After buying Shoppers Drug Mart (TSX-SC) for the TFSA, I had some $585 left. Wanting to invest this in something, I looked for a Small Cap dividend paying company. I had invested in Small Caps before, but not very successfully. I had believed the theories that they were different from other companies, that you should not expect the best ones to be making a profit and that the real thing to look at was cash burn. Well, scratch that. I bought 8 Small Caps, of which I have two left. I have not sold them as they are worth so little. They were all losers. So now, I am valuing them as I am valuing any other companies.
I went to the Globe and Mail site of www.globeinvestor.com/ and from Globe Investor section I selected the Stock Filter. I asked for companies that were worth between $1 and $5.50 and had a yield between 4% and 20%. I got back 22 companies. I got quotes on them all and proceeded to look at the estimates on these stocks and at the “company snapshot” pages. The company snapshot page is useful as it gives you parts of the financial statements for the last 3 years and for the last 12 months.
From looking at this stuff, I narrowed the companies down to 5, of which I thought two might be of interest in the future and 3 might be of interest now. The three companies I ended with were Matrikon Inc (TSX-MTK), McCoy (TSX-MCB) and Pulse Data (TSX-PSD). Next, I started spreadsheets on these companies, trying to fill in, at least some of the data, for the last 6 years, to give me 5 years worth of growth data. I also looked them up at TD Waterhouse where I have my Trading Accounts. TD Waterhouse is handy as it has INK Company Insider Reports and for companies that are covered, Financial Post Investor Reports.
For McCoy, it had very good Revenue, Earnings and Dividend Growth and there was good insider buying, especially under $3.00. However, no one expects this stock to match the 2007 earnings in 2008 or 2009. In fact, it is expected that the company earnings will go down in both these years. Also, the Accrual Ratio is extremely high at 21%.
For Pulse Data, there were Strong Buy ratings on this stock and some insider buying. However, they have not made a profit in the last two financial calendar years ending in 2006 and 2007. For the few analysts following this stock, there is a wide divergent in what, if any profit will be made in 2008 and 2009. The Revenues on stock has been declining since 2004. In the financial statements, the company is busy revising them to try only to show what they are doing on continuing businesses. Revenues and cash flows were being revised statement to statement. I do not like this.
The company I bought was Matrikon Inc. They only started paying dividends in 2008. Their annual statement year ends in August of each year, so this makes it hard to see what their dividend policies will be. Their revenues have grown by 10% over the last 5 years; their earnings have grown by 21%; their cash flows have grown by 30% and their book value by 13.5%. When I first went into my broker web site to buy this stock, the bid price was $2.16 and the asking price $2.27. This is a wide variance and the stock is not traded often. I had to wait a few hours, but finally the asking price changed to $2.17 and I bought.
Matrikon Inc. is engaged in the sale of software and information technology professional services to industrial facilities. Its web site is www.matrikon.com. See my spreadsheet at www.spbrunner.com/stocks/mtk.htm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.
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