The Ideas Report For Serious Investors

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Read the Berkshire Hathaway press release.

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Read related articles: Bloomberg, Wall Street Journal, Reuters.

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This week our subscribers are receiving a new monthly issue of The Manual of Ideas, entitled "Small- and Micro-Cap Value" (118 pages), in the mail.

We devoted our January issue to large-cap value investment ideas, highlighting such household names as Cisco Systems (CSCO), Pfizer (PFE) and Travelers (TRV). This month, we traveled to the other end of the market capitalization spectrum, aiming to uncover opportunities among companies with market caps of less than $2 billion. We believe we were able to uncover several highly compelling opportunities.

Our team has gained quite a bit of experience in this less widely scrutinized part of the market over the years. The search for compelling ideas has taken us back to a few companies we have known for some time but may have passed on due to price or other considerations. In the November 2008 issue of The Manual of Ideas, we profiled RadioShack (RSH), a retailer with a tired brand and unimpressive financial results. RadioShack embarked on a turnaround led by an executive team with experience at Eddie Lampert’s Kmart/Sears. Fast-forward two-and-a-half years: RadioShack’s stock price is roughly where stood in late 2008, while the company has grown same-store sales, transitioned to more attractive mobile products, generated lots of free cash, and repurchased a large number of shares. In short, the company has, in our view, become an intriguing and timely opportunity.

Of course, investors in small- and micro-cap public companies are well aware of the minefield that awaits those who enter uncharted territory in search of value. Over the past few years, dozens of small companies that trade on U.S. stock exchanges but operate exclusively in China have passed various value-oriented screens due to their apparently solid balance sheets and strong earnings. Unfortunately, investors are now finding out the truth about many of those companies: The founders and sponsors were often betting on the gullibility of U.S. investors — put “China” in a name, raise money in an IPO, and then lie your way to an increasing stock price. Scores of Chinese small-caps have recently been revealed as frauds, hurting not only U.S. investors but also honest Chinese business owners. We warned about U.S.-traded Chinese education companies in our July 2009 issue, and we have eliminated most of those companies from the small- and micro-cap screens in this report.

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Would you like to share your best investment idea with some of the world's top value fund managers? Would you like to add the title of Inaugural Winner of The Manual of Ideas Prize to your list of accomplishments? Would you like to win $1,000?

The Manual of Ideas is now accepting submissions for The Manual of Ideas Prize, a contest for the best one-page investment write-up on a stock idea that has not yet been covered in The Manual of Ideas (see a list of excluded companies). The author of the winning submission will receive $1,000. Winners will be selected by The Manual of Ideas research team. The deadline for your submission is April 15, 2011. No purchase is required in order to participate.

Here is what you need to do:

1. Choose a public company that is not already covered by The Manual of Ideas. The company must have a market value of at least $50 million as of March 15, 2011 and must be traded on one of the following stock exchanges: Nasdaq, NYSE or American Stock Exchange.
2. Use this template for your one-page write-up. Here are a few examples of what a finished one-pager might look like: example one, example two, example three.
3. Create a valuation table in Excel (do not use macros). The valuation table should show three valuation scenarios: conservative, base case, and aggressive. Here are two examples of what a finished valuation table might look like: example one, example two.
4. Send the one-pager (Word file) and the valuation table (Excel file) to John Mihaljevic at editor-at-manualofideas-dot-com. Include your name, company or university affiliation, and contact information in your email. The deadline for your submission is 11:59pm EST on April 15, 2011.
5. That's it! We will review the submissions and announce the winner on May 2, 2011. The winner will receive $1,000 sent by PayPal to his or her email address.
   

By sending your submission to editor-at-manualofideas-dot-com, you agree to the following contest rules:

1. You have not plagiarized anyone else's content in the writing of your one-pager.
2. You own the copyright for the content you are submitting to us. (It is okay if you have previously published all or a portion of the content, provided that you retain the copyright.)
3. You give us a non-exclusive, royalty-free, perpetual license to use the content you send us in any way. We will consider publishing high-quality write-ups in The Manual of Ideas. We will not compensate you for such publication, except that we may, in our sole discretion, pay you $100 for a published one-pager.
4. You agree to let us publish your name and affiliation in the case that you are selected as the winner of the $1,000 prize.
5. The $1,000 prize will be awarded if at least ten eligible write-ups are submitted. An eligible write-up is a write-up that fills the one-page template referenced above and that meets basic criteria for information accuracy. Only one write-up may be submitted per person.
   
6. This contest is being run by BeyondProxy LLC, the publisher of The Manual of Ideas. Direct any questions to info-at-manualofideas-dot-com.
7. We may change the terms of this contest at any time without prior notice.

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