include Paul Allen and the investment firm Apollo and Oaktree, though all three have filed to become major sellers of stock.
June 30, 2010 – Page 51 of 120
…additional insight into Charter Communications:
June 30, 2010 – Page 52 of 120
ePlus (PLUS) – Owned by Hovde, Heartland, Acadian
Herndon, VA, 703-984-8400
www.eplus.com
Technology: Software & Programming
Trading Data
Price: $18.76 (as of 6/18/10)
52-week range: $13.48 - $19.00
Month
Latest
Ago
This quarter
n/a
n/a
Next quarter
n/a
n/a
FYE 3/31/11
n/a
n/a
# of
Ests
n/a
n/a
n/a
Valuation
P/E FYE 3/31/10
P/E FYE 1/0/00
P/E FYE 12/30/00
P/E FYE 12/30/01
EV/ LTM revenue
13x
n/a
n/a
n/a
0.2x
Ownership Data
FYE 3/31/12
FYE 3/31/13
EV/ LTM EBIT
P / tangible book
5x
0.9x
LT growth
EPS Surprise
n/a
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
3/31/04
331
84
16
10
0.95
9
(6)
22
(29)
25
0
20
294
0
0
118
183
0
112
n/m
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Actual
n/a
Estimate
n/a
Fiscal Years Ended
3/31/05 3/31/06 3/31/07 3/31/08 3/31/09
3/31/10
576
647
792
849
698
684
132
104
144
139
131
129
44
(1)
30
30
22
21
26
(1)
17
16
13
13
2.73
(0.06)
2.04
1.95
1.52
1.50
9
8
8
8
8
8
11
(38)
(32)
12
21
(37)
27
35
30
12
5
11
(16)
(72)
(62)
0
17
(48)
39
21
40
58
108
85
0
0
0
0
0
0
26
26
26
26
22
18
360
374
418
380
364
406
0
0
0
0
0
0
0
0
0
0
0
0
121
134
153
94
85
54
227
245
272
216
189
220
0
0
0
0
0
0
133
129
146
164
175
186
n/m
n/m
n/m
n/m
n/m
n/m
Greenblatt Criteria
LTM EBIT yield
LTM pre-tax ROC
21%
n/m
LTME
3/31/10
684
129
25
13
1.50
8
(37)
11
(48)
85
0
18
406
0
0
54
220
0
186
n/m
FQE
3/31/10
180
32
5
4
0.42
8
8
3
5
85
0
18
406
0
0
54
220
0
186
n/m
FQE
3/31/09
134
26
2
1
0.09
8
23
1
22
108
0
22
364
0
0
85
189
0
175
n/m
$35
$30
$25
$20
$15
$10
$5
$0
May 01
May 02
May 03
May 04
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 53 of 120
BUSINESS OVERVIEW
ePlus provides IT products and related services including
financing to commercial/government customers in the U.S.
•
•
•
•
•
•
•
Value-added reseller of IT equipment. ePlus
advises customers on their IT needs and sells related
equipment to them (mostly third-party equipment
with some proprietary software sales). It also offers
implementation, maintenance, and other services.
Provision of customer financing is another
source of revenue. ePlus provides both capital and
operating lease options to customers. Net
investment in capital and operating leases was $135
million and $20 million, respectively, at March 31.
Large addressable market. IDC estimates the
market for IT spending in North America was $491
billion in 2009. The market is highly fragmented
with ~50,000 companies within ePlus’ target size
(annual revenue of $25 million to $2.5 billion).
$85 million of cash and $54 million of nonrecourse debt. The strong balance sheet has
enabled ePlus to grow its lease investments at likely
favorable terms during the credit crunch of 2009.
Minimal inventory risk, as products are shipped
directly from suppliers/distributors to the customer.
Inventories totaled only $9 million at March 31.
Phillip Norton (65) has been Chairman and CEO
since 1993 and is the largest shareholder with 27%.
Repurchased 0.4 million shares for $6 million in
fiscal year 2010 (average cost of $16.18 per share).
1
•
•
Low barriers to entry. Reselling third-party IT
products and offering related financing are hardly
business models that cannot be replicated. While
ePlus has achieved decent returns on equity in the
past (with conservative leverage), returns have been
volatile and may not be sustainable at a high level.
Supplier bargaining power as Cisco, HP and Sun
represented approximately 37%, 18%, and 7%,
respectively, of technology revenue in 2009. This is
compounded further as vendors may choose to
market their products directly to end-users, rather
than through resellers such as ePlus.
Competes against much larger rival CDW, which
was bought by private equity firms Madison
Dearborn and Providence in 2007. CDW had
revenue of $7.6 billion in the year ended March ‘10.
2006
12%
7%
647
2007
22%
-5%
792
2008
7%
1%
849
2009
-18%
0%
698
2010
-2%
1%
684
91%
9%
1%
1%
92%
8%
3%
5%
87%
13%
2%
4%
92%
8%
2%
4%
93%
7%
2%
4%
0%
-7%
0%
3%
14%
4%
2%
15%
4%
2%
21%
3%
2%
14%
3%
16%
0%
3%
5%
374
18%
2%
3%
4%
418
16%
2%
3%
1%
380
19%
2%
2%
0%
364
19%
2%
2%
1%
406
55%
28%
6%
12%
680
0%
31%
-6%
52%
26%
9%
12%
649
16%
30%
-1%
41%
29%
15%
14%
658
13%
35%
0%
33%
23%
30%
15%
656
9%
42%
0%
38%
27%
21%
14%
661
8%
44%
1%
Re-sells information technology equipment and software and related services.
Offers lease-financing to customers of the technology segment.
FY10 net income includes $4.0 million charge related to impairment of
goodwill and $3.5 million of income from a patent settlement.
4
Includes net purchases of operating lease equipment.
2
3
NSIT
SYX
PCCC
PLUS
•
FYE March 31
∆ revenue
Revenue ($mn)
Technology 1
Financing 2
EBIT margin – Technology
EBIT margin – Total
Pre-tax income margin by segment:
Technology
Financing
Total pre-tax income margin
Gross profit
Net income 3
D&A
Capex 4
Assets ($mn)
Selected items as % of total assets:
Leases and leased equipment, net
Accounts receivable, net
Cash and cash equivalents
Other assets
Employees, ending
Return on tangible equity
MV
($mn)
680
600
160
140
EV
($mn)
680
580
100
110
EV /
Rev.
.2x
.2x
.1x
.2x
P/
Tang.
Book
1.8x
1.8x
.9x
.8x
This
FY
P/E
13x
10x
13x
8x
Next
FY
P/E
11x
8x
11x
n/a
MAJOR HOLDERS
CEO Norton 27% | Other insiders 9% * | Hovde Capital 11%
DFA 8% | Heartland 5% | Patrick Retzer 5% | Acadian 1%
*
Excludes director Hovde representing Hovde Capital.
RATINGS







THE BOTTOM LINE
As a reseller of IT equipment and provider of related financing, ePlus has weathered the slowdown in IT spending during
2008/09 relatively well. Staying profitable throughout the period, the company is in a good position to use the overcapitalized
balance sheet in order to grow its lease portfolio, if/when customers increase their IT spending. Although management has
reinvested capital at decent returns in the past, low barriers to entry and high bargaining power of IT suppliers may lower
returns over time. Offsetting this concern is a low valuation, strong balance sheet and capable/incentivized management.
June 30, 2010 – Page 54 of 120
…additional insight into ePlus:
June 30, 2010 – Page 55 of 120
Foster Wheeler (FWLT) – Owned by Altrinsic, Greenlight
Geneva, Switzerland, 41-22-741-8000
www.fwc.com
Capital Goods: Construction Services
Trading Data
Price: $25.47 (as of 6/18/10)
52-week range: $18.33 - $35.82
Month
Latest
Ago
This quarter
$0.51
$0.53
Next quarter
0.57
0.58
FYE 12/31/10
2.21
2.25
Ownership Data
FYE 12/31/11
FYE 12/30/12
LT growth
EPS Surprise
5/5/10
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
12/26/03
3,724
284
(110)
(157)
(38.27)
4
(62)
13
(75)
378
1,174
123
2,507
21
1,350
1,012
3,379
0
(872)
n/m
# of
Ests
18
17
17
2.57
2.92
2.59
2.93
19
5
13.0%
11.3%
2
Actual
$0.45
9x
12x
10x
9x
0.5x
EV/ LTM EBIT
P / tangible book
5x
4.6x
Greenblatt Criteria
Estimate
$0.55
Fiscal Years Ended
12/31/04 12/30/05 12/29/06 12/28/07 12/26/08
2,661
2,200
3,495
5,107
6,854
261
346
508
744
896
(232)
(70)
344
536
631
(285)
(110)
262
394
527
(28.92)
(1.18)
1.86
2.72
3.68
10
93
133
142
141
(31)
51
265
428
429
10
11
30
51
104
(41)
40
235
377
325
317
351
611
1,049
776
1,040
852
1,390
2,044
1,790
122
115
114
115
122
2,178
1,895
2,566
3,249
3,011
35
22
22
19
24
1,252
998
1,248
1,524
1,489
535
294
182
186
193
2,703
2,236
2,502
2,675
2,611
0
0
0
0
0
(526)
(341)
64
574
400
n/m
n/m
n/m
n/m
n/m
Valuation
P/E FYE 12/31/09
P/E FYE 12/31/10
P/E FYE 12/31/11
P/E FYE 12/30/12
EV/ LTM revenue
LTM EBIT yield
LTM pre-tax ROC
12/31/09
5,056
759
455
350
2.75
127
291
46
245
997
1,942
162
3,188
37
1,282
176
2,354
0
834
>100%
LTME
3/31/10
4,737
768
462
349
2.74
127
244
37
207
954
1,901
157
3,095
36
1,204
164
2,227
0
868
>100%
FQE
3/31/09
1,265
163
92
73
0.57
126
42
15
28
780
1,730
118
2,924
23
1,371
188
2,456
0
469
n/m
19%
>100%
FQE
3/31/10
946
172
97
72
0.56
127
(4)
6
(10)
954
1,901
157
3,095
36
1,204
164
2,227
0
868
n/m
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
May 01
May 02
May 03
May 04
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 56 of 120
BUSINESS OVERVIEW
Foster Wheeler is an engineering and construction contractor
and power equipment supplier operating in two segments:
Engineering & Construction (E&C) builds processing
facilities for the oil and gas and power industries. Services
include front-end design, engineering, construction, and
project management. E&C employs about 10,500 employees.
Power provides primarily steam generating and related
equipment for power stations. It employs about 3,000 staff.
FYE December 31
2006 2007
Δ revenue
56%
27%
Δ new orders
18%
37%
Δ backlog
17%
30%
New orders ($bn)
3.0
4.1
Backlog ($bn)
2.5
3.3
Revenue ($bn)
2.8
3.6
E&C
55%
60%
Power
45%
40%
E&C
43%
40%
Power
77%
12%
EBITDA margin by segment:
E&C
21%
24%
Power
8%
10%
Corporate
-1%
-1%
Total EBITDA margin
14%
17%
E&C as % of total backlog
64%
52%
E&C as % of total orders
61%
52%
% of E&C new orders by major project location: 2
Asia
35%
27%
Europe
20%
28%
North America
8%
6%
Middle East
28%
16%
% of E&C new orders by key industry: 2
Oil refining
36%
37%
Chemical/petrochemical
43%
23%
Oil and gas
12%
32%
% of Power new orders by project location: 2
North America
63%
51%
Europe
22%
33%
Other
15%
17%
% of Power new orders by industry: 2
Power generation
92%
94%
Plant operation/maintenance
8%
6%
Δ shares out (avg) 3
43%
7%
•
•
•
•
•
•
Serves energy markets. E&C provides engineering
and construction services across the oil & gas value
chain including in liquefaction, gasification and
delayed coking. Power business has ~75% global
market share in circulating fluidized bed boilers.
Generated $207 million of trailing free cash flow
despite revenue declines and working capital
pressure from a business slowdown. Good track
record of cash generation: average annual net cash
from operations was $353 million versus capex of
$58 million in 2006-09, with no major acquisitions.
$1.5 billion E&C backlog represents 0.8x of the
segment’s 2009 revenue, while trailing new orders
equal 0.9x of revenue. Riskier fixed-price contracts
are only 15% of backlog (rest is reimbursable).
1Q10 power orders equal ~75% of total orders in
full-year 2009, increasing backlog to $851 million
(0.9x 2009 segment revenue). The company is
“clearly seeing movement on certain prospects that
have continuing interest in our highly valued CFB
[circulating fluidized bed] boiler technology.”
Repurchased 18 million shares since authorizing
$750 million buyback in 2008; $265 million remain.
$754 million of net cash at March 31. Net cash is
up 32% y-y (down 4% since yearend 2009).
•
•
•
2009
-26%
-25%
-19%
2.6
2.1
2.9
YTD
3/31/10
-23%
9%
-4%
0.9
2.3
0.6
57%
43%
66%
34%
72%
28%
4%
20%
-14%
-41%
-6%
-47%
24%
14%
-2%
17%
54%
61%
22%
19%
-4%
17%
72%
77%
24%
18%
-3%
19%
63%
48%
26%
33%
12%
9%
44%
18%
10%
13%
17%
19%
5%
13%
54%
20%
17%
57%
21%
17%
33%
38%
22%
42%
38%
20%
35%
40%
26%
15%
73%
12%
91%
9%
0%
85%
15%
-10%
95%
5%
1%
1
All data and references are in “scope” terms unless noted otherwise. Scope
represents business on which profit is earned. Scope excludes flow-through
items relating to reimbursable contracts predominantly in the E&C segment.
2
2006 figures are based on GAAP (not “scope”).
3
2006 average share count increase was materially affected by the equity for
debt exchange in 2004 and subsequent reorganization of share capital.
MAJOR HOLDERS
•
2008
10%
-17%
-23%
3.4
2.5
3.9
Competition includes Bechtel, JGC, KBR, Fluor,
Jacobs, Chicago Bridge & Iron, McDermott and
Technip in E&C business, and Aker Kvaerner,
Alstom, Babcock and Hitachi in the Power segment.
Customer project spending can be highly
cyclical, reflecting the volatility of the oil and gas,
refining, chemical and power generation industries.
Significant pension and asbestos liabilities, stated
at $251 million and $338 million as of March 31.
Long-time CEO Milchovich (60) retired in June.
New CEO Flexon (51) is ex-President of FW USA.
Insiders 1% | T. Rowe 6% | Lazard 4% | Altrinsic 4% |
Greenlight 3% | Vanguard 3% | Ameriprise 2% | Keeley 2%
RATINGS







THE BOTTOM LINE
Foster Wheeler has historically generated high cash flow, benefiting from growth in the energy sector and management focus.
Despite recent revenue pressure and a working capital drag from a slowdown in business, the company continues to increase
cash on the balance sheet. With high exposure to energy markets, as well as emerging economies in Asia and the Middle
East, we like the company’s long-term growth prospects. Competitive moat is supported by market-leading boiler technology
and expertise in complex engineering projects. Recent pick-up in power orders is a positive. Shares appear undervalued on a
10% FCF yield based on average free cash flow during 2006-09 – a period which may represent a full industry cycle.
June 30, 2010 – Page 57 of 120
…additional insight into Foster Wheeler:
June 30, 2010 – Page 58 of 120
Hewlett-Packard (HPQ) – Owned by Dodge & Cox, Cap Re
Palo Alto, CA, 650-857-1501
www.hp.com
Technology: Computer Hardware, Member of S&P 500
Trading Data
Price: $47.98 (as of 6/18/10)
52-week range: $36.67 - $54.75
Month
Latest
Ago
This quarter
$1.07
$1.07
Next quarter
1.26
1.26
FYE 10/31/10
4.49
4.50
Ownership Data
FYE 10/31/11
FYE 10/30/12
LT growth
EPS Surprise
5/18/10
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
10/31/03
73,061
19,203
2,896
2,539
0.83
3,047
6,057
1,995
4,062
14,591
40,954
19,250
74,716
1,080
25,469
6,494
36,970
0
37,746
34%
# of
Ests
30
29
31
4.97
5.40
4.97
5.43
34
7
12.0%
14.0%
4
Actual
$1.09
15x
11x
10x
9x
1.0x
EV/ LTM EBIT
P / tangible book
10x
51.4x
Greenblatt Criteria
Estimate
$1.05
Fiscal Years Ended
10/31/04 10/31/05 10/31/06 10/31/07 10/31/08
79,905
86,696
91,658
104,286
118,364
19,094
20,256
22,231
25,399
28,665
4,157
3,367
6,560
8,719
10,473
3,497
2,398
6,198
7,264
8,329
1.15
0.82
2.18
2.68
3.25
3,024
2,879
2,782
2,630
2,483
5,088
8,028
11,353
9,615
14,591
2,126
1,995
2,536
3,040
2,990
2,962
6,033
8,817
6,575
11,601
12,974
13,929
16,422
11,445
10,246
42,901
43,334
48,264
47,402
51,728
19,931
20,030
20,205
25,852
40,297
76,138
77,317
81,981
88,699
113,331
2,511
1,831
2,705
3,186
10,176
28,588
31,460
35,850
39,260
52,939
4,623
3,392
2,490
4,997
7,676
38,574
40,141
43,837
50,173
74,389
0
0
0
0
0
37,564
37,176
38,144
38,526
38,942
44%
40%
>100%
>100%
>100%
Valuation
P/E FYE 10/31/09
P/E FYE 10/31/10
P/E FYE 10/31/11
P/E FYE 10/30/12
EV/ LTM revenue
LTM EBIT yield
LTM pre-tax ROC
10/31/09
114,552
27,028
10,136
7,660
3.14
2,388
13,379
3,695
9,684
13,334
52,539
39,709
114,799
1,850
43,003
13,980
74,282
0
40,517
>100%
LTME
4/30/10
120,388
28,219
11,207
8,533
3.52
2,377
12,787
3,808
8,979
14,170
51,695
41,331
115,994
3,934
42,271
13,728
72,483
0
43,511
>100%
FQE
4/30/09
27,383
6,438
2,293
1,721
0.71
2,394
4,964
842
4,122
12,916
47,186
40,112
108,515
5,702
41,583
12,978
67,973
0
40,542
n/m
10%
>100%
FQE
4/30/10
30,849
7,248
2,858
2,200
0.91
2,345
3,091
950
2,141
14,170
51,695
41,331
115,994
3,934
42,271
13,728
72,483
0
43,511
n/m
$80
$70
$60
$50
$40
$30
$20
$10
$0
May 01
May 02
May 03
May 04
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 59 of 120
BUSINESS OVERVIEW
Hewlett-Packard (H-P) operates in five segments:
Enterprise Business (47% of FY09 revenue): provides
consulting and outsourcing (65% of FY09 segment revenue);
storage and server products (29%); and software (7%).
Personal Systems (31% of FY09 revenue): provides IT
products for commercial and consumer markets. Notebooks
and desktops were 57% and 36% of FY09 segment revenue.
Imaging and Printing (21% of FY09 revenue): provides
printer hardware and supplies, as well as scanning devices.
Supplies contributed 69% to FY09 segment revenue.
Financial Services: provides leasing, financing, and other
financial services for large global and enterprise customers.
Corporate Investments: includes 3Com and other assets.
•
•
•
•
•
•
World’s largest IT company by revenue. H-P has
scale and strong brand recognition in most markets.
Enterprise business is largest profit driver.
Ships one out of every three servers worldwide,
~52 million printers and 48 million PCs annually.
Chairman and CEO Mark Hurd (53) joined in
2005 after weak results under ex-CEO Fiorina.
Grew EBIT margin for 20th consecutive quarter
y-y in F2Q10. GAAP margin rose 90bps y-y to
9.3%. Non-GAAP margin rose 80bps y-y to 11.2%.
Guiding for GAAP EPS of $3.76-3.81 in FY10
(up 20-21% y-y), on revenue up 8-9% y-y. NonGAAP EPS is forecast $4.45-4.50 (up 16-17% y-y).
Consistently buying back shares with $37+ billion
spent on 932 million shares from FY06 to 4/2010.
•
•
•
EBIT margins are at 5-year high across business
segments. With gross margin stable at 23-24%,
further EBIT margin improvement will be difficult.
End-markets exhibit rapid technological change
and strong competition. Scale may be a hindrance
versus rivals focused on single product areas.
$3.5 billion of net debt at April 30 and ~$5 billion
of unfunded pension-related liability at FY-end ‘09.
IBM
CAJ
DELL
HPQ
EV
($mn)
175,350
40,830
19,110
110,690
EV /
Rev.
1.8x
1.1x
.3x
.9x
P/
Tang.
Book
n/m
1.7x
n/m
49.2x
This
FY
P/E
11x
18x
10x
10x
Next
FY
P/E
10x
15x
9x
9x
2006
91.7
6%
2007
104.3
14%
2008
118.4
13%
2009
114.6
-3%
YTD
4/30/10
62.0
10%
37%
32%
29%
2%
-1%
36%
35%
27%
2%
-1%
38%
36%
25%
2%
-1%
47%
31%
21%
2%
-1%
45%
33%
20%
2%
-1%
3%
9%
6%
10%
25%
7%
19%
16%
4%
20%
-17%
-19%
6%
21%
6%
9%
4%
15%
7%
-2%
7%
11%
5%
15%
7%
-2%
8%
13%
6%
15%
7%
-2%
9%
14%
5%
18%
8%
-3%
9%
15%
5%
17%
9%
-3%
9%
81%
19%
81%
19%
78%
22%
65%
35%
67%
33%
7%
2%
15%
11%
9%
33%
-19%
53%
15%
1%
25%
22%
24%
25%
24%
25%
24%
24%
24%
24%
23%
24%
23%
24%
23%
35%
65%
33%
67%
31%
69%
36%
64%
n/a
n/a
6%
6%
8%
17%
6%
17%
12%
-10%
n/a
n/a
4%
7%
3%
3%
19
-3%
3%
7%
3%
3%
24
-5%
3%
7%
3%
3%
20
-6%
2%
7%
4%
3%
14
-4%
2%
7%
4%
3%
17
-2%
Major acquisitions during the period include 3Com (included in Corporate
segment) in April 2010 and EDS (Enterprise segment) in August 2008.
Calculated as sum of days sales outstanding in accounts receivable and days
of supply in inventory less days of purchases outstanding in accounts payable.
2
MAJOR HOLDERS
Insiders <1% | Vanguard 4% | FMR 4% | Dodge & Cox 3%
RATINGS
MV
($mn)
163,010
48,380
25,330
107,200
1
FYE October 31
2005
Revenue ($bn)
86.7
∆ revenue
8%
Enterprise
38%
Personal
31%
Imaging and printing
29%
Financial services
2%
Corporate/eliminations
-1%
Enterprise
12%
Personal
9%
4%
Enterprise
6%
Personal
2%
14%
Financial services
10%
Corporate
-3%
Total EBIT margin
4%
Products
80%
Services
20%
Products
8%
Services
12%
Gross margin by type:
Products
24%
Services
21%
Total gross margin
23%
U.S.
35%
International
65%
U.S.
4%
International
11%
R&D
4%
Net income
3%
D&A
3%
Capex
2%
Cash conversion, days2
22
-5%







THE BOTTOM LINE
H-P has undergone a revival under CEO Hurd, who has doubled EBIT margin since joining in 2005. Since then, services
have grown as a percentage of revenue with enterprise business becoming the clear profit contributor (aided by acquisitions
such as EDS). Given changing technology and strong industry competition, historically high profitability may not be
sustainable through future product cycles. In addition, reinvestment of capital at attractive risk-adjusted rates of return is a
challenge given H-P’s size and diversification. We are therefore not enticed by the shares’ high-single digit earnings yield.
June 30, 2010 – Page 60 of 120
…additional insight into Hewlett-Packard:
June 30, 2010 – Page 61 of 120
June 30, 2010 – Page 62 of 120
Lear (LEA) – Owned by Lasry, GS, Paulson
Southfield, MI, 248-447-1500
www.lear.com
Consumer Cyclical: Auto & Truck Parts
Trading Data
Price: $72.10 (as of 6/18/10)
52-week range: $39.29 - $84.97
Month
Latest
Ago
This quarter
$1.20
$1.08
Next quarter
0.58
0.54
FYE 12/31/10
3.93
3.56
Ownership Data
FYE 12/31/11
FYE 12/30/12
LT growth
EPS Surprise
5/6/10
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
12/31/03
15,747
1,346
534
381
5.31
67
586
376
211
169
3,375
2,940
8,571
21
3,582
2,057
6,314
0
2,258
37%
# of
Ests
7
6
7
6.65
7.34
6.38
7.42
8
4
21.7%
n/a
1
Actual
$1.23
Estimate
$0.86
Fiscal Years Ended
12/31/04 12/31/05 12/31/06 12/31/07 12/31/08
16,960
17,089
17,839
15,995
13,571
1,402
736
928
1,152
748
564
(1,129)
(653)
323
(541)
422
(1,382)
(708)
242
(690)
5.65
(20.57)
(10.35)
3.09
(8.93)
68
67
69
77
77
676
561
285
488
164
429
568
348
202
168
247
(8)
(62)
285
(4)
585
197
503
601
1,592
4,372
3,846
3,890
3,718
3,674
3,090
1,983
2,039
2,093
1,512
9,944
8,288
7,851
7,800
6,873
668
33
65
110
2,224
4,648
4,107
3,887
3,604
4,610
1,867
2,243
2,435
2,345
1,303
7,214
7,177
7,249
6,710
6,674
0
0
0
0
0
2,730
1,111
602
1,091
199
34%
-75%
-59%
31%
-56%
12/31/09
9,740
360
894
814
11.57
70
(175)
119
(294)
1,554
3,787
808
6,073
45
2,401
927
3,984
408
1,681
97%
Valuation
P/E FYE 12/31/09
P/E FYE 12/31/10
P/E FYE 12/31/11
P/E FYE 12/30/12
EV/ LTM revenue
6x
18x
11x
10x
0.3x
EV/ LTM EBIT
P / tangible book
2x
2.6x
Greenblatt Criteria
LTM EBIT yield
LTM pre-tax ROC
LTME
4/3/10
10,510
690
1,357
972
15.19
63
201
133
68
1,300
4,012
610
6,233
46
2,746
699
4,099
214
1,921
>100%
45%
>100%
FQE
4/4/09
2,168
(75)
(257)
(265)
(3.42)
77
(337)
21
(358)
1,234
3,352
1,465
6,439
2,221
4,445
1,302
6,528
0
(89)
n/m
FQE
4/3/10
2,939
255
80
66
1.22
42
39
35
4
1,300
4,012
610
6,233
46
2,746
699
4,099
214
1,921
n/m
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
May 10
June 30, 2010 – Page 63 of 120
BUSINESS OVERVIEW
Lear is a tier I supplier of automotive parts.
The Seating segment includes seat systems and components.
Electrical Power Management includes wiring, terminals and
connectors, junction boxes and electronic modules.
Lear filed for Chapter 11 in July ’09 and exited in November.
•
•
•
•
•
•
•
•
#2 in global seating systems, based on revenue, in
a $40 billion market in 2009. Lear is #2 in North
America, #3 in Europe, and a leader in China/India.
#3 in North America and #4 in Europe in wire
harnesses. Global target market for the company’s
electrical business is estimated at $35-40 billion.
Revenue drivers: 1) number of vehicles produced
by the automotive manufacturers and 2) level of
content Lear produces for specific platforms. GM,
Ford and BMW are three largest customers globally
accounting for 20%, 19% and 12% of 2009 revenue.
Global vehicle production increased 47% y-y in
1Q10 to 17.2 million units (Europe represented 26%
of units, China 19%, and North America 17%).
13% of 2009 revenue is from Asia, where Lear is
“aggressively expanding” sales and operations.
Guiding for pf EBIT of $375-425 million in 2010,
on revenue of $11.0 billion (+13%). FCF is forecast
at $150-200 million after $175 million of capex.
$555 million of net cash as of April 3. Lear has no
material debt maturities until 2018 after recent debt
refinancing (gross debt at 4/3/10: $745 million).
Shares trade at 11-12% EBIT-to-EV yield based
on 2010 EBIT guidance, excluding special items.
•
•
•
•
2007
-10%
16.0
2008
-15%
13.6
2009
-28%
9.7
YTD
4/3/10
36%
2.9
76%
19%
4%
79%
21%
0%
80%
20%
0%
79%
21%
0%
5%
3%
-12%
-8%
-27%
-32%
32%
50%
6%
1%
1%
-1%
4%
4%
2%
n/m
-1%
2%
3%
-8%
n/m
-2%
-1%
6%
4%
n/m
-2%
4%
28%
7%
15%
10%
40%
21%
5%
19%
10%
46%
16%
2%
20%
11%
51%
n/a
n/a
n/a
n/a
n/a
7%
4%
2%
2%
1%
6%
4%
-5%
2%
1%
4%
5%
8%
3%
1%
9%
4%
2%
2%
1%
Financials reflect “fresh-start” accounting following Lear’s exit from Chapter 11
on November 9, 2009. Prior figures are based on predecessor company.
Divested European and North American interior businesses in October 2006
and March 2007, respectively, in transactions involving WL Ross and Franklin.
2
MAJOR HOLDERS*
CEO Rossiter <1% | Other insiders <1% | Anchorage 8%
Avenue 8% | D.E. Shaw 5% | Jennison 4% | Paulson 3%
* Based on inclusion of shares issuable upon conversion of preferred stock,
warrants, restricted stock units (RSUs) and options, as applicable.
•
1
FYE December 31
∆ revenue
Revenue ($bn)
Seating
Electrical
Interior2
Revenue growth by selected segment:
Seating
Electrical
Seating
Electrical
Interior2
Corporate
Total EBIT margin
U.S.
Canada
Germany
Mexico
Other countries
Gross profit
SG&A
Net income
D&A
Capex
Competition. In seating systems, key competitors
are Johnson Controls, Faurecia, Toyota Boshoku,
TS Tech, and Magna. In the electrical business,
rivals include Delphi, Yazaki, Sumitomo and Leoni.
Bargaining power of customers (compounded by
customer concentration). Cost improvements may
have to be passed on to customers to retain business,
making sustainable margin expansion challenging.
“Expect operational restructuring actions and
related investments to continue for the next few
years.” Lear had $160 million of restructuring costs
in 2009 and expects another $110 million in 2010.
Raw material and commodity cost volatility.
Material cost represented 68% of revenue in 1Q10.
Dilution: 5.2 million of convertible preferred stock,
3.7 million warrants and 1.3 million RSUs at 4/3/10.
JCI
MGA
DAN
LEA
MV
($mn)
18,670
7,890
1,570
3,300
RATINGS
EV
($mn)
21,280
6,650
2,260
2,960
EV /
Rev.
.7x
.3x
.4x
.3x
P/
Tang.
Book
8.0x
1.2x
4.7x
2.5x
This
FY
P/E
14x
n/a
20x
18x
Next
FY
P/E
12x
n/a
9x
11x







THE BOTTOM LINE
Lear has one of the strongest auto parts franchises in the world. After exiting bankruptcy in 2009, Lear is in good shape to
benefit from the upturn in automotive production in 2010. Exposure to GM and Ford (~40% of revenue) has become a
positive given their recent resurgence. While valuation is undemanding at a low-teens EBIT-to-EV yield based on 2010
guidance, high returns on capital may not be sustainable given intense competition and bargaining power of customers.
June 30, 2010 – Page 64 of 120
…additional insight into Lear:
June 30, 2010 – Page 65 of 120
Local.com (LOCM) – Owned by Essex, Bridgeway
Irvine, CA, 949-784-0800
www.local.com
Trading Data
Price: $7.94 (as of 6/18/10)
52-week range: $2.63 - $8.85
Month
Latest
Ago
This quarter
$0.19
$0.17
Next quarter
0.18
0.17
FYE 12/31/10
0.72
0.66
# of
Ests
3
3
3
Valuation
P/E FYE 12/31/09
P/E FYE 12/31/10
P/E FYE 12/31/11
P/E FYE 12/30/12
EV/ LTM revenue
n/m
11x
9x
n/a
1.9x
Ownership Data
FYE 12/31/11
FYE 12/30/12
EV/ LTM EBIT
P / tangible book
596x
26.5x
LT growth
EPS Surprise
4/22/10
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
12/31/03
9
5
1
0
0.02
2
(2)
0
(2)
1
2
0
2
4
8
0
8
0
(6)
n/m
0.84
n/a
0.79
n/a
2
n/a
n/a
n/a
n/a
Actual
$0.16
Greenblatt Criteria
Estimate
$0.13
Fiscal Years Ended
12/31/04 12/31/05 12/31/06 12/31/07
12/31/08
19
18
14
22
38
9
7
9
18
33
2
(7)
(14)
(11)
(9)
2
(7)
(13)
(18)
(9)
0.29
(0.75)
(1.44)
(1.58)
(0.60)
3
9
9
12
14
0
(3)
(9)
(8)
(4)
1
4
1
1
0
(0)
(7)
(10)
(9)
(5)
35
14
5
16
12
37
16
8
20
18
0
16
15
16
15
38
35
25
38
34
0
0
0
0
0
4
4
4
5
7
0
0
0
0
0
4
4
4
5
7
0
0
0
0
0
34
31
21
33
27
n/m
n/m
n/m
n/m
n/m
LTM EBIT yield
LTM pre-tax ROC
12/31/09
56
51
(3)
(6)
(0.44)
14
3
9
(5)
10
19
20
41
3
18
0
18
0
23
n/m
LTME
3/31/10
64
48
0
(3)
(0.19)
14
2
6
(4)
11
22
20
44
3
20
0
20
0
24
n/m
FQE
3/31/09
11
4
(3)
(3)
(0.23)
14
4
4
(1)
11
17
19
37
0
14
0
14
0
24
n/m
0%
n/m
FQE
3/31/10
19
8
0
0
0.01
15
2
2
0
11
22
20
44
3
20
0
20
0
24
n/m
$35
$30
$25
$20
$15
$10
$5
$0
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 66 of 120
BUSINESS OVERVIEW
Local.com provides U.S. business directories on the Internet.
~70,000 firms pay to advertise on company/partner websites.
•
•
•
•
•
•
•
•
•
Owns U.S.-based “local” Internet search engine
Local.com, an online business directory providing
information on 14+ million businesses. Local.com
has 15+ million unique visitors per month.
Proprietary geographic web-indexing technology
(four patents issued, nine pending) provides relevant
search results for local businesses to consumers
searching for products or services in their local area.
Private-label search is additional revenue source.
As part of the Network segment, the company’s
directories are integrated into 750+ websites of
regional media partners such as local newspapers.
Advertising revenue model. Sales of advertising to
local businesses on Local.com and private-label
sites accounted for 91% of 2009 revenue. Pay-perclick ads generated 81% of revenue in 2009.
Benefits from shift in business ad spending to the
Internet. Local search is part of a $29+ billion U.S.
online ad industry. The Kelsey Group forecasts U.S.
local search will be worth $8 billion by 2014.
Raised guidance in June. 2010 revenue is expected
at $87-90 million, up 55-60% y-y (prior: $81-84
million). While 2Q10 adj. EPS guidance is positive,
this excludes items (FCF was roughly flat in 1Q10
despite adj. net income being positive $2.6 million).
CEO Clarke (41) has been chairman since 1999.
$8 million net cash as of March 31. The company
also had $46 million federal NOLs at yearend 2009.
EV-to-revenue is 1.4x (2010 guidance midpoint).
•
•
•
•
Depends on other search engines for traffic. 57%
of traffic on Local.com and private-label partner
sites in 2009 was from rival search engines. The
company paid $26 million, including $18 million to
Google, to drive consumers to the Local.com site.
81% of 2009 revenue attributable to ad partners,
and rivals, such as Yahoo! (45%) and SuperMedia
(23%), who provide the company with advertiser
listings. Contracts are generally short-term.
History of negative FCF. 2005-09 free cash flow is
-$36 million in total (year ended 3/10: -$4 million).
Dilution. 3.7 million options (avg exercise price:
$4.34/share) and 2.8 million warrants (avg ex. price:
$6.22/share) were outstanding as of March 31.
1
FYE December 31
∆ revenue 1
Revenue ($mn)
Owned and operated 2
Network 3
Sales and advertiser services 4
Revenue growth by segment: 5
Owned and operated
Network
Sales and advertiser services
% of revenue by product:
Pay-Per-Click (PPC)
Local Promote (subscription)
Banner advertisement
Local Connect (license)
% of revenue by major customer:
Yahoo! (YHOO)
SuperMedia (SPMD)
R&D
EBIT
Net income
D&A
Capex 6
Employees, ending 7
2007
51%
17%
22
2008
78%
9%
38
2009
47%
16%
56
YTD
3/31/10
68%
13%
19
82%
18%
0%
80%
17%
3%
65%
21%
13%
58%
28%
15%
n/a
n/a
n/a
74%
64%
1372%
20%
91%
465%
30%
231%
112%
88%
1%
9%
2%
91%
4%
5%
1%
81%
13%
5%
0%
79%
15%
6%
0%
49%
15%
54%
18%
45%
23%
49%
21%
12%
-52%
-85%
10%
2%
68
24%
8%
-23%
-22%
5%
1%
74
24%
6%
-6%
-11%
6%
16%
86
1%
6%
3%
1%
8%
8%
97
1%
2009 revenue growth ex. M&A was 36%. 2 Consists of Local.com.
Includes a private label local syndication network of 750+ U.S. regional media
sites and a local distribution network for the company’s advertising feeds.
4
Includes the subscription ad product Local Promote for advertiser customers.
5
2007 figures are not available due to a change in segment reporting structure.
6
7
Includes purchases of intangible assets.
3/31/10 figure is an estimate.
3
YHOO
SPMD
LOOK
LOCM
MV
($mn)
20,510
370
20
120
EV
($mn)
17,400
2,830
0
110
EV /
Rev.
2.7x
1.4x
n/m
1.7x
P/
Tang.
Book
2.4x
n/m
.8x
25.0x
This
FY
P/E
22x
4x
n/m
10x
Next
FY
P/E
19x
23x
n/m
9x
MAJOR HOLDERS
CEO Clarke 7% | Other insiders 4% | Essex Investment 4% |
BlackRock 2% | Bridgeway 1% | RenTech 1% | Driehaus 1%
RATINGS







THE BOTTOM LINE
Internet-based, U.S. business directory Local.com has potentially valuable assets in the highly-trafficked namesake website,
proprietary web-indexing technology, and a scalable advertising platform. However, management has not been able to
monetize these assets to date. Although recent profitability improvements deserve attention, we are concerned that attractive
economics cannot be sustained as long as the company remains heavily dependent on third parties such as Google and
Yahoo! for both visitor traffic and advertisers. As we do not see this changing, the shares appear to be a “hope” investment.
June 30, 2010 – Page 67 of 120
…additional insight into Local.com:
CLOSER LOOK AT BUSINESS SEGMENTS – EXCERPTS FROM COMPANY PRESENTATION, JUNE 2010
Three Business Units:
Owned & Operated Sites (O&O) – 65% of revenue, up 20% in 2009
June 30, 2010 – Page 68 of 120
Network – 21% of revenue, up 90% in 2009
Sales & Advertiser Services (SAS) – 13% of revenue, up 485% in 2009
June 30, 2010 – Page 69 of 120
McGraw-Hill (MHP) – Owned by Cap World, T Rowe, Morgan Stanley
New York, NY, 212-512-2000
www.mcgraw-hill.com
Services: Printing & Publishing, Member of S&P 500
Trading Data
Price: $30.10 (as of 6/18/10)
52-week range: $23.55 - $36.94
Month
Latest
Ago
This quarter
$0.62
$0.63
Next quarter
1.14
1.15
FYE 12/31/10
2.59
2.65
Ownership Data
FYE 12/31/11
FYE 12/30/12
LT growth
EPS Surprise
4/27/10
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
12/31/03
4,890
2,872
990
688
1.79
381
1,382
361
1,021
696
2,256
2,137
5,365
26
1,994
0
2,808
0
2,557
>100%
# of
Ests
8
8
10
2.87
3.00
2.94
3.00
10
1
7.2%
8.7%
4
Actual
$0.33
13x
12x
10x
10x
1.6x
EV/ LTM EBIT
P / tangible book
7x
n/m
Greenblatt Criteria
Estimate
$0.25
Fiscal Years Ended
12/31/04 12/31/05 12/31/06 12/31/07 12/31/08
5,251
6,004
6,255
6,772
6,355
3,204
3,687
3,868
4,245
3,837
1,175
1,364
1,418
1,677
1,375
756
844
882
1,014
800
1.96
2.21
2.40
2.94
2.51
380
375
356
336
316
1,064
1,560
1,509
1,717
1,169
387
395
426
545
385
676
1,165
1,083
1,172
783
681
749
354
396
472
2,426
2,591
2,258
2,344
2,303
2,382
2,807
2,833
2,909
2,847
5,841
6,396
6,043
6,391
6,080
5
3
2
0
70
1,947
2,225
2,468
2,658
2,531
1
0
0
1,197
1,198
2,857
3,283
3,363
4,785
4,798
0
0
0
0
0
2,985
3,113
2,680
1,607
1,282
>100%
>100%
>100%
n/m
n/m
Valuation
P/E FYE 12/31/09
P/E FYE 12/31/10
P/E FYE 12/31/11
P/E FYE 12/30/12
EV/ LTM revenue
LTM EBIT yield
LTM pre-tax ROC
12/31/09
5,952
3,566
1,256
731
2.33
312
1,321
269
1,052
1,235
2,936
2,690
6,475
0
2,452
1,198
4,628
0
1,847
n/m
LTME
3/31/10
5,994
3,621
1,322
771
2.45
313
1,356
258
1,098
1,235
2,775
2,684
6,289
0
2,206
1,198
4,388
0
1,901
n/m
FQE
3/31/09
1,148
659
124
63
0.20
312
67
53
15
497
2,128
2,846
5,849
160
2,354
1,198
4,614
0
1,235
n/m
14%
n/m
FQE
3/31/10
1,190
714
190
103
0.33
313
103
42
61
1,235
2,775
2,684
6,289
0
2,206
1,198
4,388
0
1,901
n/m
$80
$70
$60
$50
$40
$30
$20
$10
$0
May 01
May 02
May 03
May 04
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 70 of 120
BUSINESS OVERVIEW
McGraw-Hill provides information services in the financial,
education and business data markets.
•
•
•
•
•
•
•
Wide-moat brands: Standard & Poor’s (S&P),
Capital IQ, McGraw-Hill, Platts, J.D. Power.
S&P is the #1 credit ratings provider worldwide in a
consolidated industry, which remains protected by
current financial/regulatory system. S&P, Moody’s
and Fitch have 90%+ combined market share.
Financial services segment is growing again.
Revenue is up 9% y-y in 1Q10 while EBIT margin
grew 100bps to 39.0%, in-line with last 10-year
average margin (peak and trough margins were 45%
in 2007 and 31% in 2001). Credit market services
(S&P’s ratings business) grew revenue 15% y-y.
Credit ratings business benefiting from capital
markets recovery. Transaction revenue grew 34%
in 1Q10 on a surge in debt issuance. Transaction
revenue contributed 31% to credit market services
revenue in 2009, with the rest coming from frequent
issuer annual fees, surveillance and subscriptions.
Capital IQ client base grew 10% y-y in 2009 to
more than 2,900 clients at year-end. Next to S&P
indices, the online financial database should help
diversify the Financial Services segment over time.
Strong balance sheet with marginal net cash at
March 31. Businesses could support debt.
Guiding for 2010 EPS of $2.55-2.65, up 8-12% y-y.
Shares trade at 12% trailing FCF yield and 9%
2010 earnings yield on non-GAAP EPS guidance.
1
FYE December 31
2006 2007
∆ credit market services revenue1
19%
9%
∆ investment services revenue 2
1%
16%
∆ school education revenue
-12%
9%
∆ higher ed./professional/int’l rev.
4%
6%
∆ revenue
4%
8%
Revenue ($bn)
6.3
6.8
Education
40%
40%
Financial services
44%
45%
Information and media
16%
15%
Education
-6%
7%
Financial services
14%
11%
6%
4%
Education
13%
15%
Financial services
44%
45%
5%
6%
Corporate
-3%
-2%
Total EBIT margin
23%
25%
% of financial services revenue by sub-segment:
Credit market services
76%
74%
Investment services
24%
26%
% of education revenue by sub-segment:
School education
53%
53%
Higher education/professional/int’l
47%
47%
U.S.
76%
74%
Europe
14%
15%
Asia
6%
6%
Rest of world
4%
5%
Net income
14%
15%
D&A 3
6%
6%
Capex 4
7%
8%
-5%
-6%
2008
-22%
15%
-5%
1%
-6%
6.4
2009
0%
-4%
-18%
0%
-6%
6.0
YTD
3/31/10
15%
-1%
-9%
8%
4%
1.2
42%
42%
17%
40%
44%
16%
27%
56%
17%
-2%
-13%
4%
-10%
-2%
-10%
1%
9%
-9%
12%
40%
9%
-2%
21%
12%
39%
10%
-2%
21%
-19%
39%
13%
-3%
16%
66%
34%
67%
33%
68%
32%
52%
48%
47%
53%
35%
65%
72%
16%
7%
5%
71%
16%
8%
5%
n/a
n/a
n/a
n/a
13%
7%
6%
-6%
12%
7%
5%
-1%
9%
5%
3%
0%
Comprises Standard & Poor’s ratings business.
Comprises Standard & Poor’s indices business and Capital IQ, among others.
Includes amortization of prepublication costs (in Education segment).
4
Includes investment in prepublication costs and technology project capex.
2
3
•
•
•
Risks to S&P ratings business, as S&P ratings are
perceived to have failed investors. The rating
methodology and business model have come under
scrutiny from regulators. The company is also
subject to widespread litigation. While there is no
imminent move to force S&P to fundamentally
change its business model, such a change could
significantly impair S&P’s franchise value.
Financial Services EBIT margin to decline
“about 100 basis points” in 2010, largely due to
higher costs to comply with new regulatory burdens.
School Education revenue remains pressured,
declining 9% y-y in 1Q10. Performance is unlikely
to get better quickly given weak U.S. state budgets.
MAJOR HOLDERS
CEO McGraw III 3% | Other insiders <1% | Cap World 9% |
T. Rowe 6% | FMR 4% | Vanguard 4% | State Street 4%
RATINGS







THE BOTTOM LINE
McGraw-Hill remains a wide-moat business despite challenges to the Standard & Poor’s credit ratings franchise. Whether
those challenges ultimately prove successful still remains to be seen. The company’s failure to properly evaluate credit risks,
and conflicts of interest arising from compensation by issuers, have left S&P exposed to adverse regulatory action and
litigation. This may negatively affect S&P’s earnings power, potentially impairing the franchise value of the ratings business.
However, regulators have proven toothless so far, and it is doubtful whether any changes will materially affect the business
model. In the meantime, underlying performance continues to improve. Given unique brands, a strong balance sheet, and
global growth prospects, shares are cheap trading on a 12% trailing FCF yield. Planned share repurchase is another positive.
June 30, 2010 – Page 71 of 120
…additional insight into McGraw-Hill:
UPDATE ON REGULATORY ENVIRONMENT –
June 30, 2010 – Page 72 of 120
…additional insight into McGraw-Hill:
UPDATE ON 2010 OUTLOOK –
June 30, 2010 – Page 73 of 120
Oshkosh (OSK) – Owned by Aronson, DFA
Oshkosh, WI, 920-235-9151
www.oshkoshcorporation.com
Consumer Cyclical: Auto & Truck Manufacturers, Member of S&P MidCap 400
Trading Data
Price: $35.26 (as of 6/18/10)
52-week range: $12.68 - $44.57
Month
Latest
Ago
This quarter
$1.90
$1.86
Next quarter
1.24
1.15
FYE 9/30/10
8.47
8.31
Ownership Data
FYE 9/30/11
FYE 9/29/12
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
9/30/03
1,926
292
129
76
1.08
67
105
25
81
19
467
440
1,083
70
468
2
564
0
519
66%
# of
Ests
14
14
14
3.54
3.73
3.45
3.75
14
6
LT growth
12.0%
12.8%
3
EPS Surprise
4/29/10
Actual
$3.22
Estimate
$2.61
Fiscal Years Ended
9/30/04 9/30/05 9/30/06 9/30/07 9/30/08
9/30/09
2,262
2,960
3,427
6,090
6,878
5,253
364
495
608
1,082
1,170
703
180
267
326
611
617
(980)
113
160
206
265
76
(1,160)
1.57
2.18
2.76
3.83
3.87
(15.26)
68
71
73
74
74
76
135
212
177
406
390
899
30
43
56
102
118
62
105
169
121
304
272
837
30
128
22
75
88
530
711
954
1,003
2,195
2,152
2,143
526
528
778
3,598
3,334
2,045
1,452
1,718
2,111
6,400
6,082
4,768
99
43
136
82
94
15
680
776
882
1,548
1,463
1,659
3
3
2
2,976
2,681
2,023
816
900
1,049
5,006
4,693
4,254
0
0
0
0
0
0
636
819
1,062
1,394
1,389
514
78%
96%
86%
79%
55%
-128%
Valuation
P/E FYE 9/30/09
P/E FYE 9/30/10
P/E FYE 9/30/11
P/E FYE 9/29/12
EV/ LTM revenue
n/m
4x
10x
9x
0.5x
EV/ LTM EBIT
P / tangible book
4x
n/m
Greenblatt Criteria
LTM EBIT yield
LTM pre-tax ROC
25%
>100%
LTME
3/31/10
7,969
1,523
989
576
5.55
80
1,340
83
1,257
845
2,624
1,969
5,166
1
2,036
1,615
4,202
0
965
>100%
FQE
3/31/10
2,864
628
494
293
3.22
90
259
25
234
845
2,624
1,969
5,166
1
2,036
1,615
4,202
0
965
n/m
FQE
3/31/09
1,237
137
(1,163)
(1,192)
(15.85)
74
44
1
43
108
1,809
2,056
4,445
26
1,311
2,492
4,373
0
73
n/m
$70
$60
$50
$40
$30
$20
$10
$0
May 01
May 02
May 03
May 04
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 74 of 120
BUSINESS OVERVIEW
Oshkosh manufactures commercial, fire, emergency and
military vehicles, access equipment, and vehicle bodies.
•
•
•
•
Strong brands in specialty vehicle markets.
Oshkosh is the #1 global manufacturer of aerial
work platforms/telehandlers (JLG brand), fire trucks
(Pierce), and airport vehicles. In North America, it
is the #1 maker of medium/heavy military trucks,
concrete mixers (London, McNeilus)/batch plants
(CON-E-CO), and refuse truck bodies (McNeilus),
as well as #2 in wreckers and carriers (Jerr-Dan).
U.S. military spending drives fiscal YTD growth.
The M-ATV contract to supply all-terrain-vehicles
for the Afghanistan war contributed $2.7 billion of
incremental revenue, representing all of y-y growth.
FMTV shipments to start in 1Q of fiscal 2011.
The “Family of Medium Tactical Vehicles” contract
from the U.S. Army runs for five years and is for up
to 23,000 trucks including support services. Initial
orders for 5,200 trucks are worth $690 million.
Proprietary component designs include the
suspension system for M-ATVs (sole-supplier),
Pierce fire truck design (without bulky pumphouse),
McNeilus compressed natural gas-powered refuse
vehicles, and telematics for JLG equipment.
•
•
•
•
•
52% of fiscal YTD revenue is at risk as M-ATV
contract deliveries are expected to end by
November 2010. Another significant U.S. military
contract (heavy tactical vehicles) expires in 2012.
Non-defense businesses face “soft markets” due
to construction woes, strained municipal budgets.
Changing U.S. defense/budget priorities as 77%
of fiscal YTD revenue is from U.S. government.
Government contracts are largely fixed-price,
exposing the company to potential cost-overruns.
$771 million of net debt as of March 31. $1.1
billion of total $1.6 billion debt matures in 12/2013.
TEX
FSS
FRPT
MLR
OSK
MV
($mn)
2,270
320
310
170
3,060
EV
($mn)
2,060
610
180
130
3,830
EV /
Rev.
.5x
.8x
.2x
.5x
.5x
P/
Tang.
Book
1.4x
n/m
1.0x
1.3x
n/m
This
FY
P/E
n/m
16x
12x
23x
4x
Next
FY
P/E
22x
9x
9x
23x
10x
1
FYE September 30
2005 2006
31%
16%
∆ revenue
25%
-2%
∆ backlog, ending
Revenue ($bn)
2.8
3.2
Defense
38%
41%
Access equipment
0%
0%
Fire & emergency
29%
28%
Commercial
33%
31%
Defense
37%
24%
Access equipment
n/m
n/m
Fire & emergency
43%
12%
Commercial
24%
11%
EBIT margin by segment (non-GAAP): 2
Defense
20%
18%
Access equipment
n/m
n/m
Fire & emergency
10%
10%
Commercial
3%
6%
Corporate
-2%
-2%
Total EBIT margin
10%
10%
U.S.
84%
82%
International
16%
18%
Gross profit
17%
18%
EBIT (as reported)
10%
10%
Net income
6%
6%
D&A
1%
1%
Capex
2%
2%
Period-end backlog by segment ($bn): 3
Defense
1.2
0.9
Access equipment
0.0
0.0
Fire & emergency
0.5
0.6
Commercial
0.2
0.4
Total backlog
1.9
1.9
Tangible equity/assets
19%
23%
∆ shares out (avg) 4
4%
3%
2007
90%
66%
6.1
2008
13%
-26%
6.9
2009
-24%
139%
5.3
YTD
3/31/10
106%
53%
5.3
23%
41%
18%
18%
27%
44%
17%
12%
49%
20%
21%
10%
78%
9%
9%
5%
7%
n/m
23%
6%
33%
22%
4%
-24%
37%
-66%
-1%
-37%
265%
-27%
-12%
-12%
17%
11%
10%
7%
-1%
10%
14%
12%
8%
1%
-2%
9%
16%
-19%
8%
0%
-2%
4%
19%
13%
9%
2%
-1%
16%
77%
23%
72%
28%
85%
15%
92%
8%
18%
10%
5%
2%
1%
17%
9%
4%
2%
1%
13%
-19%
-22%
3%
1%
21%
15%
9%
2%
1%
1.6
0.9
0.6
0.2
3.2
-46%
1%
1.2
0.3
0.6
0.2
2.4
-75%
1%
4.9
0.1
0.6
0.1
5.6
-64%
3%
4.3
0.2
0.5
0.1
5.1
-53%
20%
Figures reflect acquisition of JLG in December 2006, which created the
access equipment segment. YTD revenue includes $2.7 billion from the M-ATV
defense-related program, which commenced in 4Q of fiscal 2009.
2
Excludes impact of non-cash intangible asset impairment charges.
3
Backlog excludes unfunded portions of the FHTV, MTVR, ID/IQ, LVSR and
FMTV contracts. 2005-07 backlog includes discontinued operations.
4
YTD share increase reflects issuance of 15 million shares in August 2009 at
$25.00 per share for net proceeds of $358 million (used to repay debt).
MAJOR HOLDERS
CEO Bohn 1% | Other insiders 2% | Vanguard 4% | Invesco
4% | FMR 3% | Columbia Wanger 3% | DFA 3%
RATINGS







THE BOTTOM LINE
Strong momentum in Oshkosh’s military business is masking weakness in segments dependent on construction activity and
municipal budgets. As a key U.S. military contract ends in November 2010, current profitability is not sustainable. However,
new defense wins, including shipments of tactical vehicles for the U.S. Army starting in fiscal 2011, should replace some of
the lost revenue. In other businesses, top brands and a large installed base provide leverage in a recovery. Taking fiscal 2008
EBIT as a “normalized” measure, the resulting mid-teens yield on current enterprise value appears to be a fair valuation.
June 30, 2010 – Page 75 of 120
…additional insight into Oshkosh:
June 30, 2010 – Page 76 of 120
Unisys (UIS) – Owned by MCM, Aston, Acadian
Blue Bell, PA, 215-986-4011
www.unisys.com
Trading Data
Price: $22.79 (as of 6/18/10)
52-week range: $12.40 - $40.41
Month
Latest
Ago
This quarter
$0.53
$0.53
Next quarter
0.83
0.83
FYE 12/31/10
1.47
1.47
# of
Ests
2
2
1
Valuation
P/E FYE 12/31/09
P/E FYE 12/31/10
P/E FYE 12/31/11
P/E FYE 12/30/12
EV/ LTM revenue
5x
16x
9x
n/a
0.3x
Ownership Data
FYE 12/31/11
FYE 12/30/12
EV/ LTM EBIT
P / tangible book
4x
n/m
LT growth
EPS Surprise
4/27/10
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
12/31/03
5,911
1,715
428
259
7.77
33
571
437
134
636
2,258
510
5,470
20
2,054
1,048
4,074
0
1,395
>100%
2.65
n/a
2.65
n/a
2
n/a
8.0%
8.0%
2
Actual
-$0.40
Greenblatt Criteria
Estimate
$0.05
Fiscal Years Ended
12/31/04 12/31/05 12/31/06 12/31/07 12/31/08
5,821
5,759
5,757
5,653
5,233
1,362
1,161
1,010
1,287
1,127
(35)
(162)
(327)
86
41
39
(1,732)
(279)
(79)
(130)
1.14
(50.91)
(8.11)
(2.26)
(3.62)
33
34
34
35
36
470
282
29
173
255
434
382
257
309
295
36
(100)
(228)
(136)
(40)
661
643
719
830
544
2,418
2,153
2,239
2,212
1,638
527
520
498
469
391
5,621
4,029
4,038
4,137
2,824
153
77
2
204
2
2,023
1,815
1,932
1,896
1,426
898
1,049
1,049
1,058
1,059
4,114
4,062
4,102
3,771
4,267
0
0
0
0
0
1,507
(33)
(64)
367
(1,442)
-21%
-69%
-728%
n/m
n/m
LTM EBIT yield
LTM pre-tax ROC
12/31/09
4,598
1,137
346
189
4.75
39
397
201
196
648
1,703
353
2,957
66
1,395
846
4,225
0
(1,268)
n/m
LTME
3/31/10
4,496
1,150
383
202
4.74
40
329
223
107
469
1,551
345
2,712
3
1,230
847
3,932
0
(1,221)
>100%
FQE
3/31/09
1,073
215
15
(24)
(0.77)
37
39
47
(8)
469
1,454
381
2,640
301
1,585
759
4,085
0
(1,445)
n/m
28%
>100%
FQE
3/31/10
998
236
59
(12)
(0.40)
42
(28)
69
(97)
469
1,551
345
2,712
3
1,230
847
3,932
0
(1,221)
n/m
$250
$200
$150
$100
$50
$0
May 01
May 02
May 03
May 04
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 77 of 120
BUSINESS OVERVIEW
Unisys provides IT outsourcing, consulting, and related
services and products to corporate and government clients.
•
•
•
•
•
•
Major IT services and technology provider with
~24,000 staff worldwide. In a fragmented industry,
Unisys has scale to compete against most rivals.
Large presence in public sector which contributed
45% of continuing revenue in 2009 (U.S. federal
government: 21%). The financial sector represented
another 23%, while other commercial clients 32%.
CEO Coleman (58) has lead turnaround since
joining in 2008. By divesting non-core assets,
reducing costs by $500 million (headcount cut by
15%+), and focusing on fewer markets (sacrificing
revenue growth), Coleman has improved margins.
EBIT nearly quadrupled y-y in 1Q10 to $59
million, despite a 12% y-y revenue decline, on a
constant-currency basis. This reflects better sales of
high-margin servers and cost reduction benefits.
$5.9 billion of services backlog at end of March,
representing 169% of 1Q10 annualized services
revenue. Services orders grew “double-digit” y-y.
Sold non-core health information management
business for $135 million in April. Unisys expects
to report a gain on sale of $70 million in 2Q10.
•
•
•
•
Limits to recent profit improvements as majority
is due to cost-cutting. Despite recent growth, the
company’s server product sales have been in longterm decline. The services business faces strong
competition from the likes of IBM and H-P.
$381 million of net debt and large pensionrelated liabilities. Unisys expects to make pensionrelated cash contributions of $115 million in 2010
(2009: $94 million). Pension benefit obligation was
$7.2 billion at yearend 2009 ($1.5 billion unfunded).
People business with fairly low barriers to entry,
especially in consulting and systems integration.
Ongoing cash costs of restructuring are expected
to total $16 million in 2010 (2009: $61 million).
1
FYE December 31
2005 2006 2007
-1%
0%
-2%
∆ revenue
-1% -13%
-5%
Revenue ($bn)
5.8
5.8
5.7
Services
83%
85%
86%
Technology
17%
15%
14%
Services
1%
3%
-1%
Technology
-11%
-13%
-4%
Gross margin by segment:
Services
13%
12%
18%
Technology
55%
49%
53%
Total gross margin
20%
18%
23%
Services
-4%
0%
2%
Technology
5%
2%
10%
Corporate
0%
-6%
-2%
Total EBIT margin
-3%
-6%
2%
% of Services segment revenue by category:
Outsourcing
37%
39%
42%
Systems int./consulting
35%
32%
31%
Infrastructure services
18%
19%
18%
Core maintenance
11%
9%
9%
Services segment revenue growth by category:
Outsourcing
1%
10%
6%
Systems int./consulting
0%
-4%
-6%
% of Technology segment revenue by category:
Enterprise-class servers
81%
80%
80%
Specialized technologies
19%
20%
20%
U.S.
46%
44%
43%
U.K.
14%
15%
16%
Other
40%
41%
41%
U.S.
1%
-4%
-4%
U.K.
-8%
6%
3%
Other
0%
3%
-1%
R&D
5%
4%
3%
Net income
-30%
-5%
-1%
D&A 2
6%
7%
7%
Capex 2
7%
4%
5%
2%
1%
2%
2008
-7%
-3%
5.2
2009
-12%
-12%
4.6
YTD
3/31/10
-7%
-7%
1.0
88%
12%
88%
12%
87%
13%
-22%
-5%
-12%
-11%
-9%
9%
18%
46%
22%
20%
56%
25%
19%
57%
24%
3%
5%
-3%
1%
6%
16%
0%
8%
5%
16%
0%
6%
44%
32%
16%
8%
45%
34%
14%
8%
45%
34%
14%
7%
-2%
-1%
-10%
-9%
-2%
-13%
82%
18%
83%
17%
81%
19%
43%
14%
43%
46%
12%
42%
43%
12%
45%
-8%
-17%
-3%
-6%
-24%
-15%
-16%
-9%
4%
2%
-2%
8%
6%
3%
2%
4%
8%
4%
9%
2%
-2%
7%
7%
15%
YTD figures exclude discontinued HIM and payments businesses (~$210mn
of combined revenue and ~$17 million of combined pre-tax income in 2009).
2
Excludes D&A/investments related to outsourcing assets and software.
MAJOR HOLDERS
Insiders 1% * | Joseph Harrosh 9% | BlackRock 5% | MMI
Investments 5% | Vanguard 5% | Optimum 3% | Aston 3%
* Excludes director Lifflander, who represents MMI Investments.
HPQ
IBM
UIS
MV
($mn)
107,200
163,010
860
EV
($mn)
110,690
175,350
1,240
EV /
Rev.
.9x
1.8x
.3x
P/
Tang.
Book
49.2x
n/m
n/m
This
FY
P/E
10x
11x
14x
Next
FY
P/E
9x
10x
8x
RATINGS







THE BOTTOM LINE
CEO Coleman has executed a notable turnaround despite a weak economy since 2008. With a smaller and more productive
workforce, Unisys is in good shape to sustain recent profitability and benefit from a recovery in customers’ IT spending.
While shares are cheap on an EBIT-to-EV basis, adjusting for the large pension liability lowers risk-reward materially.
June 30, 2010 – Page 78 of 120
…additional insight into Unisys:
June 30, 2010 – Page 79 of 120
United Online (UNTD) – Owned by Blair, LSV, DFA
Woodland Hills, CA, 818-287-3000
www.unitedonline.com
Services: Retail (Specialty Non-Apparel), Member of S&P SmallCap 600
Trading Data
Price: $6.50 (as of 6/18/10)
52-week range: $5.70 - $9.46
Month
Latest
Ago
This quarter
$0.26
$0.26
Next quarter
0.24
0.24
FYE 12/31/10
1.07
1.07
Ownership Data
FYE 12/31/11
FYE 12/30/12
LT growth
EPS Surprise
5/5/10
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
12/31/03
186
136
33
33
0.48
64
48
5
43
204
250
40
308
0
70
0
70
0
238
n/m
# of
Ests
5
5
5
1.09
1.03
1.09
1.03
5
1
15.0%
15.0%
1
Actual
$0.28
8x
6x
6x
6x
0.8x
EV/ LTM EBIT
P / tangible book
6x
n/m
Greenblatt Criteria
Estimate
$0.26
Fiscal Years Ended
12/31/04 12/31/05 12/31/06 12/31/07 12/31/08
449
525
523
514
669
346
414
403
396
455
80
87
74
92
(63)
118
47
42
55
(98)
1.81
0.74
0.62
0.81
(1.33)
61
61
64
67
73
124
137
102
127
164
13
27
25
26
20
111
110
77
102
144
233
244
162
218
105
288
291
220
274
211
147
140
187
173
780
520
521
503
552
1,074
24
17
0
0
22
137
153
145
151
248
77
38
0
0
391
218
199
156
172
729
0
0
0
0
0
302
322
347
381
344
n/m
n/m
n/m
n/m
n/m
Valuation
P/E FYE 12/31/09
P/E FYE 12/31/10
P/E FYE 12/31/11
P/E FYE 12/30/12
EV/ LTM revenue
LTM EBIT yield
LTM pre-tax ROC
12/31/09
990
573
146
66
0.78
84
164
26
137
116
213
757
1,050
24
241
305
617
0
433
n/m
LTME
3/31/10
978
554
134
60
0.70
84
172
25
146
121
205
736
1,019
15
233
291
594
0
425
n/m
FQE
3/31/09
264
149
37
16
0.20
83
44
6
37
125
216
769
1,066
23
239
386
710
0
356
n/m
18%
n/m
FQE
3/31/10
252
131
26
11
0.12
86
52
5
46
121
205
736
1,019
15
233
291
594
0
425
n/m
$35
$30
$25
$20
$15
$10
$5
$0
May 01
May 02
May 03
May 04
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 80 of 120
BUSINESS OVERVIEW
United Online operates in three segments:
FTD provides floral offerings to consumers and retail florists
under the FTD and Interflora brands in N.A. and the
U.K./Ireland. Internet orders represented 86% of orders.
Classmates Media provides online social networking through
Classmates, Stayfriends and Trombi websites, as well as
online loyalty marketing services through mypoints.com.
Communications provides Internet access, email, Internet
security and hosting under the NetZero and Juno brands.
•
•
•
Brands with wide consumer reach. FTD had 6.1
million orders in 2009. Classmates has 60 million
registered accounts, of which 5.0 million are paying.
NetZero/Juno has 1.3 million paying accounts.
Cash-generative business model with negative
working capital and low capex (2-3% of revenue
versus D&A at 6%). FTD has no own stores - it uses
~40,000 third-party retail florists to fulfill orders.
FTD consumer orders increased 7% y-y in 1Q10.
Average order value was flat y-y excl. currency.
•
•
•
•
Guiding for adj. EBITDA down 25-33% y-y in
2Q10 to $46-52 million on revenue down 3-6% to
$244-252 million. EBITDA decline is partly due to
loss of high-margin, “post-transaction” ad revenue
after U.S. legislative pressure resulted in the
company terminating the sales practice in January.
Communications business is in secular decline.
76% of paying accounts get dial-up Internet access.
The company has no viable broadband strategy.
Increasing competition in online social networks
(Facebook) and in floral business (supermarkets).
$184 million of net debt at March 31 (down 35%
y-y). 90%+ of debt is secured by FTD assets only.
ELNK
ACOM
FLWS
UNTD
MV
($mn)
880
780
140
520
EV
($mn)
410
750
180
700
EV /
Rev.
.6x
3.2x
.3x
.7x
P/
Tang.
Book
1.4x
n/m
2.6x
n/m
This
FY
P/E
10x
29x
109x
6x
Next
FY
P/E
12x
22x
12x
6x
MAJOR HOLDERS
CEO Goldston 4% | Other insiders 2% | William Blair 9% |
BlackRock 7% | LSV 5% | Vanguard 4% | Axa 3% | DFA 3%
1
FYE December 31
2006
Revenue ($mn)
523
∆ revenue
0%
FTD
0%
Classmates Media
27%
Communications
73%
FTD
n/m
Classmates Media
64%
Communications
-13%
Adjusted EBITDA margin by segment: 2
FTD
n/m
Classmates Media
18%
Communications
32%
Total adjusted EBITDA margin
28%
Services
100%
Products
0%
Gross margin by category:
Services
77%
Products
n/m
Total gross margin
77%
U.S.
100%
International
0%
Key operating metrics by segment:
FTD: 3
Orders (mn)
n/a
Avg order value ($)
n/a
Classmates Media:
Pay accounts, ending (mn)
2.2
Monthly avg churn 4
4.8%
Monthly avg ARPU ($) 4
3.31
Monthly active accounts (mn)4
11.2
Communications:
Pay accounts, ending (mn)
2.7
% of which Internet access
85%
Monthly avg churn 4
4.6%
Monthly avg ARPU ($) 4
9.46
Monthly active accounts (mn) 4
4.0
R&D
10%
EBIT
14%
Net income
8%
D&A
7%
Capex
5%
5%
2007
514
-2%
2008
669
30%
2009
990
48%
YTD
3/31/10
252
-5%
0%
38%
62%
27%
34%
38%
55%
24%
21%
62%
20%
18%
n/m
39%
-16%
n/m
19%
-20%
n/m
3%
-18%
6%
-14%
-22%
n/m
18%
35%
29%
16%
26%
40%
28%
16%
32%
41%
25%
11%
26%
46%
21%
100%
0%
80%
20%
58%
42%
51%
49%
77%
n/m
77%
79%
25%
68%
80%
26%
58%
80%
24%
52%
99%
1%
90%
10%
83%
17%
77%
23%
6.4
64
6.5
63
6.1
60
1.8
59
3.2
4.7%
3.26
12.6
4.3
4.4%
2.98
16.0
4.9
3.8%
2.53
19.4
5.0
3.2%
2.29
17.5
2.2
83%
4.4%
9.28
3.3
1.7
80%
4.3%
9.31
2.7
1.4
77%
4.4%
9.43
2.2
1.3
76%
4.3%
9.41
2.1
10%
18%
11%
6%
5%
4%
8%
-9%
-15%
6%
3%
10%
7%
15%
7%
6%
3%
14%
6%
10%
4%
6%
2%
4%
Major acquisitions include FTD in August 2008 ($754 million enterprise value)
and MyPoints in April 2006 (included within Classmates Media segment).
Excludes stock-based compensation, restructuring and other special items.
3
2007-08 are pro-forma figures. 4 Based on 4Q of each year.
2
RATINGS







THE BOTTOM LINE
After formation of United Online via the merger of NetZero and Juno in 2001, the company has grown mainly by acquisition
(Classmates in 2004, MyPoints in 2006, and FTD in 2008). Given that acquired businesses face strong competition, and the
legacy Internet access business is in decline, historical profitability will likely not be sustained. That said, the low valuation
appears to more than offset for this. Recent management focus on debt reduction and dividends, versus M&A, is a positive.
June 30, 2010 – Page 81 of 120
…additional insight into United Online:
QUARTERLY SEGMENT BREAKDOWN, Q1 2009 – Q1 2010
June 30, 2010 – Page 82 of 120
QUARTERLY BUSINESS METRICS (a)
(a) Source: United Online, http://bit.ly/cc082v
(b) Churn is the number of pay accounts that terminated or expired divided by the number of pay accounts for a period, divided by the months in that period.
(c) ARPU takes into account services revenues generated from pay accounts of the Classmates Media or Communications segments.
June 30, 2010 – Page 83 of 120
Value Line (VALU) – Owned by Arnold Bernhard
New York, NY, 212-907-1500
www.valueline.com
Services: Printing & Publishing
Trading Data
Price: $20.18 (as of 6/25/10)
52-week range: $12.00 - $36.52
Month
Latest
Ago
This quarter
$0.41
$0.41
Next quarter
0.39
0.39
FYE 4/30/10
1.46
1.46
Ownership Data
FYE 4/30/11
FYE 4/29/12
LT growth
EPS Surprise
3/12/10
($ millions, except
per share data)
Revenue
Gross profit
Operating income
Net income
Diluted EPS
Shares out (avg)
Capex
Free cash flow
Cash & investments
Intangible assets
Total assets
Short-term debt
Long-term debt
Total liabilities
Preferred stock
Common equity
4/30/03
82
73
24
20
2.00
10
17
2
15
13
20
4
247
0
13
0
51
0
195
>100%
# of
Ests
1
1
1
1.52
1.47
1.52
1.47
1
1
n/a
n/a
n/a
Actual
$0.36
Estimate
$0.27
Fiscal Years Ended
4/30/04 4/30/05 4/30/06 4/30/07 4/30/08
4/30/09
85
85
85
84
83
69
76
76
78
77
76
63
25
27
35
36
35
24
20
21
23
25
26
23
2.04
2.14
2.35
2.47
2.56
2.30
10
10
10
10
10
10
8
37
19
25
20
14
2
2
1
1
1
1
6
35
18
24
20
13
244
82
104
113
126
107
257
89
111
122
132
112
4
4
3
2
1
1
267
99
119
129
138
118
0
0
0
0
0
0
220
44
47
47
44
31
0
0
0
0
0
0
232
55
57
53
50
37
0
0
0
0
0
0
35
44
62
76
88
81
n/m
n/m
n/m
n/m
n/m
n/m
Valuation
P/E FYE 4/30/09
P/E FYE 4/30/10
P/E FYE 4/30/11
P/E FYE 4/29/12
EV/ LTM revenue
9x
14x
13x
14x
2.3x
EV/ LTM EBIT
P / tangible book
n/m
4.1x
Greenblatt Criteria
LTM EBIT yield
LTM pre-tax ROC
-21%
n/m
LTME
1/31/10
59
54
(29)
(54)
(2.21)
10
(19)
1
(20)
65
78
1
86
0
32
0
37
0
49
n/m
FQE
1/31/10
15
13
5
4
0.36
10
(38)
0
(38)
65
78
1
86
0
32
0
37
0
49
n/m
FQE
1/31/09
16
15
5
4
0.37
10
5
0
5
108
114
1
119
0
34
0
39
0
80
n/m
$80
$70
$60
$50
$40
$30
$20
$10
$0
May 01
May 02
May 03
May 04
May 05
May 06
May 07
May 08
May 09
May 10
June 30, 2010 – Page 84 of 120
BUSINESS OVERVIEW
Value Line dates back to 1931 and operates in two segments:
The Investment Periodicals, Publishing & Licensing segment
produces investment periodicals (retail and institutional) and
includes licensing fees for Value Line’s ranking system.
Investment Management advises a Value Line-branded
family of mutual funds as well as separate accounts.
The company owns a registered broker-dealer, Value Line
Securities, which distributes the Value Line Funds, a family
of no-load funds that charge rule 12b-1 marketing fees.
FYE April 30
2006 2007 2008 2009
Revenue ($mn)
85
84
83
69
Print
43%
41%
37%
39%
Electronic 1
13%
14%
15%
19%
Total publishing
56%
55%
52%
58%
Licensing
6%
8%
9%
6%
Investment mgmt
38%
37%
40%
36%
Print
-6%
-7% -10% -12%
Electronic 1
0%
5%
5%
6%
Total publishing
-5%
-4%
-6%
-7%
Licensing
97%
37%
3% -39%
Investment mgmt
2%
-4%
5% -24%
1%
-2%
-1% -16%
∆ revenue
-6%
-9%
-6% -11%
∆ deferred revenue 2
Publishing & licensing
38%
38%
37%
37%
Investment mgmt 3
47%
51%
49%
32%
Total EBIT margin 3
41%
43%
42%
35%
Assets under mgmt ($bn)
3.8
3.8
3.8
2.3
% of AUM, Value Line Funds by asset class (period end):
Equity funds
87%
87%
87%
82%
Fixed income
8%
8%
7%
11%
Money market
4%
5%
6%
8%
0%
0%
0%
0%
•
•
•
•
Value Line Investment Survey is published weekly
and profiles 1,700 stocks. An annual subscription
costs ~$1,000, with total print and electronic
subscription revenue amounting to ~$40 million
(the company does not report subscriber numbers).
Serves as adviser to 14 Value Line mutual funds
with AUM of $2.3 billion, down from $3.7 billion
two years ago. The largest distribution channel are
fund supermarket platforms run by Charles Schwab,
TD Ameritrade, and National City Bank.
Earns high-margin fees from licensing trademarks
and proprietary information for use in third-party
investment products. AUM of licensees is $2.3
billion, down from $5.5 billion in 2008.
$30 million of liquid assets and no debt, following
$48 million SEC settlement last September and $30
million special dividend in April. $25 million is
“float” from up-front subscription payments.
•
•
2
3
40%
21%
62%
6%
33%
-13%
-2%
-10%
-31%
-30%
-19%
-12%
27%
34%
29%
2.3
83%
11%
6%
0%
Roughly one-half comes from institutional and one-half from retail subscribers.
Represents y-y change in period-end total deferred revenue.
Excludes $48 million SEC settlement charge in Q1 FY10.
•
Agreed to $48 million SEC settlement last
September. The related investigation had focused on
the commissions charged by Value Line’s brokerage
subsidiary to the Value Line equity mutual funds.
•
1
YTD
1/31/10
44
Declining publishing revenue. The erosion has
accelerated in recent years, even after accounting
for electronic subscriptions. Total publishing
revenue fell 4% in FY07, 6% in FY08, 7% in FY09,
and 10% in the first nine months of FY10.
Circulation continues to decline, driven by
competition from free and lower-cost Internet-based
research and no-cost brokerage firm research.
Declining AUM. Assets have dropped from $3.8
billion in April 2008 to $2.3 billion recently, driven
by redemptions and declines in portfolio values.
Low float and control by chairman and CEO
Jean Buttner (74). Buttner owns all of the voting
stock of Arnold Bernhard & Co., which owns 8.6
million, or 87% of Value Line’s shares outstanding.
The company and Arnold Bernhard have also
engaged in certain related-party transactions.
MHP
MORN
TSCM
VALU
MV
($mn)
9,380
2,200
90
200
EV
($mn)
9,340
1,840
50
140
EV /
Rev.
1.6x
3.8x
.8x
2.4x
P/
Tang.
Book
n/m
6.8x
1.3x
4.1x
This
FY
P/E
11x
22x
n/m
14x
Next
FY
P/E
10x
18x
37x
13x
MAJOR HOLDERS
CEO Buttner 87% (via Arnold Bernhard & Co.)
RATINGS







THE BOTTOM LINE
Value Line trades at a high single digit multiple of pretax earnings, which may at first glance appear compelling for a non
capital-intensive business that benefits from subscriber “float.” Unfortunately, Value Line is not only lacking revenue
growth, but both the publishing and asset management businesses are in decline. This suggests that the company — under
present management — sees few high-return reinvestment opportunities in the business. With CEO Jean Buttner indirectly
owning 87% of the stock, shareholders are in a difficult spot when it comes to advocating for constructive change.
June 30, 2010 – Page 85 of 120
Snapshot of 100 “Magic Formula” Companies
In Alphabetical Order
Company / Ticker
Aeropostale / ARO
Allied Healthcare / AHCI
Almost Family / AFAM
Altria Group / MO
Amedisys / AMED
America's Car-Mart / CRMT
Amerigroup / AGP
AmerisourceBergen / ABC
AmSurg / AMSG
AOL / AOL
Apollo Group / APOL
Bridgepoint Edu. / BPI
CA / CA
Career Education / CECO
Carter's / CRI
Cass Information / CASS
Centene / CNC
Cephalon / CEPH
CF Industries / CF
Charter Comms / CCMM
Chicago Bridge / CBI
Continucare / CNU
Corinthian Colleges / COCO
Cornerstone / CRTX
CSG Systems / CSGS
Cubic / CUB
Cumberland Pharma / CPIX
Dell / DELL
Dun & Bradstreet / DNB
EarthLink / ELNK
Eli Lilly / LLY
Endo Pharma / ENDP
ePlus / PLUS
Expedia / EXPE
Fluor / FLR
Forest Labs / FRX
Foster Wheeler / FWLT
GameStop / GME
Garmin / GRMN
General Dynamics / GD
Genoptix / GXDX
GigaMedia / GIGM
Gilead Sciences / GILD
GT Solar / SOLR
Gulf Resources / GFRE
H&R Block / HRB
Hansen Natural / HANS
Hewitt Associates / HEW
Hewlett-Packard / HPQ
Hi-Tech Pharmacal / HITK
Industry
Retail (apparel)
Healthcare Facilities
Tobacco
Retail (specialty)
Health Insurance
Biotechnology & Drugs
Computer Services
Schools
Schools
Software & Programming
Schools
Retail (apparel)
Computer Services
Chemical Manufacturing
Broadcasting & Cable
Construction Services
Schools
Business Services
Aerospace and Defense
Computer Hardware
Retail Financial Services
Computer Services
Major Drugs
Personal Services
Retail (technology)
Technical Instruments
Computer Services
Semiconductors
Personal Services
Beverages (non-alcoholic)
Business Services
Computer Hardware
Notable Shareholders
Hussman, Vinik
Keane, Rutabaga
Royce, Pier, Keane
Cap Re, GS, Franklin
Munder, Earnest
Alydar, Ranger, Royce
Bamco, Earnest, RenTech
Aronson, LSV, Fiduciary
Fenimore, Dreman
Dodge & Cox, Cap Re
Tiger, Maverick, Cap Re
Russell Frank, Jennison
NWQ, Pzena, Legg
Blum, RS, Kornitzer
Scopus, Thompson
Riverbridge, Kayne
Bridger, RenTech, Eagle
Times Square, LSV
S.A.C., Brookside, Axon
Oaktree, Franklin
Frontier, SouthernSun
T Rowe, Teton
Royce, Kornitzer, Acadian
Visium, BBT, Stelliam
RenTech, LSV, Rothschild
RenTech, Seligman
Frontier, Millennium
Southeastern, T Rowe
Davis, Ariel, Breeden
RenTech, Royce, Artisan
Cap World, Primecap
Cap Re, Royce, LSV
Hovde, Heartland, Acadian
Maverick, Clearbridge
Montag, Clearbridge
Clearbridge, LSV
Altrinsic, Greenlight
GS, Adage, Munder
Sterneck, Aronson
Longview, Cap Re, Harris
Eagle, MCM, Royce
Martin Currie, Acadian
Cap World, Jennison
Oaktree, Cadence, Adage
Sprott
Davis, Harris, Breeden
GS, Artisan, Eaton Park
Ariel, Artisan, Eagle
Dodge & Cox, Cap Re
Royce, Bridgeway
Recent
Price
($)
29.68
2.61
36.43
20.02
46.47
24.99
36.96
32.56
19.51
22.74
48.39
20.90
20.11
27.00
31.17
31.90
23.66
59.87
64.25
35.25
20.86
4.08
11.55
6.03
20.19
36.28
7.01
14.04
73.23
8.43
34.61
22.16
18.76
20.97
46.47
27.30
25.47
19.21
31.97
66.90
16.67
2.19
36.02
5.91
9.75
15.80
39.53
37.05
47.98
24.37
YTD
Price
∆
31%
-10%
-8%
2%
-4%
-5%
37%
25%
-11%
-2%
-20%
39%
-10%
16%
19%
5%
12%
-4%
-29%
-1%
3%
-7%
-16%
-1%
6%
-3%
-48%
-2%
-13%
1%
-3%
8%
14%
-18%
3%
-15%
-13%
-12%
4%
-2%
-53%
-33%
-17%
6%
-16%
-30%
3%
-12%
-7%
-13%
Market
Value
($mn)
2,776
118
334
41,693
1,327
283
1,911
9,199
603
2,427
7,336
1,141
10,334
2,209
1,852
300
1,219
4,502
4,565
4,044
2,108
245
1,018
154
688
970
143
27,494
3,690
910
39,910
2,577
152
5,956
8,306
8,255
3,248
2,911
6,368
25,805
292
119
32,054
851
337
5,202
3,509
3,448
112,009
302
Enter.
Value
($mn)
2,463
76
306
50,563
1,449
318
1,512
9,358
876
2,235
6,851
919
9,296
1,789
1,819
189
1,061
3,825
3,534
16,585
1,892
212
1,090
128
636
663
85
21,273
4,424
435
41,833
2,055
121
5,808
6,455
4,933
2,494
2,927
5,057
27,643
160
46
31,579
600
282
6,285
3,072
3,417
115,501
262
Website
www.aeropostale.com
alliedhealthcare.com
www.almostfamily.com
www.altria.com
www.amedisys.com
www.car-mart.com
amerigroupcorp.com
amerisourcebergen.com
www.amsurg.com
corp.aol.com
www.apollogrp.edu
bridgepointeducation.com
www.ca.com
www.careered.com
www.carters.com
www.cassinfo.com
www.centene.com
www.cephalon.com
www.cfindustries.com
www.charter.com
www.cbi.com
www.continucare.com
www.cci.edu
criticaltherapeutics.com
www.csgsystems.com
www.cubic.com
cumberlandpharma.com
www.dell.com
www.dnb.com
www.earthlink.net
www.lilly.com
www.endo.com
www.eplus.com
www.expediainc.com
www.fluor.com
www.frx.com
www.fwc.com
www.gamestop.com
www.garmin.com
generaldynamics.com
www.genoptix.com.
www.gilead.com
www.gtsolar.com
gulfresourcesco.com
www.handrblock.com
www.hansens.com
hewittassociates.com
www.hp.com
www.hitechpharm.com
June 30, 2010 – Page 86 of 120
Company / Ticker
Immunomedics / IMMU
Impax Labs / IPXL
Imperial Sugar / IPSU
InterDigital / IDCC
ITT Educational / ESI
j2 Global Comms / JCOM
KBR / KBR
L-3 Comms / LLL
Lear / LEA
Lender Processing / LPS
LHC Group / LHCG
Lincoln Educational / LINC
Local.com / LOCM
Lorillard / LO
M & F Worldwide / MFW
McAfee / MFE
McGraw-Hill / MHP
McKesson / MCK
Metropolitan Health / MDF
Microsoft / MSFT
Nat.-Oilwell Varco / NOV
Net1 UEPS / UEPS
Omnicom / OMC
Oshkosh / OSK
Pioneer Southwest / PSE
PMC-Sierra / PMCS
Pre-Paid Legal / PPD
PRG-Schultz / PRGX
Primoris Services / PRIM
Providence Service / PRSC
Raytheon / RTN
Reynolds American / RAI
SAIC / SAI
Santarus / SNTS
Seagate Technology / STX
Sharps Compliance / SMED
Sohu.com / SOHU
Synta Pharma / SNTA
Terra Nova Royalty / TTT
The Gap / GPS
TSYS (Total System) / TSS
Unisys / UIS
United Online / UNTD
Universal Travel / UTA
USA Mobility / USMO
Valassis Comms / VCI
ViroPharma / VPHM
Vonage / VG
Western Digital / WDC
Wright Express / WXS
Industry
Food Processing
Comms Equipment
Schools
Comms Services
Auto & Truck Parts
Schools
Advertising
Tobacco
Business Services
Printing & Publishing
Oil Well Services
Computer Services
Advertising
Auto & Truck Makers
Oil & Gas - Integrated
Semiconductors
Personal Services
Business Services
Personal Services
Conglomerates
Tobacco
Computer Storage
Waste Management
Computer Services
Major Drugs
Misc. Financial Services
Retail (apparel)
Computer Services
Computer Services
Business Services
Personal Services
Comms Services
Advertising
Comms Services
Computer Storage
Business Services
FMR, BlackRock
Friess, Jennison
Passport, Royce
Heartland, Opus, RenTech
Blum, Lateef, Kornitzer
Delaware, RenTech
Cap World, Aronson
Clarbridge, Harris, Pzena
Lasry, GS, Paulson
Cap World, Maverick
Royce, Mesirow
River Road, Cadence
Essex, Bridgeway
GS, RenTech, Cap Re
MHR, Valinor, Acadian
T Rowe, Cap Re
Cap World, T Rowe, MS
Cap Re, Glenview
Levy Harkins, RenTech
Cap Re, T Rowe
Sands, Primecap
General Atlantic, Dreman
Cap Re, Pzena, GE
Aronson, DFA
Glickenhaus, Royce
Waddell Reed, T Rowe
Steadfast, RenTech
Blum, JANA, RenTech
DePrince, Michael Price
Zesiger, Bridgeway
Barrow Hanley
Cap Re, Franklin
Artisan, Franklin
Westfield, Orbimed
Clearbridge, LSV
Cortina, MFC, Oak Ridge
Orbis, RenTech, GS
Bruce Kovner, ClariVest
Paradigm, Harvey
MS, JPM, LSV
Artisan, Royce
MCM, Aston, Acadian
Blair, LSV, DFA
Bridgeway, Whitebox
RenTech, LSV, GS
Peninsula, Alydar, Chilton
Baker Brothers, Palo Alto
Brookside, Bridgeway
LSV, Acadian
Select Equity, MSD
Recent
Price
($)
3.48
21.40
10.58
25.82
94.88
22.81
22.88
81.61
72.10
33.67
29.93
22.71
7.94
74.99
29.92
32.92
30.10
70.09
3.86
26.44
38.10
15.07
38.07
35.26
25.03
8.13
48.62
4.43
6.08
16.58
53.25
52.76
17.99
2.57
15.35
4.66
44.03
3.60
9.43
21.24
14.85
22.79
6.50
6.86
13.59
37.12
12.19
2.69
35.01
31.80
YTD
Price
∆
8%
57%
-39%
-3%
-1%
12%
20%
-6%
7%
-17%
-11%
5%
37%
-7%
-24%
-19%
-10%
12%
94%
-13%
-14%
-22%
-3%
-5%
11%
-6%
18%
-25%
-24%
5%
3%
0%
-5%
-44%
-16%
-51%
-23%
-29%
-31%
1%
-14%
-41%
-10%
-32%
23%
103%
45%
92%
-21%
0%
Market
Value
($mn)
262
1,340
129
1,135
3,277
1,031
3,674
9,446
3,366
3,193
562
592
127
11,463
579
5,136
9,497
19,022
154
231,716
15,965
684
11,686
3,165
829
1,864
487
104
201
214
20,292
15,377
6,836
150
7,482
68
1,665
146
286
13,819
2,931
970
566
116
301
1,850
949
567
8,023
1,234
Enter.
Value
($mn)
237
1,210
145
654
3,105
808
2,871
12,439
3,025
4,358
549
595
119
10,539
2,619
4,284
9,460
17,587
125
198,045
14,237
505
13,023
3,937
898
1,709
468
95
180
354
20,007
16,532
7,374
69
7,181
48
1,066
90
188
11,338
2,640
1,351
751
68
185
2,226
717
740
5,622
1,334
Website
immunomedics.com
www.impaxlabs.com
www.imperialsugar.com
www.interdigital.com
www.ittesi.com
www.j2global.com
www.kbr.com
www.l-3com.com
www.lear.com
www.lpsvcs.com
www.lhcgroup.com
www.lincolnedu.com
www.local.com
www.lorillard.com
mandfworldwide.com
www.mcafee.com
www.mcgraw-hill.com
www.mckesson.com
www.metcare.com
www.microsoft.com
www.nov.com
www.net1ueps.co.za
omnicomgroup.com
oshkoshcorporation.com
pioneersouthwest.com
www.pmc-sierra.com
www.prepaidlegal.com
www.prgx.com
primorisservices.com
www.provcorp.com
www.raytheon.com
reynoldsamerican.com
www.saic.com
www.santarus.com
www.seagate.com
www.sharpsinc.com
corp.sohu.com
www.syntapharma.com
www.khdhumboldt.com
www.gapinc.com
www.tsys.com
www.unisys.com
us.cnutg.com
www.usamobility.com
www.valassis.com
www.viropharma.com
www.vonage.com
www.westerndigital.com
wrightexpress.com
June 30, 2010 – Page 87 of 120
By Market Value
Company / Ticker
Microsoft / MSFT
Altria Group / MO
Eli Lilly / LLY
Dell / DELL
Raytheon / RTN
McKesson / MCK
The Gap / GPS
Omnicom / OMC
Lorillard / LO
CA / CA
McGraw-Hill / MHP
L-3 Comms / LLL
Fluor / FLR
Forest Labs / FRX
Apollo Group / APOL
SAIC / SAI
Garmin / GRMN
Expedia / EXPE
H&R Block / HRB
McAfee / MFE
CF Industries / CF
Cephalon / CEPH
KBR / KBR
Lear / LEA
Oshkosh / OSK
GameStop / GME
Aeropostale / ARO
Endo Pharma / ENDP
AOL / AOL
Amerigroup / AGP
PMC-Sierra / PMCS
Carter's / CRI
Market
Value
($mn)
231,716
112,009
41,693
39,910
32,054
27,494
25,805
20,292
19,022
15,965
15,377
13,819
11,686
11,463
10,334
9,497
9,446
9,199
8,306
8,255
8,023
7,482
7,336
6,836
6,368
5,956
5,202
5,136
4,565
4,502
4,044
3,690
3,674
3,509
3,448
3,366
3,277
3,248
3,193
3,165
2,931
2,911
2,776
2,577
2,427
2,209
2,108
1,911
1,864
1,852
Enter.
Value
($mn)
198,045
115,501
50,563
41,833
31,579
21,273
27,643
20,007
17,587
14,237
16,532
11,338
13,023
10,539
9,296
9,460
12,439
9,358
6,455
4,933
5,622
7,181
6,851
7,374
5,057
5,808
6,285
4,284
3,534
3,825
16,585
4,424
2,871
3,072
3,417
3,025
3,105
2,494
4,358
3,937
2,640
2,927
2,463
2,055
2,235
1,789
1,892
1,512
1,709
1,819
LTM
EBIT/
EV
11%
10%
11%
13%
12%
11%
13%
15%
11%
16%
14%
17%
11%
15%
13%
14%
14%
11%
16%
19%
26%
19%
16%
12%
16%
10%
13%
5%
15%
11%
66%
10%
17%
10%
13%
45%
17%
19%
13%
25%
13%
22%
16%
21%
18%
15%
14%
15%
5%
13%
LTM
EBIT/
Capital
50-99%
>99%
>99%
50-99%
>99%
>99%
50-99%
>99%
>99%
25-50%
>99%
50-99%
>99%
>99%
>99%
>99%
50-99%
>99%
50-99%
25-50%
50-99%
50-99%
>99%
50-99%
50-99%
>99%
>99%
>99%
50-99%
50-99%
>99%
>99%
50-99%
>99%
50-99%
>99%
>99%
>99%
>99%
>99%
50-99%
>99%
>99%
>99%
>99%
50-99%
>99%
>99%
>99%
50-99%
Last
Q
End
3/31
4/30
3/31
3/31
3/31
4/30
3/31
3/31
3/31
3/31
3/31
4/30
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
2/28
4/30
3/31
3/31
1/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
4/30
4/30
3/31
3/31
3/31
3/31
3/31
3/31
3/31
Industry
Computer Hardware
Tobacco
Major Drugs
Computer Hardware
Conglomerates
Oil Well Services
Tobacco
Retail (apparel)
Advertising
Tobacco
Computer Storage
Computer Storage
Schools
Personal Services
Personal Services
Business Services
Auto & Truck Parts
Schools
Auto & Truck Makers
Computer Services
Retail (technology)
Retail (apparel)
Computer Services
Schools
Health Insurance
Semiconductors
Retail (apparel)
Cap Re, T Rowe
Dodge & Cox, Cap Re
Cap World, Primecap
Cap World, Jennison
Barrow Hanley
Cap Re, Glenview
Sands, Primecap
Cap Re, Franklin
MS, JPM, LSV
Cap Re, Pzena, GE
GS, RenTech, Cap Re
NWQ, Pzena, Legg
Montag, Clearbridge
Clearbridge, LSV
LSV, Acadian
Clearbridge, LSV
Artisan, Franklin
Sterneck, Aronson
T Rowe, Cap Re
Times Square, LSV
Oaktree, Franklin
Cap World, Aronson
Lasry, GS, Paulson
Cap World, Maverick
Aronson, DFA
Artisan, Royce
GS, Adage, Munder
Hussman, Vinik
Cap Re, Royce, LSV
Dodge & Cox, Cap Re
Blum, RS, Kornitzer
Scopus, Thompson
Website
www.microsoft.com
www.hp.com
www.altria.com
www.lilly.com
www.gilead.com
www.dell.com
generaldynamics.com
www.raytheon.com
www.mckesson.com
www.nov.com
reynoldsamerican.com
www.gapinc.com
omnicomgroup.com
www.lorillard.com
www.ca.com
www.mcgraw-hill.com
www.l-3com.com
amerisourcebergen.com
www.fluor.com
www.frx.com
www.westerndigital.com
www.seagate.com
www.apollogrp.edu
www.saic.com
www.garmin.com
www.expediainc.com
www.handrblock.com
www.mcafee.com
www.cfindustries.com
www.cephalon.com
www.charter.com
www.dnb.com
www.kbr.com
www.hansens.com
hewittassociates.com
www.lear.com
www.ittesi.com
www.fwc.com
www.lpsvcs.com
oshkoshcorporation.com
www.tsys.com
www.gamestop.com
www.aeropostale.com
www.endo.com
corp.aol.com
www.careered.com
www.cbi.com
amerigroupcorp.com
www.pmc-sierra.com
www.carters.com
June 30, 2010 – Page 88 of 120
Company / Ticker
Sohu.com / SOHU
Impax Labs / IPXL
Amedisys / AMED
Centene / CNC
InterDigital / IDCC
Unisys / UIS
Cubic / CUB
ViroPharma / VPHM
EarthLink / ELNK
GT Solar / SOLR
CSG Systems / CSGS
Net1 UEPS / UEPS
AmSurg / AMSG
Vonage / VG
LHC Group / LHCG
USA Mobility / USMO
Genoptix / GXDX
Immunomedics / IMMU
Continucare / CNU
Cornerstone / CRTX
ePlus / PLUS
Santarus / SNTS
Synta Pharma / SNTA
Local.com / LOCM
GigaMedia / GIGM
PRG-Schultz / PRGX
Market
Value
($mn)
1,850
1,665
1,340
1,327
1,234
1,219
1,141
1,135
1,031
1,018
970
970
949
910
851
829
688
684
603
592
579
567
566
562
487
337
334
302
301
300
292
286
283
262
245
214
201
154
154
152
150
146
143
129
127
119
118
116
104
68
Enter.
Value
($mn)
2,226
1,066
1,210
1,449
1,334
1,061
919
654
808
1,090
1,351
663
717
435
600
898
636
505
876
595
2,619
740
751
549
468
282
306
262
185
189
160
188
318
237
212
354
180
128
125
121
69
90
85
145
119
46
76
68
95
48
LTM
EBIT/
EV
31%
19%
23%
17%
21%
13%
14%
31%
12%
20%
28%
13%
18%
40%
24%
15%
9%
21%
26%
17%
11%
11%
18%
16%
20%
16%
15%
16%
30%
20%
33%
44%
14%
15%
16%
17%
22%
11%
22%
21%
53%
>99%
5%
>99%
0%
22%
19%
38%
18%
35%
LTM
EBIT/
Capital
>99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
50-99%
>99%
>99%
>99%
50-99%
25-50%
>99%
>99%
50-99%
>99%
>99%
>99%
>99%
>99%
50-99%
>99%
50-99%
>99%
>99%
25-50%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
50-99%
>99%
>99%
>99%
50-99%
50-99%
>99%
>99%
>99%
>99%
>99%
>99%
Last
Q
End
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
1/31
3/31
3/31
3/31
3/31
4/30
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
3/31
Industry
Advertising
Computer Services
Business Services
Schools
Comms Equipment
Comms Services
Schools
Computer Services
Computer Services
Semiconductors
Business Services
Computer Services
Schools
Business Services
Comms Services
Business Services
Personal Services
Comms Services
Computer Services
Retail (specialty)
Personal Services
Major Drugs
Food Processing
Advertising
Computer Services
Personal Services
Business Services
Waste Management
Orbis, RenTech, GS
Friess, Jennison
Munder, Earnest
Select Equity, MSD
Delaware, RenTech
MCM, Aston, Acadian
RenTech, Seligman
Glickenhaus, Royce
Fenimore, Dreman
River Road, Cadence
Blair, LSV, DFA
Royce, Mesirow
Steadfast, RenTech
Sprott
Royce, Pier, Keane
Royce, Bridgeway
RenTech, LSV, GS
Riverbridge, Kayne
Eagle, MCM, Royce
Paradigm, Harvey
FMR, BlackRock
T Rowe, Teton
Zesiger, Bridgeway
Hovde, Heartland
Westfield, Orbimed
Passport, Royce
Essex, Bridgeway
Keane, Rutabaga
Bridgeway, Whitebox
Blum, JANA, RenTech
Website
www.valassis.com
corp.sohu.com
www.impaxlabs.com
www.amedisys.com
wrightexpress.com
www.centene.com
bridgepointeducation.com
www.interdigital.com
www.j2global.com
www.cci.edu
www.unisys.com
www.cubic.com
www.viropharma.com
www.earthlink.net
www.gtsolar.com
pioneersouthwest.com
www.csgsystems.com
www.net1ueps.co.za
www.amsurg.com
www.lincolnedu.com
mandfworldwide.com
www.vonage.com
www.lhcgroup.com
www.prepaidlegal.com
gulfresourcesco.com
www.almostfamily.com
www.hitechpharm.com
www.usamobility.com
www.cassinfo.com
www.genoptix.com.
www.khdhumboldt.com
www.car-mart.com
immunomedics.com
www.continucare.com
www.provcorp.com
primorisservices.com
criticaltherapeutics.com
www.metcare.com
www.eplus.com
www.santarus.com
www.syntapharma.com
cumberlandpharma.com
www.imperialsugar.com
www.local.com
alliedhealthcare.com
us.cnutg.com
www.prgx.com
www.sharpsinc.com
June 30, 2010 – Page 89 of 120
By Sector – Overview
Sector
Basic Materials
Basic Materials
Capital Goods
Capital Goods
Capital Goods
Capital Goods
Capital Goods
Capital Goods
Capital Goods
Capital Goods
Conglomerates
Consumer
Consumer
Consumer
Consumer
Consumer
Consumer
Consumer
Energy
Energy
Financial
Financial
Financial
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Services
Services
Services
Industry
Conglomerates
Auto & Truck Makers
Auto & Truck Parts
Food Processing
Tobacco
Tobacco
Tobacco
Oil Well Services
Health Insurance
Major Drugs
Major Drugs
Advertising
Advertising
Advertising
Company / Ticker
CF Industries / CF
L-3 Comms / LLL
Cubic / CUB
Fluor / FLR
KBR / KBR
Raytheon / RTN
Oshkosh / OSK
Lear / LEA
Altria Group / MO
Lorillard / LO
Amerigroup / AGP
McKesson / MCK
Forest Labs / FRX
Cephalon / CEPH
Endo Pharma / ENDP
Impax Labs / IPXL
ViroPharma / VPHM
Immunomedics / IMMU
Cornerstone / CRTX
Santarus / SNTS
Amedisys / AMED
Centene / CNC
AmSurg / AMSG
LHC Group / LHCG
Genoptix / GXDX
Continucare / CNU
Eli Lilly / LLY
Synta Pharma / SNTA
Omnicom / OMC
Local.com / LOCM
Market
Value
($mn)
4,565
337
25,805
9,446
970
8,306
3,674
3,248
2,108
201
20,292
3,165
3,366
3,509
129
41,693
15,377
11,463
829
15,965
1,911
286
3,690
32,054
19,022
9,199
8,255
4,502
2,577
1,340
949
302
262
154
150
143
1,327
1,219
603
562
334
292
245
154
118
39,910
146
11,686
1,850
127
Enter.
Value
($mn)
3,534
282
27,643
12,439
663
6,455
2,871
2,494
1,892
180
20,007
3,937
3,025
3,072
145
50,563
16,532
10,539
898
14,237
1,512
188
4,424
31,579
17,587
9,358
4,933
3,825
2,055
1,210
717
262
237
128
69
85
1,449
1,061
876
549
306
160
212
125
76
41,833
90
13,023
2,226
119
LTM
EBIT/
EV
15%
16%
13%
14%
13%
16%
17%
19%
14%
22%
15%
25%
45%
10%
>99%
11%
14%
15%
15%
16%
15%
44%
10%
12%
11%
11%
19%
11%
21%
23%
18%
16%
15%
11%
53%
5%
17%
13%
26%
16%
15%
33%
16%
22%
19%
13%
>99%
11%
31%
0%
LTM
EBIT/
Capital
50-99%
50-99%
50-99%
50-99%
50-99%
50-99%
50-99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
50-99%
>99%
>99%
>99%
50-99%
25-50%
>99%
>99%
>99%
>99%
>99%
>99%
25-50%
50-99%
>99%
>99%
>99%
50-99%
>99%
>99%
>99%
50-99%
>99%
>99%
>99%
>99%
>99%
25-50%
>99%
50-99%
>99%
50-99%
>99%
>99%
>99%
>99%
Date of
Latest
Quarter
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
1/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
Sprott
RenTech, Seligman
Montag, Clearbridge
Cap World, Aronson
Barrow Hanley
Aronson, DFA
Lasry, GS, Paulson
Passport, Royce
Cap Re, Franklin
GS, RenTech, Cap Re
Glickenhaus, Royce
Sands, Primecap
Paradigm, Harvey
Cap World, Jennison
Cap Re, Glenview
Clearbridge, LSV
Times Square, LSV
Cap Re, Royce, LSV
Friess, Jennison
Royce, Bridgeway
FMR, BlackRock
Westfield, Orbimed
Munder, Earnest
Fenimore, Dreman
Royce, Mesirow
Royce, Pier, Keane
Eagle, MCM, Royce
T Rowe, Teton
Keane, Rutabaga
Cap World, Primecap
Cap Re, Pzena, GE
Essex, Bridgeway
June 30, 2010 – Page 90 of 120
Sector
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Industry
Business Services
Business Services
Business Services
Business Services
Business Services
Business Services
Comms Services
Comms Services
Comms Services
Personal Services
Personal Services
Personal Services
Personal Services
Personal Services
Retail (apparel)
Retail (apparel)
Retail (apparel)
Retail (specialty)
Retail (technology)
Schools
Schools
Schools
Schools
Schools
Schools
Waste Management
Comms Equipment
Computer Hardware
Computer Hardware
Computer Services
Computer Services
Computer Services
Computer Services
Computer Services
Computer Services
Computer Services
Computer Services
Computer Storage
Computer Storage
Semiconductors
Semiconductors
Company / Ticker
CSG Systems / CSGS
PRG-Schultz / PRGX
Vonage / VG
USA Mobility / USMO
Expedia / EXPE
H&R Block / HRB
McGraw-Hill / MHP
The Gap / GPS
Aeropostale / ARO
Carter's / CRI
GameStop / GME
Apollo Group / APOL
InterDigital / IDCC
Dell / DELL
AOL / AOL
Sohu.com / SOHU
Unisys / UIS
EarthLink / ELNK
Net1 UEPS / UEPS
GigaMedia / GIGM
PMC-Sierra / PMCS
GT Solar / SOLR
Microsoft / MSFT
CA / CA
SAIC / SAI
McAfee / MFE
ePlus / PLUS
Garmin / GRMN
Market
Value
($mn)
4,044
3,448
1,234
688
579
566
104
1,031
567
301
5,956
5,202
487
214
116
9,497
13,819
2,776
1,852
283
2,911
7,336
3,277
2,209
1,141
1,018
592
68
1,135
112,009
27,494
2,931
2,427
1,665
970
910
684
300
119
8,023
7,482
1,864
851
231,716
10,334
6,836
5,136
3,193
152
6,368
Enter.
Value
($mn)
16,585
3,417
1,334
636
2,619
751
95
808
740
185
5,808
6,285
468
354
68
9,460
11,338
2,463
1,819
318
2,927
6,851
3,105
1,789
919
1,090
595
48
654
115,501
21,273
2,640
2,235
1,066
1,351
435
505
189
46
5,622
7,181
1,709
600
198,045
9,296
7,374
4,284
4,358
121
5,057
LTM
EBIT/
EV
66%
13%
21%
9%
11%
18%
18%
12%
11%
30%
10%
13%
20%
17%
38%
14%
17%
16%
13%
14%
22%
16%
17%
15%
14%
20%
17%
35%
31%
10%
11%
13%
18%
19%
28%
40%
21%
20%
22%
26%
19%
5%
24%
11%
13%
12%
5%
13%
21%
16%
LTM
EBIT/
Capital
>99%
50-99%
>99%
25-50%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
50-99%
>99%
50-99%
>99%
>99%
>99%
>99%
50-99%
>99%
>99%
50-99%
>99%
>99%
>99%
>99%
50-99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
50-99%
50-99%
>99%
>99%
50-99%
>99%
50-99%
>99%
>99%
>99%
50-99%
Date of
Latest
Quarter
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
1/31/10
3/31/10
3/31/10
3/31/10
3/31/10
4/30/10
4/30/10
3/31/10
4/30/10
4/30/10
2/28/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
4/30/10
4/30/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
4/30/10
3/31/10
3/31/10
3/31/10
3/31/10
Oaktree, Franklin
Select Equity, MSD
Blair, LSV, DFA
Blum, JANA, RenTech
Delaware, RenTech
RenTech, LSV, GS
Steadfast, RenTech
Zesiger, Bridgeway
Bridgeway, Whitebox
MS, JPM, LSV
Hussman, Vinik
Scopus, Thompson
GS, Adage, Munder
Blum, RS, Kornitzer
River Road, Cadence
Dodge & Cox, Cap Re
Artisan, Royce
Dodge & Cox, Cap Re
Orbis, RenTech, GS
MCM, Aston, Acadian
Riverbridge, Kayne
LSV, Acadian
Clearbridge, LSV
Cap Re, T Rowe
NWQ, Pzena, Legg
Artisan, Franklin
T Rowe, Cap Re
Cap World, Maverick
Sterneck, Aronson
June 30, 2010 – Page 91 of 120
By Sector – Capital Employed in Business
($ millions)
Sector
Basic Materials
Basic Materials
Capital Goods
Capital Goods
Capital Goods
Capital Goods
Capital Goods
Capital Goods
Capital Goods
Capital Goods
Conglomerates
Consumer
Consumer
Consumer
Consumer
Consumer
Consumer
Consumer
Energy
Energy
Financial
Financial
Financial
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Health Care
Enterprise
Value
3,534
282
27,643
12,439
6,455
2,871
2,494
1,892
663
180
20,007
50,563
16,532
10,539
3,937
3,072
3,025
145
14,237
898
4,424
1,512
188
41,833
31,579
17,587
9,358
4,933
3,825
2,055
1,449
1,210
1,061
876
717
549
306
262
237
212
160
128
125
90
85
76
69
Company / Ticker
CF Industries / CF
L-3 Comms / LLL
Fluor / FLR
KBR / KBR
Cubic / CUB
Raytheon / RTN
Altria Group / MO
Lorillard / LO
Oshkosh / OSK
Lear / LEA
Amerigroup / AGP
Eli Lilly / LLY
McKesson / MCK
Forest Labs / FRX
Cephalon / CEPH
Endo Pharma / ENDP
Amedisys / AMED
Impax Labs / IPXL
Centene / CNC
AmSurg / AMSG
ViroPharma / VPHM
LHC Group / LHCG
Immunomedics / IMMU
Continucare / CNU
Genoptix / GXDX
Cornerstone / CRTX
Synta Pharma / SNTA
Santarus / SNTS
Calculation of Capital Employed in the Business
Net Working Capital
Plus:
Plus:
Plus: Minus:
Minus:
Plus:
Other
Other
Net
Accts Inven- Current
Accts Current
Fixed
Receiv.
tory
Assets
Pay.
Liab. Assets
198
287
29
181
448
790
14
1
0
6
0
84
3,738
6,677
913
2,250
6,917
2,850
1,299
262
2,770
549
2,099
834
1,138
1,696
450
1,312
1,943
831
2,179
704
1,062
1,369
321
609
254
85
251
929
378
433
358
375
1,070
306
219
50
45
37
259
47
109
22
35
63
172
93
113
5,071
382
1,310
4,049
1,969
170
1,813
1,765
311
7,519
2,635
241
1,190
1,198
116
4,925
1,024
57
321
467
79
1,707
238
788
852
139
980
1,030
394
118
119
25
83
51
32
1,874
500
338
1,802
898
1,005
50
133
36
83
51
276
2,111
3,423
1,403
538
3,201
1,810
15
1
19
9
5
207
445
65
38
1,144
51
187
51
553
205
99
13
2
7
13
0
3,730
2,471
1,293
964
3,091
7,987
1,491
1,224
757
949
933
696
8,075
9,441
257 13,255
3,538
851
3,949
4,981
38
8,435
991
666
476
468
313
130
849
323
349
237
299
99
485
432
324
87
110
171
232
46
151
29
22
175
95
325
52
51
33
204
102
110
71
201
464
270
69
9
17
13
22
111
50
40
28
11
43
10
77
14
18
36
22
36
10
6
20
4
30
22
10
6
9
20
2
0
1
5
5
17
2
1
8
13
35
11
13
7
25
20
21
7
8
30
1
8
0
2
0
7
2
1
2
10
4
4
7
3
7
7
1
28
2
1
24
8
15
5
8
5
62
1
TOTAL
674
93
5,011
2,517
860
773
144
-348
66
24
2,176
-1,447
-1,388
-703
164
160
1,017
360
5,008
227
-621
-421
-5
11,426
2,286
1,831
207
601
733
165
78
293
-213
170
74
58
25
67
3
23
52
12
5
-7
2
13
-38
Enterprise Value /
Capital Employed
5.2x
3.0x
5.5x
4.9x
7.5x
3.7x
17.3x
nm
10.1x
7.6x
9.2x
nm
nm
nm
24.0x
19.2x
3.0x
.4x
2.8x
4.0x
nm
nm
nm
3.7x
13.8x
9.6x
45.2x
8.2x
5.2x
12.4x
18.5x
4.1x
nm
5.1x
9.6x
9.5x
12.3x
3.9x
87.8x
9.4x
3.1x
11.1x
25.0x
nm
53.0x
5.8x
nm
June 30, 2010 – Page 92 of 120
($ millions)
Sector
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Services
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Technology
Enterprise
Value
16,585
13,023
11,338
9,460
6,851
6,285
5,808
3,417
3,105
2,927
2,619
2,463
2,226
1,819
1,789
1,334
1,090
919
808
751
740
636
595
468
354
318
185
119
95
68
48
198,045
115,501
21,273
9,296
7,374
7,181
5,622
5,057
4,358
4,284
2,640
2,235
1,709
1,351
1,066
654
600
505
435
189
121
46
Company / Ticker
Omnicom / OMC
The Gap / GPS
McGraw-Hill / MHP
Apollo Group / APOL
H&R Block / HRB
Expedia / EXPE
GameStop / GME
Aeropostale / ARO
Carter's / CRI
Vonage / VG
CSG Systems / CSGS
USA Mobility / USMO
Local.com / LOCM
PRG-Schultz / PRGX
Microsoft / MSFT
Dell / DELL
CA / CA
SAIC / SAI
Garmin / GRMN
McAfee / MFE
AOL / AOL
PMC-Sierra / PMCS
Unisys / UIS
Sohu.com / SOHU
InterDigital / IDCC
GT Solar / SOLR
Net1 UEPS / UEPS
EarthLink / ELNK
ePlus / PLUS
GigaMedia / GIGM
Calculation of Capital Employed in the Business
Net Working Capital
Plus:
Plus:
Plus: Minus:
Minus:
Plus:
Other
Other
Net
Accts Inven- Current
Accts Current
Fixed
Receiv.
tory
Assets
Pay.
Liab. Assets
223
102
132
6,859
5,184
674
1,084
6,406
2,782
648
1,534
649
1,052
1,039
2,585
767
319
455
293
1,753
559
261
721
72
1,245
574
2,567
430
757
3,420
362
377
293
898
1,547
236
521
505
13
869
369
88
38
69
275
191
36
1,152
116
768
518
575
145
134
100
45
289
167
123
50
72
121
265
413
37
43
310
313
189
119
143
37
41
54
86
62
11
72
42
386
304
949
3
358
436
47
88
75
69
221
279
60
13
3
183
50
12
10
17
31
12
48
3
33
75
135
62
15
13
40
16
130
85
120
25
31
97
53
29
3
18
21
62
160
6
1
28
14
48
47
100
23
5
107
13
207
20
-227
5
-5
21
23
0
4
2
35
36
11
1
10
9
2
30
2
12
25
14
21
0
8
3
6
2
2
3
1
2
5
9,137
501
5,214
3,279
21,146
7,372
17,548
6,436
13,541 13,350
23,219
11,242
9,101
1,182
3,619 11,402
7,477
2,049
931
476
81
2,886
452
2,073
306
1,131
559
398
1,818
685
377
1,895
571
2,054
1,257
507
188
1,508
372
1,756
419
356
124
110
570
433
399
76
44
259
118
231
562
48
1,251
129
219
8
110
29
184
291
387
62
74
627
678
64
33
22
24
107
13
737
103
242
279
650
220
48
13
7
140
117
149
64
9
249
10
70
69
211
22
401
19
56
5
16
7
96
8
21
59
7
299
33
656
480
444
10
109
9
116
49
156
18
16
34
21
14
TOTAL
7,052
-1,599
2,677
53
240
-817
-1,539
514
-26
594
212
245
59
290
21
205
151
-63
-14
-65
6
71
127
20
24
20
27
-6
9
16
8
-2,201
12,198
-2,928
-1,108
1,087
2,468
1,828
652
290
-377
415
426
3
373
30
-36
-54
-17
-194
-258
109
-8
Enterprise Value /
Capital Employed
2.4x
nm
4.2x
>99x
28.6x
nm
nm
6.7x
nm
4.9x
12.4x
10.1x
38.0x
6.3x
84.4x
6.5x
7.2x
nm
nm
nm
>99x
8.9x
4.7x
23.2x
14.9x
15.6x
7.0x
nm
10.2x
4.3x
6.4x
nm
9.5x
nm
nm
6.8x
2.9x
3.1x
7.8x
15.0x
nm
6.4x
5.2x
>99x
3.6x
35.2x
nm
nm
nm
nm
nm
1.1x
nm
June 30, 2010 – Page 93 of 120
Stock Price Performance
Company / Ticker
GigaMedia / GIGM
GameStop / GME
Garmin / GRMN
Cornerstone / CRTX
Unisys / UIS
Net1 UEPS / UEPS
PRG-Schultz / PRGX
Synta Pharma / SNTA
Genoptix / GXDX
Dell / DELL
CF Industries / CF
KBR / KBR
Fluor / FLR
Eli Lilly / LLY
Expedia / EXPE
McGraw-Hill / MHP
Apollo Group / APOL
AmSurg / AMSG
Microsoft / MSFT
Oshkosh / OSK
Forest Labs / FRX
L-3 Comms / LLL
Omnicom / OMC
CA / CA
Sohu.com / SOHU
Endo Pharma / ENDP
Cephalon / CEPH
H&R Block / HRB
Altria Group / MO
Centene / CNC
Raytheon / RTN
McAfee / MFE
Recent
Price
($)
2.19
19.21
9.43
25.47
31.97
20.86
6.03
22.79
15.07
4.43
38.10
14.85
3.60
16.67
6.50
29.92
10.58
14.04
64.25
16.58
22.88
6.86
15.35
46.47
34.61
20.97
30.10
48.39
19.51
26.44
35.26
27.30
11.55
66.90
81.61
36.02
52.76
38.07
20.11
44.03
6.08
73.23
22.16
59.87
15.80
20.02
23.66
9.75
53.25
32.92
(sorted by price decline since December 31, 2007; if unavailable, then by YTD price decline)
Market
Value
($mn)
119
2,911
286
3,248
6,368
2,108
154
970
684
104
15,965
2,931
146
292
566
579
129
27,494
4,565
214
3,674
116
7,482
8,306
39,910
5,956
9,497
7,336
603
231,716
3,165
8,255
1,018
25,805
9,446
32,054
15,377
11,686
10,334
1,665
201
3,690
2,577
4,502
5,202
41,693
1,219
337
20,292
5,136
Enter.
Value
($mn)
46
2,927
188
2,494
5,057
1,892
128
1,351
505
95
14,237
2,640
90
160
751
2,619
145
21,273
3,534
354
2,871
68
7,181
6,455
41,833
5,808
9,460
6,851
876
198,045
3,937
4,933
1,090
27,643
12,439
31,579
16,532
13,023
9,296
1,066
180
4,424
2,055
3,825
6,285
50,563
1,061
282
20,007
4,284
Price Performance
Since
Since
Since
12/31/09 12/31/07 12/30/05
-33%
-88%
-23%
-12%
-69%
21%
-31%
-69%
-15%
-13%
-67%
38%
4%
-67%
-4%
3%
-65%
-17%
-1%
-53%
-92%
-41%
-52%
-61%
-22%
-49%
-48%
-25%
-48%
-27%
-14%
-48%
22%
-14%
-47%
-25%
-29%
-46%
na
-53%
-46%
na
-10%
-45%
-54%
-24%
-44%
83%
-39%
-44%
-22%
-2%
-43%
-53%
-29%
-42%
321%
5%
-41%
-42%
20%
-41%
na
-32%
-40%
na
-16%
-40%
-23%
3%
-36%
20%
-3%
-35%
-39%
-18%
-34%
-12%
-10%
-31%
-42%
-20%
-31%
-20%
-11%
-28%
-15%
-13%
-26%
1%
-5%
-25%
-21%
-15%
-25%
-33%
-16%
-25%
-2%
-2%
-25%
17%
-6%
-23%
10%
-17%
-22%
37%
0%
-20%
11%
-3%
-20%
-11%
-10%
-19%
-29%
-23%
-19%
140%
-24%
-19%
na
-13%
-17%
9%
8%
-17%
-27%
-4%
-17%
-8%
-30%
-15%
-36%
2%
-14%
16%
12%
-14%
-10%
-16%
-13%
>999%
3%
-12%
33%
-19%
-12%
21%
This
FY
22x
7x
13x
12x
11x
11x
12x
16x
8x
19x
10x
15x
nm
9x
6x
4x
1x
11x
8x
11x
14x
5x
4x
16x
8x
13x
12x
10x
11x
13x
4x
8x
7x
10x
10x
10x
11x
14x
11x
13x
9x
13x
7x
9x
12x
11x
13x
8x
11x
13x
P/E (Est.)
Next
In
FY 2 Yrs
8x
na
7x
7x
8x
7x
10x
9x
12x
15x
9x
8x
10x
11x
9x
na
7x
na
7x
na
12x
10x
14x
13x
nm
nm
8x
13x
6x
6x
4x
4x
nm
na
9x
10x
8x
8x
11x
na
13x
11x
4x
na
4x
4x
14x
13x
8x
9x
11x
9x
10x
10x
8x
7x
11x
9x
11x
10x
10x
9x
7x
18x
6x
6x
9x
9x
9x
9x
9x
8x
10x
10x
12x
11x
10x
9x
10x
9x
7x
na
12x
11x
7x
6x
8x
9x
10x
9x
10x
9x
12x
11x
6x
na
10x
9x
11x
10x
GS, Adage, Munder
Paradigm, Harvey
Sterneck, Aronson
MCM, Aston, Acadian
Blum, JANA, RenTech
Sands, Primecap
Artisan, Royce
Eagle, MCM, Royce
Blair, LSV, DFA
Passport, Royce
Zesiger, Bridgeway
Cap World, Aronson
Bridgeway, Whitebox
Clearbridge, LSV
Montag, Clearbridge
Cap World, Primecap
Fenimore, Dreman
Cap Re, T Rowe
Aronson, DFA
Clearbridge, LSV
Cap World, Jennison
Cap Re, Franklin
Cap Re, Pzena, GE
NWQ, Pzena, Legg
Orbis, RenTech, GS
Cap Re, Royce, LSV
Times Square, LSV
Sprott
Barrow Hanley
T Rowe, Cap Re
June 30, 2010 – Page 94 of 120
Company / Ticker
SAIC / SAI
Cubic / CUB
Santarus / SNTS
USA Mobility / USMO
Amedisys / AMED
The Gap / GPS
Amerigroup / AGP
McKesson / MCK
InterDigital / IDCC
Vonage / VG
EarthLink / ELNK
LHC Group / LHCG
PMC-Sierra / PMCS
CSG Systems / CSGS
Immunomedics / IMMU
Continucare / CNU
ViroPharma / VPHM
Carter's / CRI
Local.com / LOCM
Aeropostale / ARO
ePlus / PLUS
Lorillard / LO
AOL / AOL
GT Solar / SOLR
Lear / LEA
Impax Labs / IPXL
Recent
Price
($)
48.62
39.53
17.99
31.80
36.28
2.57
13.59
47.98
31.90
46.47
37.05
21.24
36.96
70.09
27.00
2.61
22.81
25.82
94.88
35.01
2.69
8.43
29.93
8.13
20.19
32.56
3.48
4.08
12.19
22.71
4.66
31.17
3.86
7.94
29.68
36.43
18.76
24.99
24.37
37.12
7.01
33.67
74.99
22.74
35.25
5.91
72.10
25.03
20.90
21.40
Market
Value
($mn)
487
3,509
6,836
1,234
970
150
301
112,009
300
1,327
3,448
13,819
1,911
19,022
2,209
118
1,031
1,135
3,277
8,023
567
910
562
1,864
688
9,199
262
245
949
592
68
1,852
154
127
2,776
334
152
283
302
1,850
143
3,193
11,463
2,427
4,044
851
3,366
829
1,141
1,340
Enter.
Value
($mn)
468
3,072
7,374
1,334
663
69
185
115,501
189
1,449
3,417
11,338
1,512
17,587
1,789
76
808
654
3,105
5,622
740
435
549
1,709
636
9,358
237
212
717
595
48
1,819
125
119
2,463
306
121
318
262
2,226
85
4,358
10,539
2,235
16,585
600
3,025
898
919
1,210
Price Performance
Since
Since
Since
12/31/09 12/31/07 12/30/05
18%
-12%
27%
3%
-11%
101%
-5%
-11%
na
0%
-10%
45%
-3%
-7%
82%
-44%
-7%
-52%
23%
-5%
-51%
-7%
-5%
68%
5%
-5%
59%
-4%
-4%
47%
-12%
-3%
32%
1%
0%
20%
37%
1%
90%
12%
7%
36%
16%
7%
-20%
-10%
7%
-57%
12%
8%
7%
-3%
11%
41%
-1%
11%
61%
-21%
16%
88%
92%
17%
na
1%
19%
-24%
-11%
20%
72%
-6%
24%
5%
6%
37%
-10%
25%
45%
62%
8%
50%
19%
-7%
51%
70%
45%
54%
-34%
5%
54%
59%
-51%
58%
652%
19%
61%
6%
94%
62%
61%
37%
65%
44%
31%
68%
154%
-8%
87%
355%
14%
94%
36%
-5%
99%
51%
-13%
151%
-17%
103%
218%
28%
-48%
na
na
-17%
na
na
-7%
na
na
-2%
na
na
-1%
na
na
6%
na
na
7%
na
na
11%
na
na
39%
na
na
57%
na
na
This
FY
7x
17x
13x
13x
15x
18x
8x
11x
16x
8x
13x
11x
13x
15x
10x
10x
12x
9x
9x
6x
17x
10x
11x
11x
9x
16x
10x
12x
18x
9x
7x
12x
8x
11x
10x
11x
na
10x
10x
20x
22x
10x
12x
16x
19x
9x
18x
9x
11x
6x
P/E (Est.)
Next
In
FY 2 Yrs
8x
7x
15x
13x
12x
11x
12x
11x
15x
na
29x
14x
11x
18x
10x
9x
16x
14x
9x
7x
11x
10x
11x
10x
13x
11x
13x
12x
8x
7x
8x
na
12x
12x
11x
na
8x
7x
6x
6x
30x
19x
13x
17x
11x
9x
10x
12x
9x
8x
14x
13x
nm
nm
11x
11x
51x
26x
8x
7x
nm
na
11x
10x
8x
na
9x
na
10x
9x
12x
11x
na
na
8x
8x
11x
10x
15x
13x
7x
4x
9x
8x
11x
10x
14x
15x
17x
11x
8x
8x
11x
10x
8x
10x
9x
7x
14x
13x
Steadfast, RenTech
Artisan, Franklin
Select Equity, MSD
RenTech, Seligman
Westfield, Orbimed
RenTech, LSV, GS
Dodge & Cox, Cap Re
Riverbridge, Kayne
Munder, Earnest
MS, JPM, LSV
Cap Re, Glenview
Blum, RS, Kornitzer
Keane, Rutabaga
Delaware, RenTech
LSV, Acadian
Royce, Mesirow
FMR, BlackRock
T Rowe, Teton
River Road, Cadence
Scopus, Thompson
Essex, Bridgeway
Hussman, Vinik
Royce, Pier, Keane
Royce, Bridgeway
Cap World, Maverick
GS, RenTech, Cap Re
Dodge & Cox, Cap Re
Oaktree, Franklin
Lasry, GS, Paulson
Glickenhaus, Royce
Friess, Jennison
June 30, 2010 – Page 95 of 120
Free Cash Flow
(sorted by LTM free cash flow yield)
Company / Ticker
Oshkosh / OSK
AOL / AOL
AmSurg / AMSG
InterDigital / IDCC
Santarus / SNTS
Net1 UEPS / UEPS
EarthLink / ELNK
USA Mobility / USMO
CSG Systems / CSGS
Amedisys / AMED
GT Solar / SOLR
GameStop / GME
Endo Pharma / ENDP
Cephalon / CEPH
Cubic / CUB
ViroPharma / VPHM
L-3 Comms / LLL
Garmin / GRMN
Forest Labs / FRX
Omnicom / OMC
Dell / DELL
Expedia / EXPE
LHC Group / LHCG
Unisys / UIS
Apollo Group / APOL
The Gap / GPS
McKesson / MCK
Continucare / CNU
LTM
FCF
Yield
44%
42%
38%
35%
33%
28%
27%
24%
22%
20%
19%
19%
18%
18%
18%
17%
17%
17%
16%
15%
14%
13%
13%
13%
13%
12%
12%
12%
12%
11%
11%
11%
11%
11%
11%
11%
11%
11%
11%
10%
10%
10%
10%
10%
9%
9%
9%
9%
9%
9%
Market
Value
($mn)
579
3,165
2,427
603
1,850
214
1,135
150
684
566
910
1,018
68
301
688
7,482
1,327
851
8,023
2,911
2,577
4,502
2,108
970
949
9,446
6,368
487
8,255
118
11,686
27,494
1,141
5,956
562
2,931
970
3,277
334
7,336
3,193
154
13,819
3,448
19,022
2,209
1,031
245
32,054
592
Enter.
Value
($mn)
2,619
3,937
2,235
876
2,226
354
654
69
505
751
435
1,090
48
185
636
7,181
1,449
600
5,622
2,927
2,055
3,825
1,892
663
717
12,439
5,057
468
4,933
76
13,023
21,273
919
5,808
549
2,640
1,351
3,105
306
6,851
4,358
125
11,338
3,417
17,587
1,789
808
212
31,579
595
Price Performance
Since
Since
Since
12/31/09 12/31/07 12/30/05
-24%
-44%
83%
-5%
-25%
-21%
-2%
na
na
-11%
-28%
-15%
103%
218%
28%
5%
-41%
-42%
-3%
11%
41%
-44%
-7%
-52%
-22%
-49%
-48%
-10%
-45%
-54%
1%
19%
-24%
-16%
-25%
-2%
-51%
58%
652%
23%
-5%
-51%
6%
37%
-10%
-16%
-40%
-23%
-4%
-4%
47%
6%
na
na
-21%
16%
88%
-12%
-69%
21%
8%
-17%
-27%
-4%
-17%
-8%
3%
-65%
-17%
-3%
-7%
82%
45%
54%
-34%
-6%
-23%
10%
4%
-67%
-4%
18%
-12%
27%
-15%
-25%
-33%
-10%
7%
-57%
-3%
-20%
-11%
-2%
-43%
-53%
39%
na
na
-18%
-34%
-12%
-11%
20%
72%
-14%
-47%
-25%
-41%
-52%
-61%
-1%
11%
61%
-8%
87%
355%
-20%
-31%
-20%
-17%
na
na
94%
62%
61%
1%
0%
20%
-12%
-3%
32%
12%
7%
36%
16%
7%
-20%
12%
8%
7%
-7%
51%
70%
-17%
-22%
37%
5%
54%
59%
P/E
Last
FY
5x
nm
10x
11x
27x
10x
13x
5x
10x
8x
3x
14x
16x
5x
17x
nm
10x
10x
17x
9x
10x
14x
12x
17x
nm
11x
9x
10x
12x
12x
15x
19x
20x
20x
12x
13x
5x
12x
13x
13x
12x
12x
13x
13x
15x
16x
15x
17x
13x
12x
This
FY
4x
4x
16x
11x
20x
11x
9x
18x
8x
6x
10x
7x
7x
8x
9x
4x
8x
9x
6x
7x
7x
9x
11x
15x
18x
10x
11x
7x
8x
10x
14x
11x
11x
13x
11x
15x
16x
9x
11x
10x
10x
8x
11x
13x
15x
10x
12x
12x
10x
9x
P/E (Est.)
Next
In
FY 2 Yrs
4x
4x
10x
9x
14x
15x
11x
9x
15x
13x
11x
na
11x
na
29x
14x
7x
na
6x
6x
13x
17x
6x
6x
nm
na
11x
18x
9x
8x
4x
4x
9x
7x
8x
8x
6x
6x
7x
7x
7x
6x
8x
9x
9x
8x
15x
na
51x
26x
9x
9x
12x
15x
8x
7x
7x
18x
8x
na
12x
11x
9x
10x
9x
7x
11x
9x
11x
9x
14x
13x
9x
na
8x
7x
12x
11x
8x
7x
9x
8x
8x
na
11x
10x
11x
10x
13x
12x
8x
7x
12x
12x
11x
11x
9x
8x
8x
7x
Aronson, DFA
Dodge & Cox, Cap Re
Fenimore, Dreman
Zesiger, Bridgeway
Westfield, Orbimed
Blair, LSV, DFA
RenTech, LSV, GS
Clearbridge, LSV
Munder, Earnest
LSV, Acadian
GS, Adage, Munder
Cap Re, Royce, LSV
Times Square, LSV
RenTech, Seligman
Sterneck, Aronson
Steadfast, RenTech
Clearbridge, LSV
Keane, Rutabaga
Cap Re, Pzena, GE
Royce, Mesirow
Artisan, Royce
MCM, Aston, Acadian
Royce, Pier, Keane
Cap World, Maverick
MS, JPM, LSV
Cap Re, Glenview
Blum, RS, Kornitzer
Delaware, RenTech
T Rowe, Teton
Cap World, Jennison
River Road, Cadence
June 30, 2010 – Page 96 of 120
Company / Ticker
Aeropostale / ARO
McGraw-Hill / MHP
Raytheon / RTN
McAfee / MFE
Carter's / CRI
Sohu.com / SOHU
PRG-Schultz / PRGX
SAIC / SAI
H&R Block / HRB
PMC-Sierra / PMCS
CF Industries / CF
Microsoft / MSFT
Genoptix / GXDX
Eli Lilly / LLY
Centene / CNC
Vonage / VG
Lorillard / LO
CA / CA
Amerigroup / AGP
Fluor / FLR
Impax Labs / IPXL
Cornerstone / CRTX
KBR / KBR
Lear / LEA
Altria Group / MO
GigaMedia / GIGM
Local.com / LOCM
Immunomedics / IMMU
ePlus / PLUS
Synta Pharma / SNTA
LTM
FCF
Yield
9%
9%
9%
8%
8%
8%
8%
8%
8%
8%
7%
7%
7%
7%
7%
7%
6%
6%
6%
6%
5%
5%
5%
5%
5%
4%
4%
4%
3%
3%
3%
3%
2%
2%
2%
2%
1%
1%
1%
0%
0%
0%
0%
-4%
-5%
-9%
-9%
-30%
-41%
-200%
Market
Value
($mn)
2,776
9,199
9,497
20,292
5,136
116
1,852
1,665
104
6,836
25,805
5,202
1,864
4,565
112,009
231,716
3,248
292
3,690
39,910
1,219
3,509
567
11,463
300
201
15,965
10,334
1,911
8,306
337
1,340
154
829
143
15,377
3,674
3,366
41,693
286
302
283
119
127
262
1,234
4,044
152
146
129
Enter.
Value
($mn)
2,463
9,358
9,460
20,007
4,284
68
1,819
1,066
95
7,374
27,643
6,285
1,709
3,534
115,501
198,045
2,494
160
4,424
41,833
1,061
3,072
740
10,539
189
180
14,237
9,296
1,512
6,455
282
1,210
128
898
85
16,532
2,871
3,025
50,563
188
262
318
46
119
237
1,334
16,585
121
90
145
Price Performance
Since
Since
Since
12/31/09 12/31/07 12/30/05
31%
68%
154%
25%
45%
62%
-10%
-31%
-42%
3%
-12%
33%
-19%
-12%
21%
-32%
-40%
na
19%
61%
6%
-23%
-19%
140%
-25%
-48%
-27%
-5%
-11%
na
-2%
-25%
17%
-30%
-15%
-36%
-6%
24%
5%
-29%
-42%
321%
-7%
-5%
68%
-13%
-26%
1%
-13%
-67%
38%
-53%
-46%
na
-13%
-17%
9%
-3%
-35%
-39%
12%
-14%
-10%
3%
-11%
101%
92%
17%
na
-7%
na
na
5%
-5%
59%
-24%
-19%
na
-14%
-48%
22%
-10%
-19%
-29%
37%
1%
90%
3%
-36%
20%
-16%
-13%
>999%
57%
na
na
-1%
-53%
-92%
11%
na
na
-48%
na
na
0%
-20%
11%
20%
-41%
na
7%
na
na
2%
-14%
16%
-31%
-69%
-15%
-13%
151%
-17%
-5%
99%
51%
-33%
-88%
-23%
37%
65%
44%
8%
50%
19%
0%
-10%
45%
-1%
na
na
14%
94%
36%
-29%
-46%
na
-39%
-44%
-22%
P/E
Last
FY
13x
19x
13x
11x
30x
9x
16x
12x
7x
15x
11x
10x
41x
9x
15x
16x
9x
10x
12x
9x
12x
18x
nm
13x
18x
7x
11x
14x
13x
12x
10x
26x
11x
27x
41x
16x
13x
6x
13x
8x
29x
11x
4x
nm
>99x
9x
nm
13x
2x
nm
This
FY
10x
16x
12x
11x
13x
5x
12x
13x
19x
13x
10x
12x
11x
8x
11x
13x
12x
9x
13x
8x
13x
17x
17x
12x
16x
9x
10x
11x
13x
16x
8x
6x
12x
9x
22x
11x
14x
18x
11x
13x
10x
10x
22x
11x
10x
13x
19x
na
nm
1x
P/E (Est.)
Next
In
FY 2 Yrs
10x
9x
14x
13x
10x
10x
10x
9x
11x
10x
4x
na
11x
10x
10x
9x
7x
na
12x
11x
9x
9x
10x
9x
10x
12x
8x
8x
10x
9x
11x
10x
10x
9x
8x
13x
12x
11x
8x
9x
12x
11x
15x
13x
30x
19x
11x
10x
16x
14x
7x
na
12x
10x
10x
9x
13x
11x
14x
13x
6x
na
14x
13x
10x
11x
8x
10x
7x
4x
10x
10x
13x
11x
11x
10x
10x
9x
8x
7x
11x
10x
8x
8x
8x
na
9x
na
nm
nm
12x
11x
17x
11x
na
na
nm
nm
nm
na
Hussman, Vinik
Barrow Hanley
T Rowe, Cap Re
Bridgeway, Whitebox
Scopus, Thompson
Orbis, RenTech, GS
Blum, JANA, RenTech
Artisan, Franklin
Dodge & Cox, Cap Re
Cap Re, T Rowe
Eagle, MCM, Royce
Cap World, Primecap
GS, RenTech, Cap Re
Riverbridge, Kayne
Sands, Primecap
NWQ, Pzena, Legg
Montag, Clearbridge
Sprott
Friess, Jennison
Glickenhaus, Royce
Cap Re, Franklin
Cap World, Aronson
Lasry, GS, Paulson
Paradigm, Harvey
Royce, Bridgeway
Essex, Bridgeway
FMR, BlackRock
Select Equity, MSD
Oaktree, Franklin
Passport, Royce
June 30, 2010 – Page 97 of 120
P/E Multiples
(sorted initially by P/E based on estimated EPS for next fiscal year)
Company / Ticker
GameStop / GME
Endo Pharma / ENDP
Forest Labs / FRX
Net1 UEPS / UEPS
PRG-Schultz / PRGX
Eli Lilly / LLY
GigaMedia / GIGM
Genoptix / GXDX
CF Industries / CF
GT Solar / SOLR
Apollo Group / APOL
Cephalon / CEPH
Unisys / UIS
CSG Systems / CSGS
Amedisys / AMED
L-3 Comms / LLL
Local.com / LOCM
Dell / DELL
Aeropostale / ARO
Cornerstone / CRTX
PMC-Sierra / PMCS
CA / CA
Oshkosh / OSK
Raytheon / RTN
Altria Group / MO
Recent
Price
($)
6.86
29.92
15.35
35.01
11.55
6.50
9.75
19.21
22.16
27.30
15.07
7.01
4.43
6.08
48.62
3.86
94.88
2.61
27.00
34.61
2.19
16.67
22.71
64.25
5.91
48.39
59.87
24.99
25.03
9.43
20.90
33.67
22.79
20.19
46.47
81.61
36.02
20.86
66.90
7.94
14.04
47.98
29.68
6.03
8.13
20.11
25.47
35.26
53.25
20.02
∆ to
52-Week
Low
High
-1% 151%
-42%
45%
-41%
41%
-31%
36%
-2%
76%
-12%
46%
-80%
53%
-11%
49%
-24%
12%
-15%
21%
-19%
49%
-12% 153%
-44%
58%
-4%
46%
-37%
9%
-52%
17%
-10%
29%
-32%
30%
-33%
33%
-7%
10%
-9% 175%
-2% 134%
-22%
24%
-10%
71%
-25%
22%
-2%
59%
-12%
22%
-31%
9%
-32%
2%
-26%
71%
-35%
32%
-22%
32%
-46%
77%
-36%
18%
-36%
38%
-22%
20%
-9%
39%
-57%
24%
-25%
18%
-67%
11%
-16%
25%
-24%
14%
-36%
9%
-21% 104%
-12%
24%
-20%
20%
-28%
41%
-64%
26%
-21%
13%
-20%
9%
Market
Value
($mn)
116
579
7,482
8,023
1,018
566
337
2,911
2,577
8,255
684
143
104
201
487
154
3,277
118
2,209
39,910
119
292
592
4,565
851
7,336
4,502
283
829
286
1,141
3,193
970
688
1,327
9,446
32,054
2,108
25,805
127
27,494
112,009
2,776
154
1,864
10,334
3,248
3,165
20,292
41,693
Enter.
Value
($mn)
68
2,619
7,181
5,622
1,090
751
282
2,927
2,055
4,933
505
85
95
180
468
125
3,105
76
1,789
41,833
46
160
595
3,534
600
6,851
3,825
318
898
188
919
4,358
1,351
636
1,449
12,439
31,579
1,892
27,643
119
21,273
115,501
2,463
128
1,709
9,296
2,494
3,937
20,007
50,563
P/E
Last
FY
9x
5x
nm
17x
14x
8x
10x
9x
10x
12x
10x
41x
7x
7x
10x
12x
12x
12x
16x
9x
4x
10x
12x
9x
10x
13x
14x
11x
27x
8x
20x
12x
5x
17x
10x
11x
13x
12x
11x
nm
19x
15x
13x
11x
41x
14x
9x
nm
11x
13x
This
FY
5x
4x
4x
6x
7x
6x
8x
7x
7x
8x
8x
22x
19x
9x
7x
8x
9x
10x
10x
8x
22x
9x
9x
8x
9x
10x
9x
10x
9x
13x
11x
10x
16x
9x
8x
10x
10x
11x
10x
11x
11x
11x
10x
12x
11x
11x
12x
4x
11x
11x
P/E (Est.)
Next
In
FY 2 Yrs
4x
na
4x
4x
4x
4x
6x
6x
6x
6x
6x
6x
6x
na
7x
7x
7x
6x
7x
18x
7x
na
7x
4x
7x
na
7x
na
8x
7x
8x
na
8x
7x
8x
na
8x
7x
8x
9x
8x
na
8x
13x
8x
7x
8x
8x
8x
8x
8x
7x
8x
9x
8x
8x
8x
10x
8x
7x
9x
7x
9x
8x
9x
na
9x
8x
9x
7x
9x
9x
9x
8x
9x
8x
9x
9x
9x
na
9x
10x
10x
9x
10x
9x
10x
11x
10x
12x
10x
9x
10x
9x
10x
9x
10x
9x
10x
9x
FY
End
Date
12/31/10
12/31/10
6/30/10
6/30/10
6/30/10
12/31/10
12/31/10
1/31/11
12/31/10
3/31/11
6/30/10
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
9/30/10
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
3/31/11
8/31/10
12/31/10
4/30/11
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
1/31/11
10/31/10
1/31/11
12/31/10
12/31/10
3/31/11
12/31/10
9/30/10
12/31/10
12/31/10
Date of
Latest
Quarter
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
4/30/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
2/28/10
3/31/10
4/30/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
4/30/10
4/30/10
4/30/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
LTM
EBIT/
EV
38%
11%
19%
26%
20%
18%
16%
22%
21%
19%
21%
5%
18%
22%
20%
22%
17%
19%
15%
13%
22%
33%
17%
15%
24%
16%
11%
14%
15%
44%
14%
13%
28%
9%
17%
14%
12%
14%
13%
0%
11%
10%
16%
11%
5%
13%
19%
25%
15%
11%
LTM
EBIT/
Capital
>99%
>99%
50-99%
50-99%
>99%
>99%
50-99%
>99%
>99%
25-50%
>99%
50-99%
>99%
>99%
>99%
50-99%
>99%
>99%
50-99%
50-99%
>99%
25-50%
50-99%
50-99%
>99%
>99%
50-99%
>99%
50-99%
>99%
>99%
>99%
>99%
25-50%
>99%
50-99%
>99%
>99%
50-99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
June 30, 2010 – Page 98 of 120
Company / Ticker
Sohu.com / SOHU
H&R Block / HRB
McGraw-Hill / MHP
Lorillard / LO
InterDigital / IDCC
Carter's / CRI
AmSurg / AMSG
The Gap / GPS
Lear / LEA
Expedia / EXPE
LHC Group / LHCG
Continucare / CNU
USA Mobility / USMO
McAfee / MFE
Microsoft / MSFT
Garmin / GRMN
Centene / CNC
SAIC / SAI
Omnicom / OMC
KBR / KBR
EarthLink / ELNK
Amerigroup / AGP
McKesson / MCK
Fluor / FLR
Impax Labs / IPXL
AOL / AOL
Cubic / CUB
Santarus / SNTS
Vonage / VG
ViroPharma / VPHM
Immunomedics / IMMU
Synta Pharma / SNTA
ePlus / PLUS
Recent
Price
($)
44.03
52.76
15.80
30.10
74.99
25.82
16.58
31.17
19.51
21.24
72.10
20.97
29.93
4.08
13.59
37.05
32.92
26.44
24.37
22.81
31.97
23.66
38.10
17.99
73.23
31.80
36.43
38.07
22.88
8.43
36.96
70.09
14.85
32.56
46.47
21.40
22.74
37.12
36.28
39.53
31.90
35.25
2.57
2.69
12.19
10.58
4.66
3.48
3.60
18.76
∆ to
52-Week
Low
High
-7%
64%
-31%
7%
-6%
47%
-22%
23%
-11%
10%
-29%
23%
-47%
12%
-38%
10%
-5%
21%
-31%
24%
-46%
18%
-36%
31%
-30%
25%
-45%
29%
-28%
12%
-25%
18%
-6%
39%
-17%
19%
-67%
23%
-18%
10%
-35%
27%
-29%
10%
-25%
32%
-7%
10%
-6%
16%
-31%
13%
-40%
21%
-22%
16%
-29%
8%
-14%
11%
-44%
2%
-39%
2%
-15%
20%
-47%
2%
-14%
26%
-68%
3%
-14%
30%
-85%
4%
-14%
17%
-39%
14%
-14%
13%
-17%
13%
-9% 126%
-88%
3%
-56%
18%
-10%
75%
-15% 179%
-40% 106%
-41%
93%
-28%
1%
Market
Value
($mn)
1,665
15,377
5,202
9,497
11,463
1,135
214
1,852
603
13,819
3,366
5,956
562
245
301
3,448
5,136
231,716
302
1,031
6,368
1,219
15,965
6,836
3,690
1,234
334
11,686
3,674
910
1,911
19,022
2,931
9,199
8,306
1,340
2,427
1,850
970
3,509
300
4,044
150
567
949
129
68
262
146
152
Enter.
Value
($mn)
1,066
16,532
6,285
9,460
10,539
654
354
1,819
876
11,338
3,025
5,808
549
212
185
3,417
4,284
198,045
262
808
5,057
1,061
14,237
7,374
4,424
1,334
306
13,023
2,871
435
1,512
17,587
2,640
9,358
6,455
1,210
2,235
2,226
663
3,072
189
16,585
69
740
717
145
48
237
90
121
P/E
Last
FY
12x
16x
10x
13x
13x
13x
10x
16x
11x
13x
6x
20x
12x
17x
5x
13x
30x
16x
29x
15x
9x
12x
11x
15x
12x
9x
13x
15x
13x
3x
13x
15x
13x
19x
12x
26x
10x
27x
17x
18x
18x
0x
5x
nm
nm
nm
16x
>99x
2x
13x
This
FY
13x
11x
12x
12x
12x
9x
11x
12x
11x
11x
18x
13x
11x
12x
8x
13x
13x
13x
10x
12x
11x
13x
10x
13x
13x
13x
11x
14x
14x
10x
13x
15x
15x
16x
16x
6x
16x
20x
15x
17x
16x
19x
18x
17x
18x
1x
7x
10x
nm
na
P/E (Est.)
Next
In
FY 2 Yrs
10x
9x
10x
10x
10x
9x
10x
10x
11x
10x
11x
na
11x
na
11x
10x
11x
9x
11x
10x
11x
10x
11x
9x
11x
9x
11x
11x
11x
18x
11x
10x
11x
10x
11x
10x
11x
10x
12x
12x
12x
15x
12x
11x
12x
10x
12x
11x
12x
11x
12x
11x
12x
11x
12x
11x
13x
11x
13x
17x
13x
11x
13x
12x
14x
13x
14x
13x
14x
13x
14x
13x
14x
15x
15x
13x
15x
na
15x
13x
16x
14x
17x
11x
29x
14x
30x
19x
51x
26x
nm
na
nm
na
nm
nm
nm
nm
na
na
FY
End
Date
12/31/10
12/31/10
4/30/10
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
1/31/11
12/31/10
12/31/10
12/31/10
6/30/10
12/31/10
9/30/10
12/31/10
6/30/10
4/30/10
12/31/10
12/31/10
12/31/10
12/31/10
1/31/11
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
3/31/11
12/31/10
9/30/10
12/31/10
12/31/10
12/31/10
12/31/10
9/30/10
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
12/31/10
9/30/10
6/30/10
6/30/10
12/31/10
3/31/11
Date of
Latest
Quarter
3/31/10
3/31/10
1/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
4/30/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
1/31/10
3/31/10
3/31/10
3/31/10
3/31/10
4/30/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
3/31/10
LTM
EBIT/
EV
19%
14%
13%
14%
15%
31%
17%
13%
26%
17%
45%
10%
16%
16%
30%
13%
5%
11%
16%
12%
16%
13%
16%
12%
10%
21%
15%
11%
17%
40%
15%
11%
13%
11%
16%
23%
18%
31%
13%
10%
20%
66%
53%
11%
18%
>99%
35%
15%
>99%
21%
LTM
EBIT/
Capital
>99%
>99%
>99%
>99%
>99%
>99%
>99%
50-99%
>99%
50-99%
>99%
>99%
>99%
>99%
>99%
50-99%
>99%
50-99%
50-99%
>99%
50-99%
>99%
25-50%
50-99%
>99%
>99%
>99%
>99%
50-99%
>99%
>99%
>99%
50-99%
>99%
50-99%
>99%
>99%
>99%
50-99%
>99%
>99%
>99%
>99%
>99%
>99%
50-99%
>99%
>99%
>99%
>99%
June 30, 2010 – Page 99 of 120
Percentile Rank within Industry
Company / Ticker
Synta Pharma / SNTA
Immunomedics / IMMU
Impax Labs / IPXL
InterDigital / IDCC
Net1 UEPS / UEPS
Sohu.com / SOHU
Microsoft / MSFT
ViroPharma / VPHM
AmSurg / AMSG
Endo Pharma / ENDP
Genoptix / GXDX
CA / CA
Lorillard / LO
GT Solar / SOLR
EarthLink / ELNK
Eli Lilly / LLY
Apollo Group / APOL
Forest Labs / FRX
Altria Group / MO
CF Industries / CF
McGraw-Hill / MHP
USA Mobility / USMO
Santarus / SNTS
Cephalon / CEPH
Expedia / EXPE
Aeropostale / ARO
PMC-Sierra / PMCS
Amedisys / AMED
Industry
Business Services
Computer Services
Major Drugs
Comms Equipment
Waste Management
Computer Services
Computer Services
Comms Services
Food Processing
Tobacco
Semiconductors
Tobacco
Computer Services
Advertising
Major Drugs
Schools
Schools
Personal Services
Schools
Tobacco
Personal Services
Comms Services
Personal Services
Schools
Retail (apparel)
Oil Well Services
Business Services
Semiconductors
Computer Storage
(sorted by LTM EBIT margin rank)
Rev. Growth
EPS Growth LTM EBIT
5-Year LTM LTM Est.
Margin
49
65
na
na
100
60
39
56
49
98
49
63
38
na
98
100
na
95
32
96
92
97
99
na
94
89
87
64
56
92
91
97
100
99
90
80
88
na
80
89
75
96
96
89
89
na
85
54
57
88
66
74
41
80
88
90
78
33
26
88
57
52
54
26
88
74
60
38
26
88
95
88
75
15
88
69
73
54
45
86
10
89
99
na
85
75
77
58
42
84
99
89
39
88
84
38
62
55
29
84
56
87
36
18
84
97
60
42
99
83
na
66
32
na
83
43
52
58
21
83
67
93
99
31
83
36
53
34
42
83
7
20
78
1
83
71
50
97
71
83
56
71
na
2
82
72
84
41
68
82
100
94
21
94
82
na
89
30
na
81
44
70
38
6
81
71
86
62
68
81
na
84
62
38
81
3
84
28
18
81
56
10
29
68
80
32
49
42
21
80
36
57
49
na
79
9
23
92
na
79
99
84
98
41
79
71
74
72
27
78
57
67
88
44
78
71
88
89
76
77
74
79
68
59
77
90
32
32
41
77
96
48
41
na
75
59
72
27
11
75
76
83
93
45
74
91
81
65
71
74
LTM
EBIT/
EV
66%
21%
20%
>99%
15%
12%
23%
31%
35%
16%
21%
19%
11%
12%
18%
26%
>99%
21%
33%
13%
15%
24%
15%
14%
16%
10%
40%
31%
13%
16%
14%
38%
19%
17%
13%
11%
15%
14%
20%
30%
53%
11%
10%
17%
16%
16%
11%
5%
26%
17%
LTM
EBIT/
Capital
>99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
50-99%
>99%
>99%
50-99%
>99%
>99%
>99%
50-99%
>99%
25-50%
>99%
>99%
>99%
50-99%
>99%
50-99%
>99%
>99%
>99%
50-99%
>99%
>99%
>99%
25-50%
>99%
>99%
>99%
50-99%
>99%
>99%
>99%
>99%
50-99%
>99%
50-99%
>99%
25-50%
>99%
>99%
50-99%
>99%
P/E
Last
FY
nm
9x
18x
2x
>99x
13x
26x
13x
16x
10x
10x
12x
16x
15x
nm
11x
nm
10x
10x
14x
13x
10x
27x
16x
29x
12x
3x
27x
9x
13x
20x
9x
12x
12x
12x
13x
9x
13x
10x
5x
5x
14x
20x
12x
13x
11x
5x
41x
17x
10x
This
FY
19x
13x
16x
nm
10x
10x
6x
9x
7x
8x
8x
13x
13x
12x
18x
11x
1x
7x
9x
11x
12x
9x
9x
11x
10x
13x
10x
20x
8x
10x
11x
5x
8x
9x
10x
11x
8x
12x
7x
8x
18x
9x
13x
9x
10x
10x
4x
11x
6x
8x
P/E (Est.)
Next
In
FY 2 Yrs
17x
11x
12x
11x
16x
14x
nm
nm
nm
nm
9x
8x
14x
13x
11x
na
nm
na
6x
na
7x
na
10x
9x
11x
10x
12x
12x
51x
26x
11x
9x
nm
na
7x
6x
8x
13x
10x
9x
11x
10x
8x
8x
8x
10x
10x
10x
11x
10x
12x
11x
13x
17x
15x
13x
8x
9x
8x
7x
9x
7x
4x
na
7x
18x
8x
7x
9x
8x
10x
9x
8x
8x
10x
10x
8x
7x
11x
18x
29x
14x
8x
9x
11x
9x
8x
7x
10x
9x
12x
10x
4x
4x
10x
12x
6x
6x
9x
7x
June 30, 2010 – Page 100 of 120
Company / Ticker
Carter's / CRI
The Gap / GPS
AOL / AOL
Cornerstone / CRTX
Oshkosh / OSK
Raytheon / RTN
CSG Systems / CSGS
Continucare / CNU
Garmin / GRMN
Omnicom / OMC
L-3 Comms / LLL
McAfee / MFE
PRG-Schultz / PRGX
H&R Block / HRB
Vonage / VG
Unisys / UIS
Cubic / CUB
SAIC / SAI
GameStop / GME
GigaMedia / GIGM
Fluor / FLR
Dell / DELL
KBR / KBR
Amerigroup / AGP
Centene / CNC
ePlus / PLUS
McKesson / MCK
Local.com / LOCM
Lear / LEA
LHC Group / LHCG
Industry
Retail (apparel)
Business Services
Schools
Business Services
Retail (apparel)
Computer Services
Computer Storage
Auto & Truck Makers
Conglomerates
Business Services
Advertising
Business Services
Computer Hardware
Personal Services
Comms Services
Computer Services
Retail (technology)
Personal Services
Computer Services
Computer Hardware
Health Insurance
Advertising
Auto & Truck Parts
Computer Services
Schools
Retail (specialty)
Rev. Growth
EPS Growth LTM EBIT
5-Year LTM LTM Est.
Margin
81
43
96
na
73
67
72
75
61
73
46
52
58
44
73
88
85
50
77
73
59
86
95
76
72
72
82
94
61
72
18
60
61
38
72
na
10
88
1
71
56
70
91
39
70
97
87
21
na
70
74
84
91
45
70
48
68
56
23
70
49
67
30
19
69
60
64
42
21
69
79
76
72
80
69
85
38
38
27
69
37
42
32
38
69
73
65
49
26
68
71
80
35
52
68
85
82
23
100
67
91
69
89
27
67
7
52
28
80
66
66
19
36
52
66
50
62
54
45
65
22
50
80
17
65
94
56
60
32
65
14
38
96
23
64
48
73
60
19
64
73
71
64
31
63
56
67
39
52
63
75
16
na
43
62
89
63
40
41
61
93
80
89
73
61
1
39
20
32
59
14
59
52
na
57
75
39
35
32
56
29
51
33
45
55
25
46
38
43
55
80
79
98
49
54
86
82
54
43
53
36
54
42
na
52
47
62
70
40
50
46
72
91
54
49
80
91
74
na
47
8
35
95
86
34
49
55
52
27
30
88
86
58
61
28
28
80
62
49
25
59
77
90
61
24
na
22
28
50
21
LTM
EBIT/
EV
44%
13%
13%
15%
20%
18%
17%
18%
19%
11%
25%
15%
9%
13%
16%
16%
11%
14%
5%
5%
10%
18%
19%
10%
13%
11%
28%
13%
22%
12%
14%
22%
17%
22%
19%
16%
11%
17%
15%
13%
21%
11%
11%
0%
45%
13%
16%
15%
14%
22%
LTM
EBIT/
Capital
>99%
50-99%
50-99%
>99%
>99%
>99%
50-99%
>99%
50-99%
>99%
>99%
>99%
25-50%
50-99%
>99%
50-99%
>99%
50-99%
>99%
50-99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
50-99%
50-99%
50-99%
>99%
>99%
>99%
>99%
>99%
50-99%
>99%
50-99%
>99%
>99%
>99%
>99%
>99%
>99%
>99%
50-99%
>99%
50-99%
>99%
>99%
P/E
Last
FY
8x
16x
13x
13x
14x
8x
13x
10x
nm
11x
nm
11x
17x
11x
17x
9x
15x
11x
30x
41x
18x
7x
9x
15x
10x
nm
5x
17x
12x
15x
12x
9x
10x
4x
12x
12x
19x
13x
13x
12x
13x
15x
19x
nm
6x
13x
12x
16x
11x
7x
This
FY
13x
12x
13x
11x
7x
6x
11x
16x
4x
12x
4x
11x
9x
10x
12x
11x
14x
10x
13x
22x
17x
19x
12x
11x
12x
17x
16x
15x
8x
13x
11x
7x
11x
22x
10x
16x
11x
14x
13x
13x
na
15x
16x
11x
18x
15x
11x
10x
10x
9x
P/E (Est.)
Next
In
FY 2 Yrs
8x
7x
11x
10x
11x
10x
12x
11x
6x
6x
6x
6x
11x
10x
14x
15x
4x
4x
10x
11x
10x
9x
10x
9x
9x
8x
9x
9x
11x
11x
12x
15x
12x
11x
9x
9x
11x
10x
7x
4x
15x
13x
7x
na
10x
9x
10x
9x
10x
9x
30x
19x
9x
na
15x
na
8x
na
12x
11x
9x
8x
7x
7x
11x
na
8x
na
8x
na
14x
13x
9x
10x
13x
11x
13x
11x
12x
11x
na
na
13x
12x
14x
13x
9x
na
11x
10x
14x
13x
11x
9x
8x
7x
8x
8x
7x
na
June 30, 2010 – Page 101 of 120
Insider Buying and Ownership
Company / Ticker
Synta Pharma / SNTA
AOL / AOL
CF Industries / CF
Cubic / CUB
H&R Block / HRB
Continucare / CNU
Immunomedics / IMMU
McGraw-Hill / MHP
Forest Labs / FRX
GigaMedia / GIGM
Fluor / FLR
KBR / KBR
Lorillard / LO
PRG-Schultz / PRGX
Lear / LEA
Cornerstone / CRTX
Sohu.com / SOHU
Endo Pharma / ENDP
CA / CA
Altria Group / MO
McAfee / MFE
Centene / CNC
Carter's / CRI
Amerigroup / AGP
Omnicom / OMC
Garmin / GRMN
Apollo Group / APOL
Santarus / SNTS
Last Six Months
Insider Insider
Buys
Sales
9
7
6
2
1
1
1
3
1
1
1
1
1
1
1
1
1
1
1
4
2
2
2
2
2
2
3
3
4
4
4
4
4
5
5
5
(sorted by fewest sells, then number of buys minus sells in past six months)
Insider
Own.
43%
0%
0%
62%
82%
41%
5%
79%
50%
46%
45%
42%
24%
12%
8%
2%
2%
1%
1%
1%
1%
1%
0%
0%
0%
0%
10%
0%
71%
22%
18%
4%
0%
0%
35%
25%
0%
0%
0%
0%
17%
3%
10%
2%
2%
1%
1%
44%
15%
11%
Recent
Price
($)
3.60
22.74
64.25
25.03
6.08
36.28
15.80
9.43
9.75
4.08
29.92
52.76
6.86
35.25
3.48
15.35
30.10
20.90
27.30
33.67
2.61
2.19
46.47
22.88
74.99
27.00
4.43
72.10
6.03
44.03
39.53
10.58
22.16
38.10
7.01
20.11
73.23
11.55
20.02
32.92
31.90
22.81
48.62
23.66
31.17
36.96
38.07
31.97
48.39
2.57
Market
Value
($mn)
146
2,427
4,565
829
201
970
5,202
286
337
245
579
15,377
116
4,044
262
7,482
9,497
1,141
8,255
3,193
118
119
8,306
3,674
11,463
2,209
104
3,366
154
1,665
3,509
129
2,577
15,965
143
10,334
3,690
1,018
41,693
5,136
300
1,031
487
1,219
1,852
1,911
11,686
6,368
7,336
150
Enter.
Value
($mn)
90
2,235
3,534
898
180
663
6,285
188
282
212
2,619
16,532
68
16,585
237
7,181
9,460
919
4,933
4,358
76
46
6,455
2,871
10,539
1,789
95
3,025
128
1,066
3,072
145
2,055
14,237
85
9,296
4,424
1,090
50,563
4,284
189
808
468
1,061
1,819
1,512
13,023
5,057
6,851
69
P/E
Last
FY
2x
10x
9x
27x
7x
17x
10x
8x
10x
17x
5x
16x
9x
nm
>99x
nm
13x
20x
12x
12x
12x
4x
12x
13x
13x
16x
7x
6x
11x
12x
18x
nm
10x
11x
41x
14x
12x
14x
13x
30x
18x
15x
10x
12x
16x
13x
15x
9x
13x
5x
This
FY
nm
16x
8x
9x
9x
15x
12x
13x
8x
12x
4x
11x
5x
19x
10x
4x
12x
11x
8x
10x
10x
22x
16x
14x
12x
10x
19x
18x
12x
13x
17x
1x
7x
10x
22x
11x
13x
7x
11x
13x
16x
12x
7x
13x
12x
13x
14x
11x
10x
18x
P/E (Est.)
Next
In
FY 2 Yrs
nm
nm
14x
15x
8x
8x
8x
10x
7x
na
15x
na
10x
9x
8x
7x
6x
na
11x
11x
4x
4x
10x
10x
4x
na
17x
11x
nm
nm
4x
4x
10x
10x
9x
7x
7x
18x
9x
8x
8x
na
8x
na
14x
13x
13x
11x
11x
10x
8x
7x
7x
na
11x
10x
10x
11x
10x
9x
15x
13x
nm
na
7x
6x
12x
10x
7x
4x
10x
9x
12x
11x
6x
6x
10x
9x
11x
10x
16x
14x
12x
12x
8x
7x
12x
11x
11x
10x
13x
11x
12x
11x
12x
15x
8x
7x
29x
14x
Div.
Yield
.6%
8.0%
1.6%
.5%
3.8%
6.8%
3.1%
1.2%
1.1%
.9%
5.3%
.8%
1.0%
.8%
1.9%
7.0%
1.8%
2.1%
4.7%
-
Dodge & Cox, Cap Re
Glickenhaus, Royce
RenTech, Seligman
Paradigm, Harvey
Sprott
T Rowe, Teton
Cap Re, Franklin
Bridgeway, Whitebox
Oaktree, Franklin
FMR, BlackRock
Clearbridge, LSV
Clearbridge, LSV
Cap World, Maverick
Keane, Rutabaga
Montag, Clearbridge
Cap World, Aronson
GS, RenTech, Cap Re
Blum, RS, Kornitzer
Blum, JANA, RenTech
Lasry, GS, Paulson
Orbis, RenTech, GS
Passport, Royce
Cap Re, Royce, LSV
Sands, Primecap
NWQ, Pzena, Legg
T Rowe, Cap Re
Riverbridge, Kayne
Delaware, RenTech
Steadfast, RenTech
Scopus, Thompson
Cap Re, Pzena, GE
Sterneck, Aronson
Westfield, Orbimed
June 30, 2010 – Page 102 of 120
Company / Ticker
Unisys / UIS
Eli Lilly / LLY
EarthLink / ELNK
ViroPharma / VPHM
Impax Labs / IPXL
Net1 UEPS / UEPS
USA Mobility / USMO
Oshkosh / OSK
Cephalon / CEPH
Dell / DELL
AmSurg / AMSG
PMC-Sierra / PMCS
LHC Group / LHCG
GameStop / GME
GT Solar / SOLR
ePlus / PLUS
Amedisys / AMED
L-3 Comms / LLL
Expedia / EXPE
McKesson / MCK
SAIC / SAI
CSG Systems / CSGS
InterDigital / IDCC
Genoptix / GXDX
The Gap / GPS
Raytheon / RTN
Vonage / VG
Local.com / LOCM
Microsoft / MSFT
Aeropostale / ARO
Last Six Months
Insider Insider
Buys
Sales
5
5
5
5
5
6
10
7
2
7
7
7
7
1
8
1
8
8
8
8
3
9
9
10
10
11
11
11
11
12
12
12
12
13
13
13
14
3
15
1
15
15
18
1
19
20
21
22
22
23
25
27
27
29
32
33
34
36
Insider
Own.
11%
4%
1%
0%
0%
1%
1%
0%
5%
3%
1%
34%
0%
11%
1%
1%
12%
1%
3%
1%
17%
6%
1%
1%
40%
28%
1%
0%
37%
4%
0%
2%
1%
14%
1%
0%
1%
2%
1%
31%
3%
1%
3%
25%
0%
25%
13%
12%
1%
0%
Recent
Price
($)
37.05
14.85
22.79
35.01
34.61
8.43
12.19
94.88
21.40
15.07
66.90
4.66
13.59
36.43
35.26
59.87
14.04
20.86
19.51
8.13
29.93
19.21
32.56
5.91
18.76
24.37
46.47
81.61
20.97
6.50
70.09
16.58
17.99
24.99
20.19
25.47
36.02
25.82
16.67
21.24
22.71
31.80
37.12
3.86
53.25
2.69
7.94
26.44
29.68
47.98
Market
Value
($mn)
3,448
2,931
970
8,023
39,910
910
949
3,277
1,340
684
25,805
68
301
334
3,165
4,502
27,494
2,108
603
1,864
562
2,911
9,199
851
152
302
1,327
9,446
5,956
566
19,022
214
6,836
283
688
3,248
32,054
1,135
292
13,819
592
1,234
1,850
154
20,292
567
127
231,716
2,776
112,009
Enter.
Value
($mn)
3,417
2,640
1,351
5,622
41,833
435
717
3,105
1,210
505
27,643
48
185
306
3,937
3,825
21,273
1,892
876
1,709
549
2,927
9,358
600
121
262
1,449
12,439
5,808
751
17,587
354
7,374
318
636
2,494
31,579
654
160
11,338
595
1,334
2,226
125
20,007
740
119
198,045
2,463
115,501
P/E
Last
FY
13x
13x
5x
17x
9x
3x
nm
12x
26x
10x
11x
16x
5x
13x
nm
14x
19x
12x
11x
41x
12x
9x
19x
10x
13x
29x
10x
11x
20x
8x
15x
10x
15x
11x
17x
9x
13x
13x
10x
13x
12x
9x
27x
12x
11x
nm
nm
16x
13x
15x
This
FY
13x
15x
16x
6x
8x
10x
18x
9x
6x
8x
10x
7x
8x
11x
4x
9x
11x
11x
11x
11x
11x
7x
16x
9x
na
10x
8x
10x
13x
6x
15x
11x
13x
10x
9x
12x
10x
9x
9x
11x
9x
13x
20x
8x
11x
17x
11x
13x
10x
11x
P/E (Est.)
Next
In
FY 2 Yrs
11x
10x
14x
13x
9x
na
6x
6x
8x
9x
13x
17x
51x
26x
8x
7x
14x
13x
7x
na
9x
9x
nm
na
11x
18x
12x
11x
10x
9x
8x
9x
9x
10x
9x
8x
11x
9x
10x
12x
11x
9x
7x
7x
14x
13x
8x
8x
na
na
11x
10x
9x
7x
9x
9x
11x
9x
6x
6x
13x
12x
11x
na
12x
11x
8x
8x
9x
8x
10x
9x
9x
8x
11x
na
8x
13x
11x
10x
8x
7x
12x
11x
15x
13x
8x
na
10x
9x
30x
19x
9x
na
11x
10x
10x
9x
10x
9x
Div.
Yield
1.9%
5.7%
7.6%
2.5%
7.4%
1.0%
2.0%
1.3%
6.2%
1.0%
1.9%
2.8%
2.0%
.7%
Artisan, Royce
MCM, Aston, Acadian
LSV, Acadian
Cap World, Primecap
Friess, Jennison
RenTech, LSV, GS
Royce, Pier, Keane
Aronson, DFA
Times Square, LSV
Fenimore, Dreman
Royce, Mesirow
GS, Adage, Munder
Royce, Bridgeway
Munder, Earnest
Blair, LSV, DFA
Cap Re, Glenview
Zesiger, Bridgeway
Artisan, Franklin
Cap World, Jennison
Eagle, MCM, Royce
MS, JPM, LSV
River Road, Cadence
Select Equity, MSD
Barrow Hanley
Essex, Bridgeway
Cap Re, T Rowe
Hussman, Vinik
Dodge & Cox, Cap Re
June 30, 2010 – Page 103 of 120
•
Background on “Magic Formula”
Investing
Magic Formula investing (MFI) is based on a simple yet
powerful way of searching for undervalued stocks.
According to Joel Greenblatt’s The Little Book That Beats
The Market, portfolios of stocks selected quantitatively
based on MFI criteria have handily outperformed the S&P
500 over the past couple of decades.
Magic Formula Performance vs. S&P 500, 1988-2004
Magic Formula (all companies)
Magic Formula (largest 1000 companies)
S&P 500
WHY MAGIC FORMULA CONTINUES TO WORK
•
“Institutional imperative” makes adherence
to MFI difficult. Institutional managers care not
only about investment risk but, perhaps more
acutely, about career risk. Many managers
cannot afford to follow a winning strategy if it
involves enduring long stretches of relative
underperformance. It is much safer from a career
standpoint to be “wrong” when everyone else is
losing money than to be “wrong” when everyone
is making money. During the 1988-2004 period
studied by Greenblatt, MFI handily
outperformed the S&P 500, yet the strategy
experienced two non-overlapping three-year
periods of underperformance. While most fund
managers may be able to endure a quarter or a
year of underperformance, they may be left with
few investors after a two- or three-year period of
subpar results. It is therefore extremely difficult
to stick with MFI when the going gets tough.
•
Investors have a hard time turning off their
emotional biases. Even a quick peek at the list
of candidates generated by the MFI screen –
available at www.magicformulainvesting.com –
is likely to make an investor’s stomach churn.
Many companies on the list are either in out-offavor industries or have major company-specific
issues, such as regulatory scrutiny, accounting
problems, executive turnover, or deteriorating
operating momentum. While many investors
may agree conceptually that buying good
companies when they are out of favor is a path to
long-term outperformance, a much smaller
number would actually be willing to follow such
a strategy. As a quantitative method, the MFI
screen is perfectly sanguine about picking a
headhunting firm during a recession or a laser
eye surgery provider when the media is calling
into question the safety of laser eye surgery.
Professional investors legitimately want to use
the MFI list as a starting point from which to do
further research and ultimately make a subjective
CAGR, 1988-2004
31%
23%
12%
Source: Joel Greenblatt, The Little Book That Beats the Market.
Magic Formula Performance vs. S&P 500, 1999-2009 *
(in %) ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 avg
MF
16
9 36 -21 52 28 22 13 15 -36 46 14.5
S&P 15 -9 -12 -22 29 11
5 16
6 -37 19 -0.2
* MF data represents performance of Formula Investing Model Portfolio,
net of fees. 1999 data is from October 1, 1999 to December 31, 1999. 2009
data is through September 30, 2009. Average is 1999-2009 CAGR.
Source: Formula Investing, www.formulainvesting.com
WHY WE LIKE MAGIC FORMULA INVESTING
•
•
Advocated by superinvestor Joel Greenblatt.
Greenblatt invented MFI as a do-it-yourself
version of the approach he has espoused while
amassing one of the most impressive investment
track records of all time. While reliable data on
Greenblatt’s complete track record is not
available, some estimates put his annualized
returns over the past couple of decades at well
north of 20%. From 1985-1994, Greenblatt
managed the Gotham Partners hedge fund,
reporting annualized returns of 50% (after
expenses, before performance fees). Gotham
returned all outside capital in January 1995.
Simple. The MFI screen ranks companies based
on only two variables: “cheapness” (pre-tax
unlevered earnings yield) and “goodness” (return
on capital employed). The two rankings are
given equal weight in the final compilation of the
MFI Top 100. This simple process stands in
stark contrast to most quantitative screening
methods, which rely on multiple variables and
are difficult to replicate.
Makes sense. Few investors would prefer a bad
business to a good one, and few would purposely
ignore the price they pay for a stock. MFI seeks
out good companies that are available at good
prices. The result is a list of businesses that offer
both a high earnings yield and a relatively high
probability that capital reinvested in the business
will generate high returns. It makes intuitive
sense that such stocks should outperform.
June 30, 2010 – Page 104 of 120
of buying stocks with low price-to-book
multiples also exhibited relatively low volatility.
Volatility, of course, is the EMH adherents’
favorite definition of risk. Undeterred, Fama
concluded that low price-to-book stocks must be
riskier in other ways… The continuing lack of
disappearance of the low price-to-book
“anomaly” suggests that investors may not flock
to MFI even after many years of demonstrated
outperformance.
judgment regarding an investment opportunity.
Unfortunately, the subjective judgment is
frequently tainted by emotional bias. As a result,
the investor may dismiss the headhunting firm
by thinking, “Of course it’s cheap, we’re in a
recession!” Similarly, the investor may dismiss
the laser eye surgery company by thinking, “Of
course it’s cheap, they might go out of
business!”
•
•
MFI never runs out of investment candidates.
Several value investment strategies have become
de facto obsolete over time. For example,
whereas Ben Graham successfully searched for
so-called “net nets” more than a half-century
ago, such companies have become virtually
extinct today. The few companies whose current
assets exceed the sum of their equity market
value and total liabilities are typically either
depleting those current assets at a rapid pace or
there are other reasons why theoretical
liquidation values might not be realized. As a
result, today’s professional investors cannot
build their businesses around “net nets.” By
contrast, MFI simply ranks public companies
relative to each other. There is no absolute
cheapness requirement, whether it be “net net” or
that book value exceed market value. As a result,
MFI will always provide investors with an
investable list of relatively attractive public
companies.
Investors tend to remain skeptical of winning
strategies even after long periods of
outperformance. Investors have been taught –
you might say “brainwashed” – that markets are
efficient and there is no free lunch. As a result,
they struggle with the notion that a simple
quantitative strategy can systematically
outperform the best efforts of large numbers of
securities analysts and portfolio managers. For
example, stocks that trade at a low multiple of
price to book value have outperformed the
broader market in a statistically significant way
for a long period of time. Economists Eugene
Fama and Kenneth French have studied this
phenomenon extensively (latest data is available
at www.kennethfrench.com). Ironically, even
after having observed this contradiction of the
efficient markets hypothesis (EMH) for many
years, Fama, in true professorial fashion, tried to
explain it away by invoking the EMH adherents’
favorite axiom: If a strategy outperforms, it must
be riskier! Unfortunately for Fama, the strategy
OUR PROPRIETARY SELECTION PROCESS
The Manual of Ideas has developed a process that seeks to
improve upon the already impressive performance of the
magic formula screen. The MF 100 is an unranked list of
the 100 most attractive companies based on earnings yield
and return on capital employed. We highly recommend
Greenblatt’s MFI website, magicformulainvesting.com
MOI’s methodology recognizes that not every equity
investment should be approached with the same set of
questions. Security analysis should be tailored to the type
of opportunity examined. For example, an investor
analyzing a company that trades at a large discount to net
cash and tangible book value might inquire whether the
company can be liquidated without major asset
impairments, not whether the company’s long-term
competitive position is favorable. On the other hand, an
investor analyzing a company that trades well above book
value and at a high multiple of earnings must examine
prospects for sustained rapid earnings growth.
The performance of the MFI screen can be improved if
one asks questions that take into account the nature of
magic formula selections. Of particular concern is the fact
that MFI favors firms exhibiting high returns on capital
employed. Such companies are generally not cheap based
on the liquidation value of their assets. Instead, they
might be cheap based on current and prospective earning
power. As a result, a crucial determination when
evaluating MF selections is whether they exhibit aboveaverage returns on capital for transitory reasons or for
reasons that have some permanence. Warren Buffett calls
this moat; others may know it as sustainable competitive
advantage. It is also crucial whether a business operates in
a growing industry that allows the company to reinvest a
portion of free cash flow at high rates of return.
The MOI seeks out companies whose earnings yield is
likely to increase over time if the stock price remains
unchanged. Such companies not only sustain high returns
on capital, but also grow earnings by reinvesting cash in
the business. As they generate high returns, such
June 30, 2010 – Page 105 of 120
companies need to reinvest only a portion of FCF in order
to achieve respectable growth. As a result, they generally
have cash available for dividends and stock repurchases.
Buybacks executed at “good” prices accelerate EPS
growth and value creation.
In order to narrow down the list of 100 MF companies to
the most promising investments, we use a scoring
methodology to rank the companies. We then consider the
scoring results and a number of increasingly subjective
criteria to narrow down the list to ten investments. In
addition to “positive” criteria, such as sustainability of
competitive advantage, management quality and industry
growth, our selection methodology takes into account the
following negative criteria, among others (as Charlie
Munger might say, “Invert!”):
•
•
Pro forma adjustments: We eliminate companies
that would not be on the MF list if their financial
statements were adjusted to reflect true operating
performance (may include companies recently
engaged in large M&A).
Capital reinvestment: We avoid companies with
virtually no opportunity for high-return
reinvestment of capital (typically companies in
industries in long-term decline).
•
Threats to key revenue source: We avoid
companies dependent on a specific customer or
contract, if loss of latter has become a real
possibility (circumstances may include
acquisition of major customer, ongoing re-bid
process for large contract, or loss of patent
protection).
•
Cyclicality: We avoid capital-intensive
businesses that generate high ROIC only during
cyclical upswings in their respective industries.
•
Faddishness: We avoid companies providing a
product or service that has a reasonably high
likelihood of being a fad.
•
Insider selling: We avoid companies with heavy
recent insider selling, particularly if such selling
occurred at prices roughly equal to or below the
current market price.
•
Alignment of interests: We avoid companies with
major CEO conflicts of interest or corporate
governance abuses.
•
Value proposition: We avoid companies that
offer a questionable value proposition to their
end customers.
•
M&A rollups: We avoid companies that have
meaningful integration risks due to major
reliance on acquisition-driven growth.
June 30, 2010 – Page 106 of 120
Favorite Stock Screens for Value Investors
Market
Value
Enterprise
Value
"Magic Formula," based on Trailing Financials
1 Synta Pharma
SNTA
$3.14
$127mn
$71mn
Trailing EBIT / EV
132%
2
EarthLink
3
Terra Nova Royalty
Company
Ticker
Price
ELNK
$8.15
$880mn
$405mn
50%
TTT
$9.83
$298mn
$200mn
32%
$107mn
$68mn
EPS Yield FY0
16%
22%
"Magic Formula," based on This Year's EPS Estimates
1 GTx
GTXI
$2.94
2
Jiangbo Pharma
JGBO
$9.25
$112mn
$39mn
3
ITT Educational
ESI
$86.94
$3,003mn
$2,831mn
13%
$112mn
$39mn
EPS Yield FY1
32%
ESI
$86.94
$3,003mn
$2,831mn
14%
GIGM
$2.03
$111mn
"Magic Formula," based on Next Year's EPS Estimates
1 Jiangbo Pharma
JGBO
$9.25
2
ITT Educational
3
GigaMedia
$37mn
14%
Contrarian: Shunned by the market, but not by insiders
1 Ormat Technologies
ORA
$28.41
$1,291mn
2
NuStar Energy L.P.
3
* Solar Capital
$1,901mn
Insider Buys
$43,666mn
NS
$57.48
$3,461mn
$5,391mn
$30,062mn
SLRC
$19.49
$644mn
n/m
$24,635mn
Contrarian: Biggest YTD Losers (deleveraged & profitable)
1 Broadwind Energy
BWEN
$2.32
$248mn
$241mn
∆ Price YTD
-71%
2
A-Power Energy
3
China Nepstar
APWR
$7.94
$360mn
$272mn
-57%
NPD
$3.19
$337mn
$169mn
-56%
$21,401mn
n/m
∆ Shares Q-Q
-20%
-17%
Value with Catalyst: Cheap Repurchasers of Stock
1 United Overseas Bank
UOVEY
$28.42
2
China Integrated
3
Electr. For Imaging
CBEH
$8.54
$287mn
$250mn
EFII
$9.70
$439mn
$234mn
-8%
Profitable Dividend Payors with Decent Balance Sheets
1 Am. Capital Agency
AGNC
$28.97
$949mn
$873mn
Div. Yield
19%
2
Fifth Street Finance
FSC
$11.74
$532mn
n/m
11%
3
BBVA Banco Frances
BFR
$6.57
$1,175mn
n/m
11%
$560mn
$409mn
EV/Revenue
.06x
TECD
$38.28
$1,942mn
$1,443mn
.06x
IM
$15.80
$2,613mn
$2,073mn
.07x
$27.05
$1,147mn
$119mn
EV/GP
.12x
IDT
$9.79
$222mn
$48mn
.17x
WINN
$10.17
$560mn
$409mn
.20x
Activist Targets: Potential Sales, Liquidations or Recaps
1 PennyMac Mortgage
PMT
$16.47
$276mn
-$48mn
NCAV / MV
114%
Deep Value: Lots of Revenue, Low Enterprise Value
1 Winn-Dixie Stores
WINN
$10.17
2
Tech Data
3
Ingram Micro
Deep Value: Neglected Gross Profiteers
1 WellCare
WCG
2
IDT Corp.
3
Winn-Dixie Stores
2
Colony Financial
3
Ingram Micro
CLNY
$17.95
$263mn
-$25mn
104%
IM
$15.80
$2,613mn
$2,073mn
99%
June 30, 2010 – Page 107 of 120
“Magic Formula,” based on Trailing Operating Income
Companies with high returns on capital employed, trading at high trailing EBIT-to-enterprise value yield
Move To
52-Week
Low
High
▼
▼
EBIT/
Capital
Employed
Tax
Rate
Price/
Tangible
Book
MV
($mn)
EV
($mn)
EV/
Sales
Trailing
EBIT/
EV
Insiders
%
Buys/
Own. Sells
Company
Ticker
Price
($)
1
2
3
4
5
Synta Pharma
EarthLink
Terra Nova Royalty
* Cytokinetics
Unisys
SNTA
ELNK
TTT
CYTK
UIS
3.14
8.15
9.83
2.74
20.22
-33%
-10%
-29%
-9%
-36%
121%
15%
64%
103%
100%
127
880
298
176
861
71
405
200
83
1,242
.5x
.6x
.4x
1.0x
.3x
132%
50%
32%
30%
31%
infinite
1561%
infinite
infinite
2270%
n/m
n/m
68%
1%
16%
2.9x
1.4x
1.2x
1.9x
n/m
43%
1%
79%
6%
1%
11 / -/6
-/- / 17
-/5
6
7
8
9
10
GigaMedia
ePlus
* Ambassadors Group
InterDigital
* Medicis Pharma
GIGM
PLUS
EPAX
IDCC
MRX
2.03
17.23
11.22
26.20
22.37
-4%
-22%
-9%
-30%
-34%
197%
11%
54%
21%
26%
111
140
214
1,152
1,349
37
109
102
670
960
.2x
.2x
1.1x
2.0x
1.5x
27%
27%
25%
30%
20%
infinite
infinite
infinite
899%
infinite
6%
39%
34%
28%
43%
1.0x
.8x
2.9x
>9.9x
3.3x
1%
40%
6%
2%
2%
-/- / 12
-/4
- / 20
-/4
11
12
13
14
15
Foster Wheeler
Jiangbo Pharma
* Tessera Technologies
ITT Educational
United Online
FWLT
JGBO
TSRA
ESI
UNTD
23.31
9.25
16.86
86.94
6.02
-21%
-22%
-3%
-2%
-2%
54%
57%
91%
40%
57%
2,973
112
847
3,003
525
2,219
39
429
2,831
709
.5x
.4x
1.7x
2.0x
.7x
22%
131%
21%
19%
19%
705%
249%
937%
infinite
infinite
21%
28%
43%
39%
40%
4.2x
1.2x
1.8x
>9.9x
n/m
0%
50%
2%
0%
4%
- / 18
-/- / 10
2/7
- / 13
16
17
18
19
20
Sohu.com
* Metropolitan Health
AOL
Apollo Group
* H&R Block
SOHU
MDF
AOL
APOL
HRB
42.02
3.99
21.96
43.75
15.55
-2%
-54%
-11%
-1%
-4%
72%
13%
34%
76%
49%
1,589
159
2,344
6,632
5,120
990
130
2,151
6,148
4,429
1.9x
.4x
.7x
1.4x
1.1x
20%
21%
27%
20%
17%
1239%
662%
250%
416%
infinite
17%
38%
47%
42%
38%
2.8x
3.9x
3.1x
9.9x
>9.9x
22%
25%
0%
15%
5%
-/1
- / 26
7/-/5
1/-
21
22
23
24
25
Bridgepoint Edu.
Oshkosh
USA Mobility
* InfoSpace
Amerigroup
BPI
OSK
USMO
INSP
AGP
17.79
34.04
13.23
7.93
34.42
-24%
-59%
-26%
-17%
-39%
55%
31%
15%
53%
10%
971
3,056
293
284
1,780
749
3,827
177
53
1,380
1.4x
.5x
.6x
.2x
.3x
17%
26%
32%
23%
16%
infinite
207%
175%
203%
infinite
42%
35%
n/m
4%
27%
5.9x
n/m
1.9x
1.2x
2.3x
1%
1%
0%
1%
1%
-/-/8
1/8
1 / 15
-/4
26
27
28
29
30
Immunomedics
* Genoptix
Amedisys
* Primoris Services
Endo Pharma
IMMU
GXDX
AMED
PRIM
ENDP
3.40
15.80
44.86
6.98
22.31
-32%
-2%
-34%
-16%
-25%
111%
147%
43%
28%
11%
256
277
1,281
231
2,594
231
145
1,403
210
2,072
3.7x
.8x
.9x
.5x
1.4x
16%
37%
18%
19%
18%
infinite
131%
279%
227%
263%
n/m
45%
39%
38%
26%
6.5x
1.5x
n/m
4.5x
4.1x
8%
1%
1%
82%
0%
-/- / 21
- / 12
1/-/1
31
32
33
34
35
Chicago Bridge
Reynolds American
* Impax Labs
AmSurg
ViroPharma
CBI
RAI
IPXL
AMSG
VPHM
20.55
51.37
20.49
18.78
11.87
-56%
-26%
-67%
-2%
-54%
26%
9%
9%
26%
21%
2,076
14,972
1,283
581
924
1,860
16,127
1,153
854
692
.5x
1.9x
1.9x
1.3x
2.0x
15%
15%
25%
26%
19%
infinite
infinite
140%
132%
196%
39%
38%
36%
17%
42%
n/m
n/m
3.8x
n/m
5.8x
1%
42%
5%
3%
1%
-/9
-/-/7
- / 10
10 / 7
36
37
38
39
40
* Career Education
* Continucare
* Forest Labs
* Corinthian Colleges
* MedQuist
CECO
CNU
FRX
COCO
MEDQ
24.71
3.63
27.63
10.25
8.21
-26%
-36%
-16%
-2%
-39%
45%
45%
20%
98%
22%
2,022
218
8,355
903
308
1,602
185
5,033
975
287
.8x
.6x
1.2x
.6x
.9x
16%
19%
20%
23%
15%
403%
163%
154%
128%
408%
36%
39%
28%
39%
7%
6.1x
4.2x
1.9x
>9.9x
6.9x
0%
46%
1%
0%
70%
3/1
-/-/-/2
-/-
41
42
43
44
45
* EMCOR Group
Sinovac Biotech
* Centene
* Allied Healthcare
CA
EME
SVA
CNC
AHCI
CA
23.70
4.98
22.61
2.23
19.46
-25%
-28%
-25%
-17%
-17%
26%
151%
15%
52%
24%
1,572
269
1,165
101
10,000
1,122
205
1,007
59
8,962
.2x
2.4x
.2x
.2x
2.1x
22%
20%
14%
25%
14%
122%
135%
infinite
113%
infinite
37%
27%
36%
27%
34%
4.1x
3.8x
2.4x
1.8x
n/m
2%
12%
2%
1%
25%
- / 11
-/-/4
-/-/2

Company website
SEC
Y!
Proxy
Y!
Price Charts
* New additions are highlighted.
Screening criteria: ► Market value > $100 million ► ADRs and banks excluded
MV = market value. EV = enterprise value. Number of insider transactions relates to most recent six-month period.
June 30, 2010 – Page 108 of 120
“Magic Formula,” based on This Year’s EPS Estimates
Companies with high returns on capital employed, trading at high earnings yields (based on this FY EPS estimates)
Move To
52-Week
Low
High
MV
($mn)
EV
($mn)
▼
▼
EV/
Sales
This FY
EPS
Yield
EBIT/
Capital
Employed
Tax
Rate
Price to
Tangible
Book
Insiders
%
Buys/
Own. Sells
Company
Ticker
Price
($)
1
2
3
4
5
GTx
Jiangbo Pharma
ITT Educational
* ePlus
Endo Pharma
GTXI
JGBO
ESI
PLUS
ENDP
2.94
9.25
86.94
17.23
22.31
-35%
-22%
-2%
-22%
-25%
362%
57%
40%
11%
11%
107
112
3,003
140
2,594
68
39
2,831
109
2,072
1.0x
.4x
2.0x
.2x
1.4x
16%
22%
13%
13%
14%
infinite
249%
infinite
infinite
263%
n/m
28%
39%
39%
26%
3.2x
1.2x
>9.9x
.8x
4.1x
69%
50%
0%
40%
0%
17 / 1
-/2/7
- / 12
-/1
6
7
8
9
10
Metropolitan Health
Impax Labs
InterDigital
Corinthian Colleges
Apollo Group
MDF
IPXL
IDCC
COCO
APOL
3.99
20.49
26.20
10.25
43.75
-54%
-67%
-30%
-2%
-1%
13%
9%
21%
98%
76%
159
1,283
1,152
903
6,632
130
1,153
670
975
6,148
.4x
1.9x
2.0x
.6x
1.4x
12%
16%
11%
16%
12%
662%
140%
899%
128%
416%
38%
36%
28%
39%
42%
3.9x
3.8x
>9.9x
>9.9x
9.9x
25%
5%
2%
0%
15%
- / 26
-/7
- / 20
-/2
-/5
11
12
13
14
15
* Career Education
GT Solar
Bridgepoint Edu.
USA Mobility
* Forest Labs
CECO
SOLR
BPI
USMO
FRX
24.71
6.05
17.79
13.23
27.63
-26%
-27%
-24%
-26%
-16%
45%
19%
55%
15%
20%
2,022
871
971
293
8,355
1,602
620
749
177
5,033
.8x
1.1x
1.4x
.6x
1.2x
11%
11%
11%
13%
13%
403%
infinite
infinite
175%
154%
36%
38%
42%
n/m
28%
6.1x
6.5x
5.9x
1.9x
1.9x
0%
1%
1%
0%
1%
3/1
- / 11
-/1/8
-/-
16
17
18
19
20
Immunomedics
EarthLink
GameStop
* H&R Block
America's Car-Mart
IMMU
ELNK
GME
HRB
CRMT
3.40
8.15
18.51
15.55
24.16
-32%
-10%
-8%
-4%
-24%
111%
15%
55%
49%
13%
256
880
2,805
5,120
273
231
405
2,821
4,429
311
3.7x
.6x
.3x
1.1x
.9x
10%
10%
14%
10%
11%
infinite
1561%
104%
infinite
210%
n/m
n/m
36%
38%
36%
6.5x
1.4x
5.7x
>9.9x
1.6x
8%
1%
6%
5%
13%
-/-/6
- / 11
1/1 / 15
21
22
23
24
25
Dell
PMC-Sierra
Lihua International
Western Digital
China Electric Motor
DELL
PMCS
LIWA
WDC
CELM
12.93
7.75
9.12
31.78
5.77
-8%
-7%
-50%
-22%
-23%
35%
30%
39%
49%
71%
25,325
1,777
266
7,283
120
19,104
1,622
222
4,882
86
.3x
3.0x
1.1x
.5x
1.0x
10%
10%
12%
20%
14%
infinite
infinite
117%
83%
91%
28%
5%
26%
9%
24%
>9.9x
4.2x
2.9x
1.7x
2.1x
12%
1%
48%
0%
51%
3/9
- / 10
-/-/2
-/-
26
27
28
29
30
Local.com
Allied Healthcare
Seagate Technology
* Medicis Pharma
CF Industries
LOCM
AHCI
STX
MRX
CF
7.55
2.23
13.68
22.37
67.60
-60%
-17%
-32%
-34%
-15%
17%
52%
58%
26%
63%
121
101
6,668
1,349
4,803
113
59
6,367
960
3,772
1.8x
.2x
.6x
1.5x
1.6x
10%
12%
26%
9%
11%
infinite
113%
70%
infinite
111%
n/m
27%
2%
43%
35%
>9.9x
1.8x
2.5x
3.3x
2.8x
13%
1%
2%
2%
0%
- / 33
-/-/-/4
6/-
31
32
33
34
35
Gilead Sciences
Foster Wheeler
Lincoln Educational
Penwest Pharma
Primoris Services
GILD
FWLT
LINC
PPCO
PRIM
36.35
23.31
20.96
3.42
6.98
-10%
-21%
-16%
-62%
-16%
38%
54%
35%
13%
28%
32,348
2,973
546
109
231
31,873
2,219
549
100
210
4.2x
.5x
.9x
3.7x
.5x
10%
9%
12%
23%
10%
185%
705%
91%
65%
227%
25%
21%
41%
n/m
38%
5.5x
4.2x
4.4x
6.0x
4.5x
1%
0%
3%
2%
82%
1 / 19
- / 18
- / 22
-/1/-
36
37
38
39
40
* SciClone Pharma
* Cherokee
* CSG Systems
Nephros
* Eli Lilly
SCLN
CHKE
CSGS
NEP
LLY
2.98
16.80
19.46
5.50
33.94
-30%
-7%
-32%
-35%
-6%
79%
45%
23%
111%
12%
141
148
663
142
39,138
103
141
611
116
41,061
1.4x
4.4x
1.2x
2.4x
1.8x
12%
9%
11%
23%
13%
85%
629%
88%
54%
66%
4%
40%
34%
31%
21%
2.3x
>9.9x
>9.9x
1.9x
6.1x
22%
13%
1%
31%
0%
2/1
-/- / 15
-/2
-/5
41
42
43
44
45
Gulf Resources
Aeropostale
Hewlett-Packard
* Cephalon
* Fuqi International
GFRE
ARO
HPQ
CEPH
FUQI
9.22
29.62
45.92
58.77
8.11
-79%
-36%
-20%
-11%
-6%
62%
9%
19%
24%
303%
319
2,770
107,200
4,419
224
263
2,458
110,692
3,742
99
2.3x
1.1x
.9x
1.6x
.2x
14%
10%
10%
11%
25%
62%
159%
124%
82%
50%
27%
40%
20%
26%
22%
2.2x
6.1x
>9.9x
5.2x
.8x
50%
1%
0%
1%
43%
-/- / 35
- / 32
-/8
-/-

Company website
SEC
Y!
Proxy
Y!
Price Charts
Screening criteria: ► Market value > $100 million ► ADRs and banks excluded ► Enterprise value to market value < 1.5
June 30, 2010 – Page 109 of 120
“Magic Formula,” based on Next Year’s EPS Estimates
Companies with high returns on capital employed, trading at high earnings yields (based on next FY EPS estimates)
Move To
52-Week
Low
High
MV
($mn)
EV
($mn)
▼
▼
EV/
Sales
Next FY
EPS
Yield
EBIT/
Capital
Employed
Tax
Rate
Price to
Tangible
Book
Insiders
%
Buys/
Own. Sells
Company
Ticker
Price
($)
1
2
3
4
5
Jiangbo Pharma
ITT Educational
GigaMedia
Bridgepoint Edu.
Career Education
JGBO
ESI
GIGM
BPI
CECO
9.25
86.94
2.03
17.79
24.71
-22%
-2%
-4%
-24%
-26%
57%
40%
197%
55%
45%
112
3,003
111
971
2,022
39
2,831
37
749
1,602
.4x
2.0x
.2x
1.4x
.8x
32%
14%
14%
14%
14%
249%
infinite
infinite
infinite
403%
28%
39%
6%
42%
36%
1.2x
>9.9x
1.0x
5.9x
6.1x
50%
0%
1%
1%
0%
-/2/7
-/-/3/1
6
7
8
9
10
Endo Pharma
Corinthian Colleges
Apollo Group
Lihua International
Metropolitan Health
ENDP
COCO
APOL
LIWA
MDF
22.31
10.25
43.75
9.12
3.99
-25%
-2%
-1%
-50%
-54%
11%
98%
76%
39%
13%
2,594
903
6,632
266
159
2,072
975
6,148
222
130
1.4x
.6x
1.4x
1.1x
.4x
15%
19%
13%
19%
13%
263%
128%
416%
117%
662%
26%
39%
42%
26%
38%
4.1x
>9.9x
9.9x
2.9x
3.9x
0%
0%
15%
48%
25%
-/1
-/2
-/5
-/- / 26
11
12
13
14
15
GT Solar
* Forest Labs
Allied Healthcare
China Electric Motor
GameStop
SOLR
FRX
AHCI
CELM
GME
6.05
27.63
2.23
5.77
18.51
-27%
-16%
-17%
-23%
-8%
19%
20%
52%
71%
55%
871
8,355
101
120
2,805
620
5,033
59
86
2,821
1.1x
1.2x
.2x
1.0x
.3x
12%
14%
15%
19%
16%
infinite
154%
113%
91%
104%
38%
28%
27%
24%
36%
6.5x
1.9x
1.8x
2.1x
5.7x
1%
1%
1%
51%
6%
- / 11
-/-/-/- / 11
16
17
18
19
20
Dell
America's Car-Mart
Western Digital
Terra Nova Royalty
* Actuate
DELL
CRMT
WDC
TTT
ACTU
12.93
24.16
31.78
9.83
4.45
-8%
-24%
-22%
-29%
-13%
35%
13%
49%
64%
39%
25,325
273
7,283
298
202
19,104
311
4,882
200
174
.3x
.9x
.5x
.4x
1.5x
11%
13%
20%
11%
11%
infinite
210%
83%
infinite
infinite
28%
36%
9%
68%
14%
>9.9x
1.6x
1.7x
1.2x
>9.9x
12%
13%
0%
79%
7%
3/9
1 / 15
-/2
-/-/8
21
22
23
24
25
* H&R Block
Local.com
Seagate Technology
Primoris Services
Foster Wheeler
HRB
LOCM
STX
PRIM
FWLT
15.55
7.55
13.68
6.98
23.31
-4%
-60%
-32%
-16%
-21%
49%
17%
58%
28%
54%
5,120
121
6,668
231
2,973
4,429
113
6,367
210
2,219
1.1x
1.8x
.6x
.5x
.5x
11%
11%
26%
12%
11%
infinite
infinite
70%
227%
705%
38%
n/m
2%
38%
21%
>9.9x
>9.9x
2.5x
4.5x
4.2x
5%
13%
2%
82%
0%
1/- / 33
-/1/- / 18
26
27
28
29
30
PMC-Sierra
Penwest Pharma
* SciClone Pharma
Lincoln Educational
Nephros
PMCS
PPCO
SCLN
LINC
NEP
7.75
3.42
2.98
20.96
5.50
-7%
-62%
-30%
-16%
-35%
30%
13%
79%
35%
111%
1,777
109
141
546
142
1,622
100
103
549
116
3.0x
3.7x
1.4x
.9x
2.4x
11%
29%
15%
14%
27%
infinite
65%
85%
91%
54%
5%
n/m
4%
41%
31%
4.2x
6.0x
2.3x
4.4x
1.9x
1%
2%
22%
3%
31%
- / 10
-/2/1
- / 22
-/2
31
32
33
34
35
Gulf Resources
Sohu.com
CF Industries
China Valves
Gilead Sciences
GFRE
SOHU
CF
CVVT
GILD
9.22
42.02
67.60
9.46
36.35
-79%
-2%
-15%
-63%
-10%
62%
72%
63%
57%
38%
319
1,589
4,803
347
32,348
263
990
3,772
342
31,873
2.3x
1.9x
1.6x
3.3x
4.2x
16%
10%
12%
15%
11%
62%
1239%
111%
59%
185%
27%
17%
35%
26%
25%
2.2x
2.8x
2.8x
3.3x
5.5x
50%
22%
0%
63%
1%
-/-/1
6/-/2
1 / 19
36
37
38
39
40
* Medicis Pharma
Fuqi International
Shengkai Innovations
* CSG Systems
* Cephalon
MRX
FUQI
VALV
CSGS
CEPH
22.37
8.11
7.99
19.46
58.77
-34%
-6%
-65%
-32%
-11%
26%
303%
32%
23%
24%
1,349
224
184
663
4,419
960
99
165
611
3,742
1.5x
.2x
3.3x
1.2x
1.6x
10%
19%
12%
12%
12%
infinite
50%
86%
88%
82%
43%
22%
24%
34%
26%
3.3x
.8x
3.0x
>9.9x
5.2x
2%
43%
87%
1%
1%
-/4
-/-/- / 15
-/8
41
42
43
44
45
* JDA Software
* QKL Stores
* Hewlett-Packard
RINO International
* Eli Lilly
JDAS
QKLS
HPQ
RINO
LLY
23.68
4.40
45.92
13.88
33.94
-40%
-20%
-20%
-41%
-6%
34%
99%
19%
153%
12%
987
131
107,200
397
39,138
1,104
84
110,692
315
41,061
2.5x
.3x
.9x
1.5x
1.8x
10%
12%
11%
16%
13%
196%
85%
124%
50%
66%
35%
n/m
20%
2%
21%
6.2x
1.7x
>9.9x
1.6x
6.1x
4%
67%
0%
52%
0%
- / 35
-/- / 32
-/-/5

Company website
SEC
Y!
Proxy
Y!
Price Charts
Screening criteria: ► Market value > $100 million ► ADRs and banks excluded ► Enterprise value to market value < 1.5
June 30, 2010 – Page 110 of 120
Contrarian: Shunned By The Market, Not By Insiders
Companies close to 52-week lows, with consistent insider buying and no selling
▼
Move To
52-Week
Low
High
MV
($mn)
EV
($mn)
EV/
Sales
Next
FY
P/E
Price/
Tang.
Book
%
Own.
Insiders
Net Sh. Bought **
$'000
% of sh.
Company
Ticker
Price
($)
1
2
3
4
5
Ormat Technologies
NuStar Energy L.P.
* Solar Capital
* Texas Industries
Barnes & Noble
ORA
NS
SLRC
TXI
BKS
28.41
57.48
19.49
31.16
16.43
-8%
-12%
-11%
-12%
-6%
55%
12%
24%
52%
75%
1,291
3,461
644
865
946
1,901
5,391
n/m
1,334
1,006
4.8x
1.3x
n/m
2.1x
.2x
24x
17x
8x
n/m
21x
1.5x
2.3x
.9x
1.1x
n/m
57%
2%
6%
17%
37%
43,666
30,062
24,635
23,495
16,742
3%
<1%
4%
3%
2%
6
7
8
9
10
AOL
* Tengion
* Heritage-Crystal
FBR Capital Markets
* Coca-Cola
AOL
TNGN
HCCI
FBCM
KO
21.96
3.95
8.07
4.11
50.26
-11%
-16%
-7%
-14%
-6%
34%
33%
71%
77%
18%
2,344
49
87
256
115,900
2,151
250
85
n/m
118,741
.7x
n/m
.9x
n/m
3.8x
14x
n/m
24x
10x
13x
3.1x
n/m
2.1x
.8x
9.2x
0%
4%
61%
3%
5%
12,385
9,464
8,780
8,068
6,886
<1%
16%
9%
3%
<1%
11
12
13
14
15
* Chinacast Education
* Armour Residential
* Steel Dynamics
* Plains Exploration
KAR Auction Services
CAST
ARR
STLD
PXP
KAR
6.32
6.53
14.08
21.68
12.71
-11%
-4%
-12%
-11%
-13%
36%
53%
45%
69%
25%
291
204
3,049
3,037
1,711
202
205
5,230
5,698
3,502
3.6x
n/m
1.1x
4.2x
2.0x
11x
4x
7x
11x
11x
2.1x
.9x
4.0x
1.1x
n/m
24%
20%
5%
2%
56%
5,960
5,466
4,463
4,336
3,813
2%
3%
<1%
<1%
<1%
16
17
18
19
20
* THQ
First Community Bank
* Prospect Capital
Hansen Medical
Auxilium Pharma
THQI
FCFL
PSEC
HNSN
AUXL
4.58
2.00
10.17
2.38
24.79
-10%
-13%
-15%
-16%
-5%
93%
150%
30%
126%
55%
310
11
684
128
1,176
129
n/m
n/m
113
1,000
.1x
n/m
n/m
6.5x
5.7x
11x
8x
n/m
45x
1.5x
.4x
1.1x
4.4x
10.0x
1%
53%
3%
4%
0%
3,394
3,182
2,532
2,404
2,281
1%
23%
<1%
2%
<1%
21
22
23
24
25
* Tyler Technologies
Center Bancorp
Adolor
Capital Bank
California Water
TYL
CNBC
ADLR
CBKN
CWT
16.49
7.31
1.22
3.36
36.34
-12%
-5%
-13%
-11%
-7%
31%
39%
84%
107%
12%
577
107
57
43
756
573
n/m
(16)
n/m
1,158
2.0x
n/m
n/m
n/m
2.6x
19x
n/m
48x
16x
60.1x
1.4x
1.6x
.5x
1.8x
5%
15%
3%
25%
6%
2,276
1,988
1,834
1,761
1,236
<1%
2%
3%
4%
<1%
26
27
28
29
30
MDU Resources
* Kimberly-Clark
SWS Group
* NCI Building Systems
Bank of Commerce
MDU
KMB
SWS
NCS
BOCH
18.67
61.47
10.17
8.85
4.66
-8%
-16%
-10%
-10%
-8%
30%
9%
54%
189%
35%
3,512
25,447
331
173
79
4,927
30,166
n/m
509
n/m
1.3x
1.6x
n/m
.6x
n/m
11x
12x
13x
n/m
9x
1.8x
12.0x
.9x
n/m
1.1x
7%
0%
9%
2%
61%
1,139
1,045
1,027
956
941
<1%
<1%
<1%
<1%
1%
31
32
33
34
35
* Ascent Media
* Valence Technology
Cymer
Bank of SC
City Holding
ASCMA
VLNC
CYMI
BKSC
CHCO
25.95
0.81
31.88
10.00
29.73
-15%
-9%
-14%
-10%
-5%
18%
151%
26%
47%
26%
371
109
959
40
469
55
169
790
n/m
n/m
.1x
10.5x
2.2x
n/m
n/m
n/m
n/m
9x
10x
.6x
n/m
1.8x
1.4x
1.8x
7%
49%
0%
28%
3%
908
880
797
750
743
<1%
<1%
<1%
2%
<1%
36
37
38
39
40
Verizon
Dean Foods
* CNB Financial
SJW Corp.
CF Industries
VZ
DF
CCNE
SJW
CF
28.55
10.29
10.84
24.65
67.60
-7%
-9%
-3%
-16%
-15%
20%
115%
75%
15%
63%
80,703
1,868
95
457
4,803
138,699
6,021
n/m
717
3,772
1.3x
.5x
n/m
3.3x
1.6x
12x
9x
9x
20x
8x
n/m
n/m
1.6x
1.8x
2.8x
0%
2%
8%
30%
0%
742
659
596
542
541
<1%
<1%
<1%
<1%
<1%
41
42
43
44
45
FalconStor Software
Access National
eDiets.com
QuinStreet
* General Steel
FALC
ANCX
DIET
QNST
GSI
2.66
5.75
0.72
12.24
2.62
-1%
-11%
-6%
-4%
-8%
114%
20%
325%
49%
129%
121
61
25
552
136
82
n/m
40
482
677
1.0x
n/m
2.2x
1.5x
.4x
n/m
9x
15x
8x
2.1x
.9x
n/m
6.2x
2.1x
29%
40%
7%
46%
41%
500
431
418
416
393
<1%
<1%
2%
<1%
<1%

Company website
SEC
Y!
Proxy
Y!
Price Charts
Screening criteria: ► Major insider buying in past six months ► Price within 20% of 52-week low ► MV > $1 million
MV = market value. EV = enterprise value. ** during past six months (value estimate based on recent price).
June 30, 2010 – Page 111 of 120
Contrarian: Biggest YTD Losers (deleveraged & profitable)
Non-financial companies with no net debt, positive analyst estimates for next year's EPS, and large YTD price drop
▼
MV
($mn)
EV
($mn)
Price Change Since
December 31,
2003
2008
2009
Price to
Tangible
Book
Next
FY
P/E
Insiders
%
Buys/
Own. Sells
Company
Ticker
Price
($)
1
2
3
4
5
Broadwind Energy
A-Power Energy
China Nepstar
Genoptix
Fuqi International
BWEN
APWR
NPD
GXDX
FUQI
2.32
7.94
3.19
15.80
8.11
248
360
337
277
224
241
272
169
145
99
n/m
n/m
n/m
n/m
n/m
-48%
85%
-37%
-54%
30%
-71%
-57%
-56%
-56%
-55%
1.7x
1.4x
1.5x
1.5x
.8x
8x
6x
18x
11x
5x
13%
29%
76%
1%
43%
2/2
-/-/- / 21
-/-
6
7
8
9
10
SmartHeat
AirMedia
KongZhong
RINO International
China Sky One
HEAT
AMCN
KONG
RINO
CSKI
6.66
3.58
6.14
13.88
11.64
218
235
220
397
195
182
159
93
315
130
n/m
n/m
n/m
-80%
870%
11%
-25%
83%
297%
-27%
-54%
-52%
-50%
-50%
-49%
2.2x
1.1x
2.6x
1.6x
1.8x
8x
11x
13x
6x
4x
43%
10%
0%
52%
37%
-/-/-/-/-/-
11
12
13
14
15
China Distance Edu.
Duoyuan Global Water
Neutral Tandem
athenahealth
Cumberland Pharma
DL
DGW
TNDM
ATHN
CPIX
3.28
18.44
11.77
23.71
7.13
114
454
389
785
146
68
241
218
717
87
n/m
n/m
n/m
n/m
n/m
-18%
n/m
-27%
-37%
n/m
-49%
-48%
-48%
-48%
-48%
1.8x
1.7x
1.6x
8.1x
2.2x
13x
11x
10x
27x
7x
0%
49%
3%
6%
35%
-/-/-/2
1 / 42
4/2
16
17
18
19
20
Energy Recovery
Aviat Networks
Alvarion
Compellent Tech
Shanda Games
ERII
AVNW
ALVR
CML
GAME
3.80
3.82
2.09
12.76
5.75
199
228
130
405
1,656
150
106
28
332
1,240
n/m
-11%
-82%
n/m
n/m
-50%
-26%
-42%
33%
n/m
-45%
-45%
-44%
-44%
-44%
2.0x
.9x
.8x
3.3x
6.4x
24x
64x
16x
47x
7x
35%
2%
6%
10%
71%
- / 18
-/-/2/-/-
21
22
23
24
25
Santarus
Albany Molecular
Perfect World
New York & Co.
NVIDIA
SNTS
AMRI
PWRD
NWY
NVDA
2.61
5.13
22.44
2.45
11.08
152
163
1,146
147
6,340
72
92
869
136
4,599
n/m
-66%
n/m
n/m
43%
66%
-47%
30%
6%
37%
-44%
-44%
-43%
-43%
-41%
3.6x
.6x
3.2x
.8x
2.7x
29x
128x
6x
245x
10x
11%
33%
27%
2%
5%
-/5
-/1
-/3/8
- / 22
26
27
28
29
30
Nephros
Myriad Genetics
Tiens Biotech
Sykes Enterprises
* GigaMedia
NEP
MYGN
TBV
SYKE
GIGM
5.50
15.77
1.83
15.63
2.03
142
1,542
131
741
111
116
1,143
129
573
37
424%
157%
-85%
82%
22%
227%
-50%
-7%
-18%
-64%
-41%
-40%
-39%
-39%
-38%
1.9x
2.7x
.8x
1.8x
1.0x
4x
13x
8x
8x
7x
31%
2%
95%
12%
1%
-/2
-/6
-/-/7
-/-
31
32
33
34
35
AgFeed Industries
Horsehead
Charming Shoppes
Transcend Services
* Nokia
FEED
ZINC
CHRS
TRCR
NOK
3.13
8.01
4.07
13.55
8.25
141
347
472
142
30,896
118
254
459
116
24,671
n/m
n/m
-26%
227%
-51%
94%
70%
67%
36%
-47%
-37%
-37%
-37%
-37%
-36%
1.3x
1.0x
1.8x
4.4x
4.4x
8x
9x
21x
13x
9x
31%
0%
2%
12%
1%
-/-/2/-/-/-
36
37
38
39
40
King Pharmaceuticals
* Stein Mart
* China Nuokang Bio
Concord Medical
* QKL Stores
KG
SMRT
NKBP
CCM
QKLS
7.92
6.92
5.10
5.67
4.40
1,977
300
808
279
131
1,817
229
782
163
84
-48%
-16%
n/m
n/m
43900%
-25%
512%
n/m
n/m
76%
-35%
-35%
-35%
-34%
-34%
1.7x
1.3x
9.8x
1.1x
1.7x
10x
9x
9x
10x
8x
0%
37%
73%
0%
67%
1/3
-/4
-/-/-/-
41
42
43
44
45
* Syntroleum
Ceragon Networks
* LSI Industries
* Resources Connection
TeleTech
SYNM
CRNT
LYTS
RECN
TTEC
1.76
7.79
5.25
14.14
13.37
136
267
126
655
822
110
192
112
517
688
-59%
11%
-61%
4%
18%
226%
54%
-24%
-14%
60%
-34%
-34%
-33%
-33%
-33%
4.3x
1.4x
1.1x
4.0x
2.1x
25x
12x
26x
40x
11x
14%
12%
19%
3%
51%
3/-/-/4
-/-/6

Company website
SEC
Y!
Proxy
Y!
Stock Price Charts
Screening criteria: ► Positive net cash ► Positive next FY EPS estimate ► Market value > $100 million
June 30, 2010 – Page 112 of 120
Value with Catalyst: Cheap Repurchasers of Stock
Companies that may be creating value by reducing their shares outstanding at relatively cheap prices
▼
MV
($mn)
EV
($mn)
Q-Q
Change
in Shares
Next
FY
P/E
Price to
Tangible
Book
Net Cash
as % of
MV
Insiders
%
Buys/
Own.
Sells
Company
Ticker
Price
($)
1
2
3
4
5
United Overseas Bank
China Integrated
Electr. For Imaging
Aspen Insurance
* Career Education
UOVEY
CBEH
EFII
AHL
CECO
28.42
8.54
9.70
25.35
24.71
21,401
287
439
1,960
2,022
n/m
250
234
n/m
1,602
-19.9%
-16.7%
-8.3%
-7.0%
-3.5%
12x
7x
12x
7x
7x
1.9x
1.8x
1.3x
.6x
6.1x
n/m
13%
47%
n/m
21%
35%
65%
1%
0%
0%
-/-/-/-/3/1
6
7
8
9
10
EDENOR
O2Micro
Cameco
Employers Holdings
E-House China
EDN
OIIM
CCJ
EIG
EJ
6.78
6.13
22.72
15.70
15.67
304
214
8,928
671
1,257
454
115
8,505
n/m
767
-3.1%
-2.8%
-2.3%
-2.3%
-2.2%
10x
14x
11x
.5x
1.2x
1.9x
1.5x
5.6x
-49%
46%
5%
n/m
39%
52%
6%
0%
1%
1%
-/-/-/14 / -/-
11
12
13
14
15
Dillard's
Anaren
* H&R Block
Tongjitang Chinese
* Mestek
DDS
ANEN
HRB
TCM
MCCK
23.85
15.91
15.55
4.03
17.50
1,635
234
5,120
136
124
2,302
228
4,429
122
150
-2.1%
-2.0%
-2.0%
-2.0%
-1.8%
13x
12x
9x
81x
-
.7x
2.0x
22.0x
1.2x
1.3x
-41%
3%
13%
11%
-21%
34%
8%
5%
6%
0%
-/-/1/-/-/-
16
Navigators Group
NAVG
42.84
702
n/m
-1.8%
12x
.9x
n/m
22%
-/-
No additional companies met the screening criteria outlined below.
Screening criteria: ► MV < 2 * BV ► Price <= 12 * next FY EPS ► Debt/equity < 0.4 ► No net insider selling ► MV > $100 million
► Q-Q change in shares < 0
MV = market value. EV = enterprise value. BV = book value. # of insider trades relates to latest six months.
June 30, 2010 – Page 113 of 120
Profitable Dividend Payors with Decent Balance Sheets
Dividend-paying companies with no net debt and EPS estimates in excess of 75% of the indicated annual dividend
▼
Move To
52-Week
Low
High
MV
($mn)
EV
($mn)
Dividend Yield
Last 12
Annual
Months Indicated
Est. P/E
This Next
FY
FY
Price to
Tangible
Book
Insiders
%
Buys/
Own. Sells
Company
Ticker
Price
($)
1
2
3
4
5
Am. Capital Agency
Fifth Street Finance
BBVA Banco Frances
BGC Partners
Telecom Argentina
AGNC
FSC
BFR
BGCP
TEO
28.97
11.74
6.57
5.35
17.56
-26%
-23%
-51%
-34%
-35%
8%
16%
24%
30%
25%
949
532
1,175
444
3,457
873
n/m
n/m
n/m
3,239
20%
9%
2%
6%
12%
19%
11%
11%
10%
10%
5x
11x
8x
9x
8x
7x
9x
8x
8x
7x
1.5x
1.1x
1.8x
2.3x
2.7x
0%
6%
67%
33%
79%
1/5/-/2/-/-
6
7
8
9
10
TICC Capital
* Cherokee
NGP Capital
Himax Tech
EarthLink
TICC
CHKE
NGPC
HIMX
ELNK
8.54
16.80
7.79
3.02
8.15
-51%
-7%
-32%
-28%
-10%
0%
45%
20%
31%
15%
230
148
169
537
880
n/m
141
n/m
376
405
7%
11%
8%
20%
5%
9%
9%
9%
8%
8%
11x
11x
16x
12x
10x
11x
10x
9x
10x
12x
1.0x
>9.9x
.7x
1.4x
1.4x
3%
13%
4%
43%
1%
5/-/6/-/-/6
11
12
13
14
15
USA Mobility
American Software
Nat'l Australia Bank
Westpac Banking
Porter Bancorp
USMO
AMSWA
NABZY
WBK
PBIB
13.23
4.97
20.96
94.72
13.25
-26%
-4%
-20%
-23%
-20%
15%
41%
41%
41%
30%
293
126
43,589
56,387
117
177
88
n/m
n/m
n/m
8%
7%
6%
6%
6%
8%
7%
6%
6%
6%
8x
17x
11x
10x
12x
11x
13x
8x
10x
9x
1.9x
2.5x
1.6x
2.6x
1.0x
0%
13%
1%
0%
66%
1/8
-/9
-/-/-/-
16
17
18
19
20
Nokia
First Bancorp
NASB Financial
Chunghwa Telecom
Banco Santander
NOK
FNLC
NASB
CHT
STD
8.25
13.14
15.23
19.65
11.05
0%
0%
0%
-16%
-22%
94%
66%
112%
4%
62%
30,896
128
120
19,055
90,928
24,671
n/m
n/m
16,411
n/m
6%
6%
6%
6%
4%
6%
6%
6%
6%
6%
11x
14x
13x
14x
8x
9x
13x
6x
14x
7x
4.4x
1.3x
.7x
1.6x
2.2x
1%
15%
63%
39%
21%
-/-/3
-/-/-/-
21
22
23
24
25
Cal-Maine Foods
Lenovo
Lorillard
Hot Topic
Tower Bancorp
CALM
LNVGY
LO
HOTT
TOBC
33.46
11.70
71.77
5.48
22.12
-27%
-44%
-7%
-12%
-14%
16%
37%
15%
82%
70%
797
5,726
10,970
244
158
737
3,647
10,046
175
n/m
2%
1%
5%
1%
5%
6%
6%
6%
5%
5%
12x
19x
11x
26x
12x
10x
10x
18x
8x
2.4x
n/m
n/m
1.1x
1.1x
45%
63%
0%
2%
21%
-/1
-/-/-/-/-
26
27
28
29
30
Life Partners
Bristol Myers Squibb
Australia and NZ
K-Fed Bancorp
American Ecology
LPHI
BMY
ANZBY
KFED
ECOL
19.82
25.57
19.71
9.00
14.98
-29%
-25%
-38%
-19%
-10%
24%
6%
24%
15%
33%
295
43,972
49,708
120
274
n/m
43,485
n/m
n/m
240
5%
5%
5%
2%
5%
5%
5%
5%
5%
5%
9x
12x
15x
39x
25x
8x
11x
11x
16x
20x
4.9x
6.1x
2.3x
1.4x
3.0x
51%
0%
1%
69%
7%
1/-/3
-/2/1/-
31
32
33
34
35
Microchip Technology
United Bankshares
Garmin
* Colony Financial
Paychex
MCHP
UBSI
GRMN
CLNY
PAYX
28.86
25.37
32.02
17.95
26.51
-26%
-35%
-31%
-4%
-10%
7%
26%
26%
17%
24%
5,355
1,104
6,378
263
9,582
4,481
n/m
5,067
n/m
9,216
5%
5%
7%
1%
5%
5%
5%
5%
5%
5%
14x
15x
11x
15x
19x
13x
14x
12x
10x
17x
3.7x
2.4x
2.7x
1.0x
>9.9x
3%
3%
44%
1%
11%
- / 11
- / 14
-/5
1/-/-
36
37
38
39
40
Maxim Integrated
Credit Suisse
Washington Trust
Healthcare Services
Turkcell
MXIM
CS
WASH
HCSG
TKC
17.41
38.85
18.40
19.50
13.52
-14%
-6%
-24%
-12%
-10%
23%
55%
11%
20%
48%
5,264
44,868
297
854
11,898
4,405
n/m
n/m
781
10,498
5%
5%
5%
4%
5%
5%
5%
5%
5%
5%
18x
8x
13x
24x
10x
13x
7x
12x
20x
10x
2.3x
1.9x
1.5x
4.6x
2.8x
1%
0%
15%
7%
67%
-/2
-/-/4
-/5
-/-
41
42
43
44
45
* Foot Locker
Baldwin & Lyons
Meridian Bioscience
Electro Rent
People's United
FL
BWINB
VIVO
ELRC
PBCT
13.32
22.32
16.98
13.48
14.01
-29%
-14%
-6%
-35%
-2%
26%
19%
54%
15%
24%
2,081
330
690
323
5,250
1,602
n/m
629
264
n/m
5%
6%
4%
6%
4%
5%
4%
4%
4%
4%
15x
22x
22x
27x
37x
13x
14x
19x
18x
27x
1.3x
.9x
5.6x
1.4x
1.4x
1%
45%
2%
31%
1%
-/2
- / 12
-/5
- / 10
2/3

Company website
SEC
Y!
Proxy
Y!
Price Charts
Screening criteria: ► Positive net cash ► Positive EPS estimates for this FY and next FY ► MV > $100 million
June 30, 2010 – Page 114 of 120
Deep Value: Lots of Revenue, Low Enterprise Value
Companies that trade at low multiples of net revenue
▼
Move To
52-Week
Low
High
MV
($mn)
EV
($mn)
EV/
Sales
Est. P/E
This
Next
FY
FY
Price to
Tangible
Book
Insiders
%
Buys/
Own.
Sells
Company
Ticker
Price
($)
1
2
3
4
5
Winn-Dixie Stores
Tech Data
Ingram Micro
World Fuel Services
Cardinal Health
WINN
TECD
IM
INT
CAH
10.17
38.28
15.80
25.33
34.24
-12%
-21%
-1%
-29%
-39%
57%
28%
20%
20%
7%
560
1,942
2,613
1,505
12,397
409
1,443
2,073
1,210
11,867
.06x
.06x
.07x
.09x
.12x
27x
10x
9x
12x
15x
28x
9x
8x
11x
14x
.8x
.9x
.9x
2.8x
4.0x
1%
3%
4%
4%
0%
- / 14
- / 12
- / 25
-/8
-/-
6
7
8
9
10
AmerisourceBergen
Eastman Kodak
SYNNEX
Office Depot
Kelly Services
ABC
EK
SNX
ODP
KELYA
31.87
4.90
26.58
4.58
15.97
-45%
-48%
-13%
-24%
-37%
4%
85%
24%
101%
19%
9,004
1,317
922
1,262
559
9,163
1,107
1,136
1,675
627
.12x
.14x
.14x
.14x
.14x
15x
9x
9x
n/m
35x
14x
n/m
8x
22x
18x
n/m
n/m
1.2x
1.7x
1.1x
1%
0%
35%
4%
22%
- / 11
-/1
- / 148
-/3
-/-
11
12
13
14
15
OfficeMax
McKesson
Insight Enterprises
Kindred Healthcare
Tutor Perini
OMX
MCK
NSIT
KND
TPC
14.93
68.16
14.70
14.66
17.75
-68%
-37%
-44%
-19%
-22%
33%
5%
15%
36%
44%
1,266
18,498
680
579
871
1,058
17,063
677
697
731
.15x
.16x
.16x
.16x
.16x
18x
14x
13x
11x
9x
13x
13x
11x
10x
7x
3.1x
5.8x
1.8x
.7x
1.5x
0%
0%
1%
2%
46%
-/3
- / 14
- / 12
-/1/4
16
17
18
19
20
Systemax
Barnes & Noble
Tesoro
Sunoco
BJ's Wholesale Club
SYX
BKS
TSO
SUN
BJ
16.37
16.43
12.60
36.24
37.60
-31%
-6%
-16%
-41%
-21%
49%
75%
34%
0%
8%
600
946
1,780
4,369
2,024
580
1,006
3,332
6,004
1,971
.17x
.18x
.18x
.18x
.19x
10x
43x
n/m
30x
14x
8x
21x
10x
16x
13x
1.8x
n/m
.7x
1.6x
1.9x
64%
37%
1%
0%
1%
- / 21
6/4
- / 12
1/- / 11
21
22
23
24
25
Brightpoint
Manpower
EMCOR Group
Celestica
Sears Holdings
CELL
MAN
EME
CLS
SHLD
7.80
44.46
23.70
8.88
72.52
-34%
-14%
-25%
-33%
-24%
19%
42%
26%
28%
73%
550
3,640
1,572
2,042
8,330
650
3,414
1,122
1,330
9,835
.20x
.21x
.21x
.22x
.22x
11x
37x
14x
28x
9x
17x
12x
27x
7.2x
3.2x
4.1x
1.4x
2.0x
2%
1%
2%
10%
4%
- / 19
- / 16
- / 11
-/1/3
26
27
28
29
30
Arrow Electronics
Flextronics
Owens & Minor
Valero Energy
KBR
ARW
FLEX
OMI
VLO
KBR
24.11
6.29
28.19
18.77
21.62
-19%
-37%
-9%
-19%
-25%
35%
33%
16%
16%
14%
2,904
5,125
1,779
10,614
3,472
3,486
5,454
1,841
17,080
2,669
.22x
.23x
.23x
.23x
.23x
7x
8x
14x
18x
13x
7x
7x
13x
9x
12x
1.4x
3.0x
3.4x
.7x
2.2x
3%
0%
2%
0%
0%
-/2
-/- / 15
-/6
-/-
31
32
33
34
35
Avnet
Centene
Administaff
SUPERVALU
Kroger
AVT
CNC
ASF
SVU
KR
25.76
22.61
24.59
12.00
20.23
-22%
-25%
-33%
-1%
-6%
32%
15%
14%
49%
23%
3,911
1,165
643
2,547
12,945
4,149
1,007
404
9,971
19,869
.23x
.24x
.25x
.25x
.25x
10x
13x
34x
7x
12x
8x
11x
23x
6x
10x
1.6x
2.4x
3.0x
n/m
3.3x
0%
2%
12%
1%
6%
- / 11
-/4
- / 22
1/-/4
36
37
38
39
40
Amerigroup
Sony
Rite Aid
Unisys
Lear
AGP
SNE
RAD
UIS
LEA
34.42
27.33
1.01
20.22
70.75
-39%
-14%
-6%
-36%
-44%
10%
48%
133%
100%
20%
1,780
27,427
897
861
3,303
1,380
21,235
6,992
1,242
2,962
.26x
.26x
.27x
.28x
.28x
12x
29x
n/m
14x
18x
12x
12x
n/m
8x
11x
2.3x
1.2x
n/m
n/m
2.5x
1%
0%
29%
1%
0%
-/4
-/-/-/5
1/1
41
42
43
44
45
* Costco Wholesale
Repsol
* Fluor
* Arkansas Best
* Best Buy
COST
REP
FLR
ABFS
BBY
56.44
21.13
44.36
20.48
35.16
-21%
-11%
-10%
-3%
-11%
10%
36%
32%
69%
39%
24,785
23,684
7,929
518
14,836
21,680
42,419
6,078
431
14,716
.28x
.29x
.29x
.29x
.29x
19x
8x
15x
n/m
10x
17x
7x
14x
27x
9x
2.3x
1.5x
2.3x
1.1x
3.5x
1%
47%
0%
5%
18%
- / 27
-/-/-/7
7 / 27

Company website
SEC
Y!
Proxy
Y!
Price Charts
Screening criteria: ► EV to trailing revenue less than 0.5x ► Market value does not exceed revenue ► Market value > $500 million
June 30, 2010 – Page 115 of 120
Deep Value: Neglected Gross Profiteers
Companies that trade at low multiples of gross profit
▼
Move To
52-Week
Low
High
MV
($mn)
EV
($mn)
Enterprise Value /
Gross
Sales Profit
EBIT
Est. P/E
This Next
FY
FY
Price/
Tang.
Book
Insiders
%
Buys/
Own. Sells
Company
Ticker
Price
($)
1
2
3
4
5
WellCare
IDT Corp.
Winn-Dixie Stores
Humana
Retail Ventures
WCG
IDT
WINN
HUM
RVI
27.05
9.79
10.17
48.10
8.43
-39%
-84%
-12%
-43%
-75%
45%
16%
57%
9%
42%
1,147
222
560
8,187
413
119
48
409
1,520
233
.0x
.0x
.1x
.0x
.1x
.1x
.2x
.2x
.2x
.3x
.8x
1.7x
12.1x
.8x
1.9x
12x
27x
9x
50x
10x
28x
9x
-
1.5x
1.4x
.8x
2.1x
2.4x
4%
24%
1%
1%
53%
-/3
-/4
- / 14
-/3
-/-
6
7
8
9
10
American Equity
RealNetworks
Charming Shoppes
Blyth
* CoreLogic
AEL
RNWK
CHRS
BTH
CLGX
11.39
3.47
4.07
35.48
18.06
-54%
-27%
-16%
-27%
-21%
2%
56%
70%
69%
18%
666
469
472
313
1,877
548
147
459
240
1,981
.4x
.3x
.2x
.3x
.3x
.4x
.4x
.5x
.5x
.5x
7.4x
n/m
n/m
7.7x
4.9x
6x
n/m
n/m
13x
17x
6x
n/m
21x
12x
13x
.8x
1.2x
1.8x
1.3x
5.9x
5%
38%
2%
34%
5%
1/1/7
2/-/5
-/-
11
12
13
14
15
Eastman Kodak
THQ
Office Depot
Great A & P Tea
Sierra Wireless
EK
THQI
ODP
GAP
SWIR
4.90
4.58
4.58
4.05
7.07
-48%
-10%
-24%
-13%
-28%
85%
93%
101%
221%
84%
1,317
310
1,262
226
220
1,107
129
1,675
1,327
101
.1x
.1x
.1x
.2x
.2x
.5x
.5x
.5x
.5x
.5x
1.9x
n/m
n/m
n/m
n/m
9x
42x
n/m
n/m
-
n/m
11x
22x
n/m
-
n/m
1.5x
1.7x
n/m
1.7x
0%
1%
4%
50%
7%
-/1
12 / -/3
6/7
-/-
16
17
18
19
20
Core-Mark
Imation
OfficeMax
Barnes & Noble
Molina Healthcare
CORE
IMN
OMX
BKS
MOH
28.19
9.90
14.93
16.43
30.48
-12%
-26%
-68%
-6%
-44%
22%
27%
33%
75%
2%
302
378
1,266
946
784
211
154
1,058
1,006
330
.0x
.1x
.1x
.2x
.1x
.6x
.6x
.6x
.6x
.6x
6.5x
n/m
59.1x
7.6x
6.1x
11x
35x
18x
43x
19x
9x
32x
13x
21x
15x
.9x
.7x
3.1x
n/m
2.3x
2%
21%
0%
37%
50%
- / 22
4/-/3
6/4
1 / 20
21
22
23
24
25
Interactive Brokers
Hot Topic
Pacific Sunwear
Stein Mart
Genesco
IBKR
HOTT
PSUN
SMRT
GCO
17.25
5.48
3.43
6.92
28.62
-14%
-12%
-17%
-6%
-39%
22%
82%
111%
99%
22%
711
244
226
300
688
485
175
169
229
588
.4x
.2x
.2x
.2x
.4x
.7x
.7x
.7x
.7x
.7x
1.1x
12.2x
n/m
6.7x
8.2x
24x
26x
n/m
10x
13x
14x
18x
n/m
9x
11x
1.2x
1.1x
.8x
1.3x
1.7x
0%
2%
2%
37%
3%
-/-/-/-/4
1/6
26
27
28
29
30
Aviat Networks
Evercore Partners
Universal American
Liz Claiborne
* AnnTaylor Stores
AVNW
EVR
UAM
LIZ
ANN
3.82
25.42
15.70
4.57
17.27
-6%
-31%
-51%
-47%
-60%
116%
50%
5%
113%
46%
228
436
1,185
432
1,015
106
256
661
1,010
803
.2x
.7x
.1x
.4x
.4x
.7x
.7x
.8x
.8x
.8x
n/m
8.8x
2.8x
n/m
45.9x
n/m
19x
9x
n/m
15x
64x
13x
9x
18x
12x
.9x
2.1x
1.3x
n/m
2.3x
2%
7%
7%
0%
1%
-/-/9
- / 18
-/- / 10
31
32
33
34
35
Haverty Furniture
Bob Evans Farms
Kenneth Cole
Sears Holdings
* Coldwater Creek
HVT
BOBE
KCP
SHLD
CWTR
13.42
25.66
11.59
72.52
3.70
-33%
-4%
-44%
-24%
-4%
35%
33%
28%
73%
149%
290
779
210
8,330
341
245
952
143
9,835
292
.4x
.6x
.3x
.2x
.3x
.8x
.8x
.8x
.8x
.8x
51.0x
8.9x
n/m
14.4x
n/m
18x
12x
23x
28x
53x
14x
10x
16x
27x
18x
1.2x
1.3x
1.5x
2.0x
1.4x
21%
2%
47%
4%
35%
- / 16
-/3
-/1
1/3
-/-
36
37
38
39
40
Saia
Fred's
Extreme Networks
Brown Shoe
Repsol
SAIA
FRED
EXTR
BWS
REP
15.00
12.05
2.82
16.71
21.13
-25%
-25%
-37%
-62%
-11%
33%
19%
34%
19%
36%
238
475
254
725
23,684
322
431
150
816
42,419
.4x
.2x
.5x
.4x
.3x
.8x
.8x
.9x
.9x
.9x
201.0x
11.3x
n/m
13.6x
3.5x
>99x
16x
24x
15x
8x
12x
13x
13x
13x
7x
1.2x
1.2x
1.8x
2.2x
1.5x
3%
7%
5%
2%
47%
-/2
-/4/-/1
-/-
41
42
43
44
45
* J.C. Penney
* Christopher & Banks
Kelly Services
Spartan Stores
Investment Tech
JCP
CBK
KELYA
SPTN
ITG
23.21
6.86
15.97
14.25
17.44
-1%
-22%
-37%
-17%
-11%
60%
69%
19%
21%
66%
5,487
246
559
321
760
6,108
146
627
497
473
.3x
.3x
.1x
.2x
.8x
.9x
.9x
.9x
.9x
.9x
8.6x
n/m
n/m
8.5x
6.8x
14x
34x
35x
10x
13x
11x
20x
18x
10x
11x
1.1x
1.3x
1.1x
>9.9x
2.1x
0%
1%
22%
2%
1%
-/-/4
-/-/1
-/4

Company website
SEC
Y!
Proxy
Y!
Price Charts
Screening criteria: ► EV not more than trailing gross profit ► Market value not more than 2x gross profit ► Market value > $200 million
June 30, 2010 – Page 116 of 120
Activist Targets: Potential Sales, Liquidations or Recaps
Companies that may unlock value through a corporate event
▼
Move To
52-Week
Low
High
MV
($mn)
EV
($mn)
Price to
Tangible
Book
Net Cash
(% of MV)
Net Net
ST Assets
(% of MV)
EV/
Sales
Next
FY
P/E
Insiders
%
Buys/
Own.
Sells
Company
Ticker
Price
($)
1
2
3
4
5
PennyMac Mortgage
Colony Financial
Ingram Micro
Alvarion
Exceed Company
PMT
CLNY
IM
ALVR
EDS
16.47
17.95
15.80
2.09
6.75
-5%
-4%
-1%
-7%
-9%
21%
17%
20%
130%
103%
276
263
2,613
130
133
(48)
(25)
2,073
28
103
.9x
1.0x
.9x
.8x
.8x
117%
109%
21%
78%
23%
114%
104%
99%
97%
93%
n/m
n/m
.1x
.1x
.3x
7x
10x
8x
16x
-
1%
1%
4%
6%
18%
1/1/- / 25
-/-/-
6
7
8
9
10
Tech Data
TomoTherapy
Hurco
Ascent Media
Callaway Golf
TECD
TOMO
HURC
ASCMA
ELY
38.28
3.02
15.71
25.95
6.44
-21%
-20%
-12%
-15%
-28%
28%
55%
30%
18%
58%
1,942
163
101
371
415
1,443
15
65
55
404
.9x
.9x
.9x
.6x
.8x
26%
91%
36%
85%
3%
93%
92%
90%
90%
89%
.1x
.1x
.8x
.1x
.4x
9x
n/m
18x
n/m
16x
3%
9%
5%
7%
1%
- / 12
-/8
2/1/-/1
11
12
13
14
15
Aviat Networks
Hardinge
Tuesday Morning
Axcelis Technologies
QLT
AVNW
HDNG
TUES
ACLS
QLTI
3.82
8.89
4.61
1.77
5.85
-6%
-57%
-54%
-82%
-66%
116%
13%
91%
46%
14%
228
103
198
184
313
106
81
171
150
123
.9x
.7x
.8x
.9x
.8x
54%
22%
13%
19%
61%
88%
85%
85%
83%
83%
.2x
.4x
.2x
1.0x
2.8x
64x
17x
12x
n/m
-
2%
3%
0%
1%
15%
-/-/2 / 13
-/9/-
16
17
18
19
20
Force Protection
InfoSpace
FormFactor
Retail Opportunity
CSS Industries
FRPT
INSP
FORM
ROIC
CSS
4.47
7.93
11.07
9.92
16.70
-12%
-17%
-5%
-6%
-4%
117%
53%
136%
11%
63%
314
284
554
415
162
180
53
121
85
135
1.0x
1.2x
1.0x
1.1x
.9x
43%
81%
78%
80%
16%
80%
79%
79%
79%
78%
.2x
.2x
.8x
60.5x
.3x
9x
31x
n/m
-
1%
1%
3%
2%
19%
-/3
1 / 15
-/2
- / 24
-/9
21
22
23
24
25
Maxygen
Benchmark Electron.
Zoran
PCTEL
Advanced Analogic
MAXY
BHE
ZRAN
PCTI
AATI
5.78
17.46
9.96
5.36
3.40
-15%
-23%
-15%
-9%
-12%
44%
31%
24%
33%
64%
180
1,101
510
102
146
21
712
110
42
48
1.3x
1.1x
1.1x
.9x
1.3x
88%
35%
78%
59%
67%
78%
75%
74%
73%
72%
.5x
.3x
.3x
.7x
.5x
12x
26x
19x
n/m
10%
1%
1%
6%
7%
-/6
-/1
1/- / 13
1/2
26
27
28
29
30
Novatel Wireless
Cutera
ModusLink
Core-Mark
L.B. Foster
NVTL
CUTR
MLNK
CORE
FSTR
5.90
9.61
6.49
28.19
27.12
-5%
-21%
-15%
-12%
-8%
132%
25%
71%
22%
29%
184
129
286
302
276
45
33
126
211
171
.9x
1.3x
1.0x
.9x
1.2x
76%
74%
56%
30%
38%
71%
70%
70%
69%
68%
.1x
.6x
.1x
.0x
.5x
>99x
n/m
34x
9x
16x
2%
6%
2%
2%
2%
-/-/1
-/1
- / 22
-/-
31
32
33
34
35
Microtune
Hooker Furniture
* Vital Images
* Universal Stainless
Electro Scientific
TUNE
HOFT
VTAL
USAP
ESIO
2.53
11.55
13.35
16.80
13.57
-35%
-6%
-24%
-14%
-31%
21%
55%
27%
51%
11%
137
124
193
114
378
58
86
57
89
222
1.4x
1.0x
1.4x
.8x
1.1x
57%
31%
70%
22%
41%
66%
66%
66%
66%
65%
.7x
.4x
1.0x
.8x
1.5x
51x
11x
n/m
10x
15x
3%
4%
2%
2%
1%
-/1/3/1
-/-/1
36
37
38
39
40
* BigBand Networks
* Aceto
Richardson Electron.
Rimage
Gilat Satellite
BBND
ACET
RELL
RIMG
GILT
2.90
6.38
9.63
17.12
4.55
-7%
-25%
-71%
-19%
-13%
103%
17%
28%
13%
37%
196
162
170
163
184
31
123
162
64
60
1.4x
1.3x
1.3x
1.3x
.8x
84%
24%
5%
61%
68%
63%
63%
62%
62%
61%
.2x
.4x
.4x
.8x
.3x
n/m
12x
10x
15x
-
2%
4%
18%
1%
6%
22 / 79
1/2/3
-/5
-/-
41
42
43
44
45
Oplink Comms
JAKKS Pacific
* Willbros Group
Bel Fuse
* Exar
OPLK
JAKK
WG
BELFB
EXAR
14.91
14.74
8.21
18.41
7.23
-27%
-28%
-7%
-20%
-13%
34%
14%
125%
37%
10%
313
411
326
214
317
143
241
232
134
122
1.3x
1.3x
.9x
1.2x
1.3x
54%
41%
29%
37%
61%
61%
61%
60%
60%
60%
1.1x
.3x
.2x
.7x
.9x
15x
11x
7x
14x
22x
3%
1%
3%
14%
18%
-/-/-/-/6
1/-

Company website
SEC
Y!
Proxy
Y!
Price Charts
Criteria: ► Tang. book > 50% of MV ► ST assets - liabilities > 50% of MV ► Net cash ► Insiders < 20% ► MV > $100 million
June 30, 2010 – Page 117 of 120
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Portfolio Manager`s Review

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