A couple of weeks ago, we asked you to pitch us your best stock idea the Peter Lynch way: short, sweet, and persuasive, because you should never need more than a minute to explain to someone why you own a particular company.
We received over 150 entries on our Sell Us a Stock discussion board; if you want some great ideas be sure to look through some of them.
After much discussion, our judges returned to us the following three entries as most persuasive (while still under the 150-word limit). Each will receive a one-year subscription to Tom Gardner's Motley Fool Hidden Gems. We also threw in a few honorable mentions for your reading pleasure... so enjoy!
Cryptologic (Nasdaq: CRYP) - by jimgillies
Recent price: $7.73
Cryptologic enables safe, secure online gaming. Advocating industry regulation, it is certified to strict requirements in multiple jurisdictions.
A high-margin, zero-debt business, Cryptologic generates loads of cash, but trades at an EV/FCF of 3.5 in an unsettled industry. The most recent flow ratio was 0.15, trailing-FCF margin nearly 42%, cash per share rose from $3.18 to $4.16 over the past year, and 20% of shares have been retired since 1998.
Government pressure on online gaming has unsettled investors, beating down valuation. So pronounced was the fear that Cryptologic closed at $3.18 last October 7 -- what was then value of cash-on-hand!
Refocused on growth in Europe and Asia, Cryptologic is ignoring the U.S. until the regulatory situation clears. Britain expects full regulation of online gaming by 2004 or 2005, while Asia and Europe already welcome online gaming. As uncertainty dissipates, Cryptologic will emerge as the owner of the market.
Biolase Technology (Nasdaq: BLTI) - by BillGoliber
Recent price: $11.37
No whirring drill, no novocaine injections. Just sit down, and a few comfortable minutes later, you're done.
Biolase, with its "Waterlase" dental laser, is doing just that. Growth estimated at 50%-plus yearly for several years. Already profitable. Expanding into Europe, and current facilities can handle the growth for another three years. New tax laws encouraging businesses to pursue capital expenditures, making it much more appealing for dentists to spend the $50K-plus for the machine. Acquiring competitors to tighten already strong patent protection and expand its marketing base. About 140,000 U.S. dentists, with only 2% market penetration thus far. Rated top product in several trade magazines. Strong insider purchasing on the open market. Only 20 million shares outstanding, with 20% currently short. 600K average daily volume. New addition to the Russell 2000 and 3000.
Did I mention that going to the dentist won't hurt anymore?
Donegal Group (Nasdaq: DGICB) - by davidjon13
Recent price: $12.07
This property/casualty holding firm is selling for less than its TANGIBLE book value and has a P/E of about 8.8, even though there's nothing obviously wrong with the company. It has a yield of over 3% at a time when dividends look like a virtue, both in the short and the long term. The CEO is constantly buying shares (in little dribs and drabs); his latest drib was less than a month ago at a price not too far from today's. The company has almost no debt; its sales are growing, and income is growing faster.
Everything you've been hearing about what rising premiums are going to do for Berkshire Hathaway
And if you vote for me, I'll kiss your baby.
Honorable Mentions
Procter & Gamble
One hundred twelve years of uninterrupted dividend payments...
more.
Thor Industries
Leverages greater economies of scale than its peers in purchasing, manufacturing and distributing RVs...
more.
Marvel Enterprises
CEO Peter Cuneo treats his portfolio of characters as stars with the company as their agent...
more.
Wendy's International
While competitors McDonalds and Yum Brand's are struggling to weave their way out of massive loads of debt, Wendy's low debt/equity (half the industry average) and high cash flow will allow it to focus on growth...
more.
