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Author: 2BAFOOL4LIFE Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 66  
Subject: Re: How to Invest $50,000 ? Date: 8/31/2003 2:52 AM
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When looking at small caps, I pay a lot of attention to debt, profitability and free cash flow. If the company has postivie free cash flow, has a financial health grade and profitablity grade of A- better and it seems to occupy a nice niche in the market, I buy it (if management seems ethical) and not worry too much about what the stock does in the short term or even about liquidity. I believe that strong companies will eventually recover from small shocks

Of the shares you mentioned, I would definately stay away from CCBI, it doesn't have much of a history and Morningstar gives it a financial health grade of F and a profitability grade of D-.

I'm not that excited about RATE although it's a foolish 8. It also has a financial health grade of D- on Morningstar. I'm generally weary of investing in internet companies. They are very fleeting.

I like Lifeway. The young lady running the company took over after her father died. Her compensation (according to Forbes) is less than $100K if I remember correctly. And they don't seem to be awarding themselves huge stock options...yet. The dairy business is easy to understand and catering specifically to the dairy needs of lactose-intolerant people with a product that appeals to the general health-conscious population is smart. They recently expanded to the Latin market with a new line of products and a change of packaging seems to have been well-received. One risk is that since all the company's products are based on 'kefir', any side effects can easily cripple the company. Also, since the company does not own its own distribution stores, distributors can demand lower prices, which can hurt margins.

NCEB has decent fundamentals.... but it's financial and profitability grades are B- and B repectively.... which is below my A- cutoff. The shares seem slightly overvalued compared to the industry so I would wait for a better price... or an improvement in fundamentals.

BDY and DYII are great solid companies... the price of BDY seems to have stabilized... DYII is facing a lot of resistance around $24-25 and seems to find a lot of support under $24... I would try to bid under $24.

Disclosure: At the time of this publication, NewFool owned share of LWAY
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