Sandvine Corp. (SVC.TO)

One of those great Canadian technology companies. They are really a global leader in helping telco, cable and wireless companies better manage their Internet traffic. Picture a 10 lane highway with all the slow pokes on the left and Netflix hugging all the other lanes. This company is able to provide solutions for broadband networks increase and smooth out the traffic as well as collect and manage data as a value added service to their customers. Dividend yield of 2.73%.

Has been following this for a number of years, but it never really got past that lumpy revenue trait that it has always had. The last few quarters have been okay. Have been building and building, and haven’t had any pre-announcements. They have a new product that can actually grow into something great. Had always felt that it would be a great take out candidate.

He has a small position. They have been lucky in terms of their earnings. A pristine balance sheet. He thinks the market has been quite volatile for them and the visibility is not what it once was. The right time to buy this company is when they miss a quarter because their contract signing is rather lumpy.

Deep packet inspection, which enables Internet service providers and cable companies to know what is actually going over their network, i.e. video or text messaging. If they know that, they can charge for it and charge band width accordingly. The frustrating thing is that earnings have been so darn lumpy, and haven’t really come in with any sort of consistency. He is very enthusiastic about this company. A good inherent business to be in.

Scores in the top 90% in his stocks on a value basis. Trading at 3.7X EBITDA, with a strong ROE of 21%. Cheap on a PE basis. There are no debt problems and they have cash on the balance sheet. The only knock is that price momentum has turned over giving it a little bit of selling pressure.

Likes this a lot and thinks it is an undervalued business. Technology is not fully respected by other technology companies and by the market. Recently had some issues where they had a patent troll say they have a patent they had used. That caused the stock to drop off, creating some uncertainty. Any time this trades below $3, he considers it to be a pretty good opportunity.

This is going to need to show that it can go higher. It is mired at around $3. If he owned it, he would be very concerned because it hasn’t shown that it wants to go higher for a very, very long time. He would be a buyer at about $3, but wouldn’t be a buyer at this level.

(A Top Pick Oct 24/14. Up 15.47%.) One of these technology companies that if you play it at the right time, you can make a lot of money. There is some positive momentum coming after the last quarter, after a few quarters of negative revenue guidance. At these levels, he feels they can earn $0.25 if they keep the momentum. Trading at 13X earnings.

(A Top Pick Jan 2/15. Up 6.36%.) Overall he thinks the outlook is pretty good for this.

One of the few stocks he added this year. They are the traffic cop on the Internet. They generate great cash flow. They got to ridiculous levels and had two earnings warnings then beat the second warning and the stock took off again. There is an activist investor involved. They are the world leaders and will probably be sold for a lot of money some day.

Anything would be better than this company in terms of how they have performed. Their problem is that they cannot make a quarter to save their lives. This has resulted in the very low stock price multiple. No one really cares about the company and they have $150 million in cash. He thinks the company should go private.

(A Top Pick Oct 24/14.Down 14.03%.) Has been an extremely frustrating stock to own. They really need to announce some deals. Trading at pretty low levels here. The stock generates 10% free cash flow yield, even on these lower revenue projections, so if they actually do start to execute, it is going to be a great thing for the stock and he thinks it should do very, very well. Extremely cheap at these levels. They have $1 per share of cash on their balance sheet.

Tends to be really lumpy with their numbers and it doesn’t seem to be the same rationality for their lumpiness. When they have a good quarter, the stock tends to have a big run and everyone loves it. When they have a bad quarter, the exact opposite happens.

A nice little company that has an image problem. They are sitting on a ton of cash. Stock is relatively cheap, but they have this horrible habit of missing their quarterly forecasts. The stock gets punished, and then they kind of work their way back, make a couple of quarters, and then miss a quarter. He thinks this is a company that needs to go private. They are not going to get that super high growth multiple they deserve if things were going better in terms of consistency. If you own, consider taking your cash and moving to another company.

(Top Pick Oct 24/14, Down 19.06%) They are trying to get into the large telecom companies but there is a big slow down before they take up the deals. The last couple of quarters they have come out pre-earnings release and said they won’t meet their targets. There is over a dollar a share in cash and they want to make an acquisition and they are in fact a good takeover target themselves.