It's the ultimate dream for an investor -- turning $1,000 into $1 million. But what would it take to perform such a feat? It's a question that's been on Rich Smith's mind for some time now. He's been wrestling with it in the context of how to do it with small caps, and he's amended his original hypothesis. Check out this updated article for some ideas and a window into what Tom Gardner's doing in Motley Fool Hidden Gems.
In today's Motley Fool Take:
- Digging a Hidden Gem
- Discussion Board of the Day: Building/Maintaining a Home
- Qualcomm's a Clear Winner
- Quote of Note
- Expecting the Expected
- More on Fool.com Today
Digging a Hidden Gem
Subscribers to Motley Fool Hidden Gems, our small-cap value newsletter, are grinning ear to ear today in the wake of an earnings release from one of our earliest and best picks to date: Mine Safety
Looking at the numbers for continuing operations in the third quarter, Mine Safety notched a 28% rise in sales and a 72% increase in profits, to $0.50 per diluted share. And in case you're wondering, the "diluted" element in that figure increased just 1% over the past year. Pretty modest, for a company whose stock price has nearly doubled in value over the past 52 weeks.
Year to date, Mine Safety can claim 23% revenue gains and a 54% increase in profit per diluted share over its numbers for the first nine months of 2003. Thus, it would appear that both Mine Safety's revenue and earnings growth are accelerating as the year progresses.
Basically, everything looks to be going fine on the surface at Mine Safety. So let's sink a shaft into the company's numbers, and see if we can bring any deeper problems to light: On the margin front, its net margins from continuing operations (to compare apples to apples, I'm excluding the results for the chemical division it sold off last year) increased from 6.6% to 8.5%, helped by an increase in operating margins from 10.8% to 13.7%. No problems there.
Turning to days sales outstanding (DSO), it's more of the same. The company needed 69 days to convert a sale into cash in the bank last year. The process takes neither more nor less time today.
Actually, the only fault I was able to find in Mine Safety's numbers lay in its "inventory turns" (the number of times the company can sell out its whole inventory of goods, be they raw materials, works in progress, or finished goods). That number dropped from 3.5 times in three quarters, to 3.2 times (the result of a 25% increase in inventories year-on-year). This bears watching, but as mine canaries go, it still looks pretty healthy to me.
For more Foolish excavation into Mine Safety, read:
Fool contributor Rich Smith has no beneficial interest in any companies mentioned in this article.
Discussion Board of the Day: Building/Maintaining a Home
Have you checked out our Home Center? Looking to move or wondering what you can do to improve the value of your existing homestead? All this and more -- in the Building/Maintaining a Home discussion board. Only on Fool.com.
Qualcomm's a Clear Winner
Americans have already had their fair share of confusion -- after being whipsawed with early election exit polls that proved misleading, investors were elated just to have clarity on the issue of their national leader. But sleep-deprived investors got another chance to debate and haggle when Qualcomm's
The easy part to figure out is that the San Diego wireless technology provider made a ton of money. The more difficult part was figuring out just how much it made, and whether it was more or less than expected.
You see, reading the tea leaves on Qualcomm's performance has been a little more difficult lately, due to a royalty accrual change the company decided to implement this quarter. The actual change has no impact on revenue received, only in how it books and reports it. But the real confusion comes when analysts and investors want to compare this quarter's performance to others.
After looking at numbers in several forms -- pro-forma, GAAP, "prior method," and "new method" -- it's easy to want to go back to a simple map with red and blue on it to figure out who won. But after sifting through it all, it comes down to this: While Qualcomm's quarterly numbers failed to live up to optimistic expectations, the company closed out an amazing fiscal year.
In fiscal 2004, Qualcomm grew the top line in excess of 30% and earnings better than 50%. It is now sitting on more than $7 billion in cash and equivalents and even paid investors $308 million in dividends this year. Growth in the Wideband Code Division Multiple Access (WCDMA) segment is continuing, with 26% of its royalties now coming from this patented technology.
All this adds up to a stock that has appreciated nearly 70% in the past year -- amazing for a company that was already valued near $40 billion to start.
Unfortunately, 2005 is shaping up to be another tough year for Wall Street to gauge Qualcomm. While everyone else was worrying about the election, the company was one busy beaver, announcing three small company acquisitions and planning new investments in its business segments.
With all this activity, the stock will likely remain volatile in the near term as analysts opine the pros and cons of Qualcomm's new efforts.
Fool contributor Dave Mock still sees red and blue states when he closes his eyes. He owns no shares of Qualcomm, but has authored a book on the company titled The Qualcomm Equation.
Quote of Note
"No problem is so formidable that you can't walk away from it." -- Charles M. Schulz
Expecting the Expected
Like a midlife crisis or the car going on the fritz as you're on the first leg of a long-awaited road trip, some things in life you can count on. The key is to be prepared, whether you're getting serious about buying a house with your new bride, your son declares a new major the semester before he's supposed to graduate, or the market takes a dive just as you start to build your retirement getaway.
It's times like these when a second opinion is especially welcome. Having a financial plan -- one that you consult on a regular basis -- can take the guesswork and stress out of managing your finances, no matter what life stage you're in. It will help you project future costs, see how your current savings match up with them, pinpoint current and future financial issues, identify weak spots, and provide a much-needed wake-up call regarding savings, spending, and orthodontia costs.
There are a lot of ways to formulate a financial plan. You can do it on your own with a few self-help books. You can hire an outsider to occasionally check in with. (We created TMF Money Advisor for this purpose. Take it for a free spin.) Or you can hire a special someone to be at your beck and call. (Here's a comparison chart that sets up different types of professional advice help available.)
No matter what kind of help you choose, when you need expert advice, you want to be certain you have found a person competent to give it -- and one who will be acting in your best interests rather than his own. When it comes down to it, your money, like your health, is your responsibility. The more you know, the better off you'll be.
More on Fool.com Today
Want to take control of your retirement? Tom and David Gardner offer some tips in How to Rule Your Retirement.... Should George W. Bush be held responsible for job creation? Bill Mann discusses the ramifications in What the President Cannot Do.... In Can Taser Protect Itself?, David Gardner completes his interview with Taser co-founder and President Tom Smith.... Lots of companies are looking to ride Google's paid search coattails, Rick Munarriz says in Google's Kissing Cousins.
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For a list of all our stories from today, see our Today's Headlines page.