Here are four buy recommendations from the Magic Formula list of the top twenty-five companies. The first two do not pay a dividend, but the last two do.
- Korn/Ferry International (KFY)
An executive search company, with over 5% net profit margin and growing, and best of all, no debt. The current credit crunch shouldn't impact them. I don't think the threat of a recession on the horizon will hurt KFY. When times are hard, companies will be even more willing to pay up for talent. KFY is $22.21/share, giving a market cap of over $1 billion, with an 11% pre-tax Earnings Yield, and Return On Capital over 100%. - ICF International (ICFI)
ICFI is a consultant to various US government departments. I don't foresee cuts in government spending any time soon, no matter who is elected President or who controls Congress. The company is young, growing fast, and profitable (over 5% net profit). It has low debt, so it doesn't have to try to borrow in the current credit crunch. It has a market cap of $350 million with a current price of $24.63, an EY of 16% and ROC of over 100%. - Gevity HR (GVHR)
Gevity HR is, as the name implies, a specialist in Human Resources. They are undergoing a complete restructuring right now, so the gamble here is that this will work. GVHR pays a 3% dividend while investors wait for the turnaround. The company has a poor record on corporate governance. GVHR's price has been cut in half over past couple of months, but it may have bottomed now. They have no debt, but it's still a risky dividend play, with the uncertainty over the shift in strategy. It's
currently $11.52/share, with a market cap of $280 million, a EY of 12% and ROC of over 100%. - Biovail (BVF)
Already in my Magic Formula portfolio, Biovail is at an attractive buy point again, with a 7% dividend (this is a Canadian company, so they will take a portion of it off the top, making it about 6% for an American investor). Since the arrival of the new CEO, the company has better stewardship and a fatter dividend. Concerns over a recent Non-Approval Letter due to study designs, not safety or efficacy have dropped the stock price back into "buy" territory. They have enough cash to continue the dividend, even with this setback.
Disclosure: I own shares of Biovail (BVF).
