Jae Jun | Dec 27, 2012 01:41AM ET
If you're looking for strong small cap stocks, the Forbes Best Small Companies is a great place to find ideas. While tens of thousands of investors may read it, I doubt many actually take action in going through the companies. That’s where you and I can be different. If you haven’t already, download this my prior assessment of MED . I previously wrote how MED was a pyramid scheme, but the company, fan base and franchises have proven me wrong so far.
News hit that that the second CEO in as little as two months has quit to pursue personal interests, which is worrisome indeed.
Based on the big stock run up, valuation ratios have increased a lot and the DuPont analysis shows that in 2010, 2011 and TTM, the ROE is falling due to a drop in margins, which is a worry sign.
Piotroski score has fallen to 4 in the TTM and in 2011, the Beneish M score showed red for the first time since 2003, a possible sign of earnings manipulation.
Valuation
MED turned it around in 2009, and looking at the company from 2009 to 2012, I come up with the following fair values.
Don’t forget to submit and vote for the best 2013 stocks. I’m going to add IEC Electronics (IEC) to the list because I think it has some real good qualities after looking at it again.
The 2012 is doing well, so let’s see how well we can do in 2013.
AIG is coming first with Dolby Labs (DLB) second and Microsoft (MSFT) third.
AIG: half of growing BV, no more government overhang.
DLB: company has done very well into the mobile space. Only 1-2 years ago, DLB penetration in mobile was 5%. Latest results show 15%. Very solid high margin business. Too cheap at $30. Target of $45.
MSFT: Strong but underappreciated balance sheet, play on Windows 8 success.
Agree? Disagree?
Disclosure: None
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