Value Microcaps Motherboard

[stanu78]

Hweb.. I like your valuation model/investmet philosophy... Here's mine...

My investment philosophy is actually very close to yours.. (maybe that's why I like yours.. jk... :) )

Some of the things I also like to see (in addition to everything that you already mentioned):

- No debt/Low debt (I just personally don't like debt though I know equity is expensive and using some debt might improve EPS). this is just my personal even though I know this is not optimal according the WACC principle.(where it tesll us the weighted average cost of capital will be the lowest when a certain percentage of debt is used which often called the Effecient frontier)

- Have to be profitable. or at least break even. I don't buy money losing companies. (which limit my selection greatly).. so I won;t buy early turnaround stories.

- I look at the business (type of business) and see if they will be able to stay in business (not even talking baout growth yet) for 10-20 years down the road (I learned this from Buffet/Ben Graham). this is the hardest part of investing.. to be able to determine/forecast future secular trends and economic moat of an industry and a particular companies. I guess this is similar to what you said about sustainable earning.
Choosing business is a tough choice. I have choose not to buy in apparel business hence I miss TRLG below $2.. and I also decided not to buy OIL companies after I bought CNR and I tried to understand their 10Q and *k for operation result and I don't understand as they report everything with BOPD and I also don't understand how to value reserves and how to find new source once the well is dry. in this case I miss TGA and CNR below $1. PYOL and EGY and ASPN also looks good

- Another thing is that I look on Enterprise value in addition to just price. EV/E in addition to P/E. and I also look at EV/FCF (free cash flows). Similar as you I look for PE 10 or lower. sometime if the PE is 15 but the EV/E is 10 or lower than 10 .. then I might be interested. (if the business is good)

- Great management with high integrity and capability to execute on plan. I'd rather see management put reasonable goal and hit it rather than predict very high and then miss it badly.

- Crack the special situation code (NOL carry forward. One time tax benefit/credit. One time gain/sale on investment. non-recurring item and make sure it's non recurring.) this is also crucial .. t hugh it often explicitly said in 10Q a lot of people choose to ignore it. I have several experience with the NOL carryforward epiration transition and one time tax credit where the stocks tanks.. for example NTST. and I'm also might be sitting on the next one .. MDF... but the business is good I hope this one have different story than NTST when the transition happen.

Some of my major holding by using this philosophy (MDF GEXA AOBO EMRI NTWK ADNW NGMC) I think EMRI is abit expensive now thinking about selling and also ADNW management hasn't been executing. I also still like NTST

Good night folks

Stan