| a continuation of my search for the best small | | | | 3. Computer Programs and Systems (CPSI) - |
| companies from the 200 listed in Forbes 2008. | | | | designs hospital IT support systems |
| The companies ranked 71-130 has yielded 8 | | | | 4. Rocky Mountain Chocolate Factory (RMCF) - |
| results. To recap, below are the criterias of how | | | | manufactures chocolate and other confectionery |
| the companies are being filtered. | | | | products |
| 1. Immediately exclude financials (don't understand | | | | * Company with a long history and very honest |
| or know how to value them) | | | | and candid management. |
| 2. Run the companies through the intrinsic value | | | | 5. Credo Petroleum (CRED) - explores for oil & |
| spreadsheet with the PE as the growth rate, but | | | | gas |
| capped at 15%. The selected companies shall | | | | * I was surprised that Credo made it past the |
| exhibit; | | | | filter as it is a business typical of high capex but it |
| * Positive, consistent and growing cash flows. | | | | is one of the rare oil & gas companies that is |
| * Consistent margins. Fluctuating/decreasing | | | | cash flow positive. Margins are stable for a cyclical |
| margins over several years will not be accepted | | | | company. |
| unless the other criterias are outstanding. | | | | 6. Dionex (DNEX) - makes analytical instruments |
| * Above average returns from capital | | | | for chemicals industry |
| investments (CROIC, ROE, ROA) | | | | 7. Neogen (NEOG) - develops products for food |
| * Strong balance sheet | | | | and animal safety |
| 3. Companies should have at least 5 years of | | | | 8. Gen-Probe (GPRO) - develops and markets |
| operating history | | | | clinical diagnostic products |
| 4. The companies that make the cut will then be | | | | Remarks |
| reviewed individually | | | | I noticed that as I kept going down the list, the |
| Results | | | | quality of the businesses started to decline. |
| 1. Portfolio Recovery Associates (PRAA) - collects | | | | Margins are inconsistent, returns are low or |
| portfolios of defaulted consumer debt | | | | non-existent as well as growth in revenue and |
| 2. Techne (TECH) - develops hermatology | | | | FCF. |
| controls and biotechnology products | | | | |