Top Computer Hardware Companies To Buy Right Now

Top Computer Hardware Companies To Buy Right Now: George Risk Industries Inc (RSKIA)

George Risk Industries, Inc. (GRI), incorporated on February 21, 1961, is engaged in the design, manufacture and sale of computer keyboards, push button switches, burglar alarm components and systems, pool alarms, thermostats, EZ Duct wire covers and water sensors. GRI is a diversified manufacturer of electronic components, consisting of the security industries variety of door and window contact switches, environmental products, proximity switches and custom keyboards. The Company operates in two segments: security alarm products and security alarm products GRI's security burglar alarm products comprise approximately 84% of net revenues and are sold through distributors and alarm dealers/installers. These products are used for residential, commercial, industrial and government installations. Its products include security products/ magnetic reed switches, data entry peripherals, pushbutton switches, custom engraved keycaps and proximity sensors.

The security segment has approximately 3,000 customers. One of the distributors, ADI accounts for approximately 40% of the Company's sales of these products. The keyboard segment has approximately 800 customers. Keyboard products are sold to original equipment manufacturers to their specifications and to distributors of off-the-shelf keyboards of proprietary design. GRI owns and operates its main manufacturing plant and offices in Kimball, Nebraska with a satellite plant 40 miles away in Gering, Nebraska.

Advisors' Opinion:

• [By Geoff Gannon] n. When it traded around $4.50 (it's now more like $7.50 a share) it was a net-net with a good business and a moat. There were risks – customer concentration for one – and it was no blue chip. There was no diversification of product lines, customers, geography, industry, etc. It was c! losely tied to U.S. construction activity.

  All this means it was no blue chip. Not that it didn't have a moat. I felt it did. And certainly not that it wasn't a high quality business. It demonstrably was (unleveraged returns on tangible equity were around 30%). And it was a net-net. In fact, it was a net cash stock at one time.

  So they do happen. But they are rare. The usual distinction with net-nets is not between companies like that – companies which may have a moat, do earn good returns on capital, etc. – but between companies that are legitimate and illegitimate businesses.

  A legitimate business is – in my mind – a historically profitable one. It is likely to have positive retained earnings (there are exceptions to this rule – but it's a good first check). It should have more years of profits (6 or more) than losses in the last 10 years. And it should be self-financing.

  Compare this to an illegitimate business. The least legitimate businesses are those that – while publicly traded – have never turned a profit and can't self finance. They may be net-nets – but they are net-nets because they have issued stock in the past and then seen their share prices drop. Retained earnings are often negative.

  There are other factors to consider. Is the business old or young? Is depreciation – and other accounting – especially conservative or aggressive? Are taxes especially conservative or aggressive? And is share issuance dilutive or not.

  I think a legitimate business tends towards LIFO accounting, quicker depreciation, higher taxes paid as a percentage of reported income, and lower share issuance. There are exceptions. Many

• [By Geoff Gannon] >Ark Restaurants (ARKR). When I bought them - and even now - I think their return on buyback would be high and I'd be in favor of it. However, the stocks are illiquid and their free cash flow relative to the dollar value of freely traded shares is not high. As a result, I'm always in favo! r of RSKI! A and ARKR buying back stock. But, I understand it's very hard for them to do in practice unless there is a meaningful holder who signals he wants out of the stock.

  My approach to buybacks is pretty simple. One, I prefer them. Two, I look at the share count history over the last 10 to 20 years as my guide to what the company might do in the future - I want a pattern of predictable behavior. Generally, that means a continuously shrinking share count that shrinks in bull markets and bear markets, panics and recessions and booms and busts and so on. Three, if I'm a buyer of the stock - then the company should be a buyer of its own stock. No questions asked on that one. If the stoc k is good enough for me to buy it's clearly good enough for the company to buy. Finally, I look for the return on buyback. I tend to focus on the earning power the company is buying relative to the net cash it is spending. If a company has cash on its balance sheet, the amount of net cash consumed by a buyback will be less than it appears because I will end up with a greater percentage ownership of the resulting balance sheet as well as the income statement.

  I want the return on buyback to always be at least 10%. As a rule, the average company will only get returns on its buybacks of 10% or higher if it pays less than 15 times normal earnings. In special cases - fast growing companies, companies where free cash flow vastly exceeds reported income, etc. - it is possible that buybacks above 15 times earnings will return more than 10%. It almost never makes sense for a company to buy back stock at over 25 times earnings. So, for most companies, under 15 times earnings is the green zone for bu

source from Top Stocks For 2015:http://www.topstocksblog.com/top-computer-hardware-companies-to-buy-right-now.html