Issue 2: Small/Mid

This issue was probably the most fun I’ve ever had with Value Line. There are more opportunities, great businesses, and interesting businesses in here than I’ve seen yet in the other 24 issues. The industrial services industry was my personal favorite to pore over; many of these companies operate in small niches & their profitability is extremely high. Maritime, as usual, is an industry with almost universal value destruction for shareholders. The restaurants had a few up-and-coming businesses that may have good outlooks moving forward. The environmental companies were all pretty bland; nothing stood out on either extreme of great/terrible. Here are my companies to look into:

Interesting Businesses:

  • Team Inc.- also a great business; I’m interested, going back to 2001/2002, whether it was possible to predict the growth moving forward.
  • Pre-Paid Legal Services- largest share buyback program in the last decade of all Value Line issues (so, virtually all companies in USA)

Interesting Prices:

  • Ambassador’s Int’l- pretty beaten up, deep value possibility
  • Benihana Inc.- very solid business, perhaps worth a look for growth prospects
  • Innotrac Corp.- again, pretty beaten up & deep value possibility
  • J. Alexander’s- hit hard by recession, would be a bet on recovery
  • New Frontier Media- deep value possibility
  • Pacer Int’l- not bad, very consistent operations except for recession; cheap if earning power returned in full
  • VSE Corp.- also a great business (based on historical financials), may be the single-greatest opportunity if their earning power is not going anywhere; a friend of mine thinks they’re going to fall off a cliff, I’m going to take a look

Great Businesses:

  • Exponent Inc.
  • Landstar System Inc.
  • Neogen Corp.
  • Pre-Paid Legal Services- favorite of the issue
  • Standard Parking
  • Steiner Leisure
  • Syntel Inc.
  • Team Inc.- highest growth rate I’ve seen except at True Religion
  • VSE Corp.- may not stay on the list if my friend is correct about them losing out on earnings moving forward

You’d do well to check some of these out; I haven’t seen opportunities like this in a while. Also, one other to check out might be Radioshack; their stock fell off a cliff & the business is pretty solid. It’s funny to me that although the market is at such high levels, there are some companies still under everyone’s radar…

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About Andrew Schneck

I am a value investor focused on misunderstood securities and industries, with an eye for long-term stock ownership.
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4 Responses to Issue 2: Small/Mid

  1. Andrew says:

    I owned PPD in 2010. bought it at 45, it went to 35, bought some more. eventually sold out at 64 or so. Now i hear they are getting bought out for 66.50 or so. Still pretty cheap for such a good company, but their subscriber numbers are on a secular decline.

    • schn1eck7 says:

      In looking over historical financials (keep in mind I know nothing of their management team, corporate governance, future outlook, etc.), I’d pay about $38 or less for them to make it a value investment with my standards. Seems you got in at a very solid price and did quite well. Once they get bought out (looks like before July 31 this year), I’ll take them off my list of Great Businesses

  2. Andrew says:

    Pacer International also seems like an undervalued situation, but if you look deeper they just lost one of their biggest clients.

    Standard Parking is a great business, I agree. It never gets cheap enough though.

  3. Leivo says:

    I found pre-paid legal couple months ago and no one can disagree, the numbers are great. But after reading about the company it seems it provides extremely bad service to it´s customers and it´s business model just don´t have any real long term advantages

    Here´s a link to some complains about PPD http://www.consumeraffairs.com/legal/prepaid.html

    And
    “Speaking of the marketing plan though, it’s a multi-level marketing (MLM) strategy – also known as a “pyramid scheme”. Pre-Paid recruits independent salespeople who sell the product and recruits associates to do the same, earning commissions on both their own and their associate’s sales.
    About 98% of its “associates” earn less than $250 per year selling product. As a result, Pre-Paid has to consistently renew its salesperson base, as generally over half of it turns over every year. While this leads to new one-time enrollment fee payments for new salespeople, it also leads to a lot of inexperienced and unqualified people hawking the product. This turns prospective customers off to the company and creates a bad reputation. ”

    Quantative side is great qualitive side…not so great.

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