Although the majority of my portfolio is in blue chip stocks, like Microsoft (MSFT), Dow Chemical (DOW) and General Electric (GE), with a good dollop of cash now (30% of the portfolio after taking profits during the rally over the last six months), the most fun I have is managing the 10% of assets I have allocated to small cap, speculative positions. It is this portion of the portfolio where I try to hit more than singles and doubles. My goal over time is to hit more "home runs" than I have "strikeouts." It is the area where my aggressive investing side can shine. Some of my recent successes include SciClone (SCLN) and Warren Resources (WRES). Here is another small speculative stock that is in my current portfolio.
"Theragenics Corporation (TGX) operates as a medical device company serving the cancer treatment and surgical products markets primarily in the United States and Europe. It operates through two segments, Surgical Products and Brachytherapy Seed." (Business Description from Yahoo Finance)
7 reasons TGX is a solid speculative buy at $1.75 a share:
- Although revenue was basically flat in FY2011, earnings increased 50% over FY2010 to 9 cents a share.
- It has a solid balance sheet with $17.5mm in net cash, which is around 30% of market capitalization.
- Its yearend backlog increased 7% over yearend FY2010, and it has completed an ERP implementation at its four core locations which should help efficiency.
- The company has completed an acquisition of Core Oncology's prostrate brachytherapy business. This increases Theragenics' market share, which is important due to the high fixed costs and low variable cost nature of this business. In addition, the company had organic growth in this segment for the first time in six years during FY2011.
- The stock is selling at just 70% of book value and 71% of sales. It also sells for just 7 times operating cash flow if you back out net cash on the books.
- Insiders are holding tight and have not sold a share in over a year. Given its small market capitalization, high cash balance and niche products; the company would make sense as an acquisition for larger player looking to fill out its product line.
- This equity was more than three times higher prior to 2008. The stock looks like it has gone through a long bottoming process, is showing increasing technical strength and just crossed its 200 day moving average (see chart):
Disclosure: I am long TGX.