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XO Group Inc. Message Board

  • analyst112 analyst112 Jun 3, 2008 12:02 PM Flag

    If you love cheap stocks like KNOT

    I repeat my story for those that lost some $$ in KNOT. It is cheap, but this is cheaper.

    CADA will raise the div next quarter to .33 so the yield is 3.7%. The magic yield is 4%. That is, no stock goes above that unless the fundamentals are poor--like banks, etc. Further, CADA will pay out $5 of excess cash if it looks like Obama is going to win. That could happen this year as the tax laws could change in 2009. If they pay out $5, and the stock goes ex div to $30, our yield is 4.4%.

    CADA's base earnings are not cyclical as we saw last quarter, same customer sales up 6% probably due to inflation in food, gas, oil, medical --all markets they serve. Market share gains continue with reseller base only penetrated 10%. Number of new accounts running at a 25% increase over last year, and last quarter, due to expansion of sales force. Costs already sunk for sales force which we saw last quarter and new accounts more than offsetting new costs. New sales force only 1/2 as productive as old sales force so in 1 year they will be ramping up to meet ability of old sales force. They don't even have a 1% market share-- so a huge market. Base business sluggish but it will recover with the rest of the economy when the time is right. In the meantime, base biz is only 1/3 of profits and 1/4 next year and covers all overhead. They will earn $1.55 this year so the P/E is 23 on 9/08 eps. That is only 4 months away, so we have to look at 9/09 which is $2 in eps according to the metrics presented at past conference calls. There is no chance of down or even flat earnings --no matter what. So the stock is 18 times earning with a 20% return assets and 30% on equity and growing at 30-40% in a wide open market with no current competitor. Inflation only helps sales. Not only that, institutions don't own it and management has their net worth tied up in the stock. On top of all that, we have a portfolio of credit card assets that can be sold for between $18-25/shr and we have $7 in cash per share.

    I have been a security analyst for a long time and this is the stuff that you only find two or three times in a 30 career. If you believe, make this 20% of your portfolio and relax, collect the dividend and wait for it to hit $100 which it will surely do by 2010--24 months from now. This is a retirement stock.

    There is a lot of funky selling going on right now as portfolio managers get fired and new ones blow out the old stuff--but this will pass. You individuals are the shareholder base so don't let the tape influence you. Buy more on dips. Good luck to us.

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