Stock picks August

The 412 algorithm identifies stocks, and some friends give the thumbs up or down on each.

At the end, you will see the list of stocks used for my personal financial investment.
As of 9/25, the results are here:

Confirmed by others
HSON +0%
seems ok
seems ok
XELB +15%
seems ok
LXU +44.89%
classic asset play. Nicely positive cashflow (they’re effectively liquidating their capital investment), though they’re accumulating some interest they aren’t paying for now (capitalizing it at high interest rates).

PFSI +8.85%

RLGT + 29.79%

DFBG +55.49%
OPY +20.43%

GTN +55.49%
GSM -10.53%

CTG -8.09%
have had significant negative cashflow (customers aren’t paying up, usually a bad sign) recently, otherwise ok

AP -9.4%
Most of their equity is tied up in asbestos insurance receivables, and they are being sued over asbestos. There is a decent chance the lawyers will drive them into bankruptcy (they’ve been unusually successful with asbestos, because so many smokers have been near asbestos at some time in their life).

LCUT -11.48%
Made a major acquisition, now has negative tangible equity and a huge inventory. Sales rose more modestly (from the acquisition). Those intangible assets probably have little value, which would make the company insolvent if properly recognized. Only the latest quarter’s results include the acquisition (especially the interest payments).

VIRC +1.04%
Holds 9 months of inventories; inventories are rising fast while sales are dropping. Their inventory exceeds their equity.
CLRO -6.67%
negative cashflow and lots of inventory with dropping sales, but bankruptcy looks like it is a ways off due to limited debt.

Stay away:

CBK -15.98%
controller just resigned, though that might be because they have a new CFO.
They just had a large inventory increase over the last quarter, and their equity is almost entirely their inventory (which is probably overvalued because they can’t sell it).
They look like they will be delisted soon because their stock price is so low, unless they do a reverse split or something like that.

HBP -9.11%
50% increase in inventories over the last year with much smaller increase (11%) in sales. Highly negative cashflow (which has been ongoing for over a year). Their inventory is twice their equity (so a likely inventory writedown could render them insolvent).
Current assets < current liabilities and negative cashflow. EXTREME BANKRUPTCY RISK (don’t you have any bankruptcy risk screens?) PANL - Not available from my broker Want a scientifically proven algorithm that finds the best investments?

48 thoughts on “Stock picks August

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