My Favorite Stock Right Now
The Dynamic Wealth Report
May 17, 2010
On Friday, I got home from the office a little early. The weather was
beautiful and there was a slight breeze. It was about 80 degrees. I
grabbed a cool drink and sat on the back porch.
Linda was riding her horses.
After awhile, I grabbed some reading material. If you know me, you know
my reading material is always about business.
I picked up the Primedia (PRM) 10-K and Proxy.
Don’t roll your eyes at me right now. Yes, this information was sent out
over a month ago… yes, I was slow to review it. I’d tossed the
information on my giant pile of things to read. And I’m just getting to
it now.
Regardless of my delay, this 10-K and Proxy holds a ton of interesting
and relevant information. Most companies post this information right on
their corporate website… free for anyone to view.
Remember, you can
never learn too much about one of your investments… and this is one of
my favorites.
Let me show you why...
-------------Sponsor-------------
Where Can You Turn $300 Into $1.3 Million Right Now?
Our own small-company specialist, Robert Morris, has found a
way to 'sniff out' tiny penny stocks on the verge of a major breakout. And
the timing for this has never been better.
You see, the system takes advantage of an obscure SEC regulation that
sends penny stock prices through the roof.
We've seen some stocks gain 852%... 5,450%... even 17,496% in no time
flat.
Click here
for the details...
-----------------------------------
Flipping through the proxy, I learned KKR is still one of the largest
stockholders. Take a quick look at page 35 of the Proxy… KKR owns over
61.8% of the company – which is fantastic. You’ll also learn that KKR
paid themselves a consulting fee of $400,000 in 2009 – not so fantastic.
KKR, by the way, is one of the oldest private equity shops around.
They’ve made billions buying and selling businesses. When people talk
about “smart money”, they mean investors like KKR!
You can learn a lot from the 10-K and Proxy.
Another big investor, Marathon Asset Management, owns 12.5%... and the
Directors and Officers own over 3.4%. A little quick math and you’ll
realize more than 77% of Primedia stock is held by this small group of
people.
I see it as a great sign and here’s why…
The company has approximately 44 million shares outstanding. If 77% is
closely held, it leaves about 23% of the stock out on the open market.
23% of 44 million is a mere 10.1 million shares.
Think of it this way… if another investor wants to buy a big chunk of
this stock, there’s only 10 million shares out there. And we all know
how supply and demand works. Less supply and more demand lead to higher
prices!
I learned that simply by reading the Proxy statement.
Now, let’s take a quick look at the 10-K…
This huge document is overflowing with information. The 10-K talks about
product offerings, cost cutting efforts, Net Operating Losses, stock
repurchase programs, and even dividends.
Let’s just say, everything I learned made me smile.
Take for example Primedia’s product offerings (page 26 for those of you
following along in the 10-K). Their New Home Guide revenue was off by
50% because of the soft housing market. Many would see this as a huge
negative. I see it positively. Just think… when the housing market
returns (and it will), advertising will accelerate… and this one product
could see huge growth in revenue and earnings!
You’ll also learn about cost cutting. Just look at page 27 and you’ll
see their cost cutting efforts. Who doesn’t like a management team
that’s watching every penny?
On page 22 of the 10-K, you’ll learn about a hidden asset they have –
NOLs.
NOLs are Net Operating Losses. It means that sometime in the past, the
company lost a big chunk of money ($452.4 million in Primedia’s case).
That $450 million isn’t an asset, but it can be used to offset taxes
from future profits.
Primedia profits generated today are shielded from the tax man… And that
gives them more money to distribute to shareholders!
This leads me to their share repurchase program. On page 75, you’ll see
the company is authorized to buy up to $5.0 million in common stock from
the market. I like the plan and I think management should push to make
it bigger!
And that brings me to page 38 of the 10-K. Here you’ll discover
management is paying out about $12 million a year in dividends. It’s all
going to fatten the pocketbooks of shareholders.
When I bought Primedia back in the fall of 2008, the P/E ratio was 1. The company was just starting to pay a dividend of $0.07 a quarter. The
dividend yield was 28%!
Here I am a year and a half later. The stock has climbed from $1 to
$3.50 and I’ve grabbed more than $0.42 per share in dividends! (The
longer I hold, the higher the dividend number will go.)
My cost basis is now a mere $0.65! With the stock appreciation, I’m
sitting on gains of more than 438%. That’s why Primedia is my favorite
stock right now.
So if you don’t already have a position, should you buy Primedia today?
My short answer is YES!
Of course, I own this stock so I’m a bit biased.
Think of it this way… The company has a simple business model, they’re
generating tons of cash from operations, and their dividend yield is
over 7.9%. Owning Primedia gives you an opportunity to invest
alongside some of the brightest investors out there (KKR). Don’t pass
up this opportunity.
• Gold Mining Industry (Up 7.3%)
In just the last month, one industry is jumping like no-other… the Gold
Miners. The problems in Europe are sending shock waves of fear throughout
the global markets. One safe haven is hard assets and gold specifically. Gold prices are through the roof and companies like
US Gold (UXG) are
leading the entire industry higher.
Print
Page
Bookmark Us
Home | Whitelist Us |
Terms of Use |
Privacy Policy |
Contact Us | Security |
Site Map