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No. of Recommendations: 3
EBIX published great year end results on March 1. The company is profitable, and new lines of business are contributing to the top and bottom line. Initial reaction to the news was a swift rise in the price, but then, the sell off began.

Two different items could be behind the selling. First, seeing that there was an internal investigation into how taxes were being accounted for, and then seeing an eight year payout makes one pause. Lax accounting is bad enough, but having to negotiate with the tax man is not a good sign. However, I don't think that was the cause of the price decline on Friday.

News that there are heightened tensions between India and Pakistan coming out the week that Ebix had made a big show of its investments in India, and the financials showing how much of the revenues and profits are tied into the Indian operations, may have had more to do with the selling. The risk is real and needs to be taken into account. How much is impacts Ebix is still up for debate.

I like EBIX as a growth company. The organization does a lot of growth through acquisition. That said, I'm perplexed as to why there has been a constant push to buy back shares. Yes, I think it was undervalued, and do so at these prices. However, it's a small company based on market value. Cash can be used to grow it larger, or returned to shareholders. The minimal dividend hasn't been raised in years. If anything, a commitment by the board to grow the company and prove it by growing the dividend would make some sense. After all, most of what EBIX does revolves around making money on transactions.

There is a lot of potential for EBIX. The focus on businesses in India may be great timing. I'm willing to continue to hold my investments in EBIX, but I don't see me raising my stake in the company. There is a lot for management to do; clarify the stock split, clarify how that impacts dividend, and justify the deployment of capital.

Full Disclosure - I had added to my position in EBIX over the past six months. It is an overweight position in my portfolio.
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