Top Computer Hardware Stocks To Own For 2015

Top Computer Hardware Stocks To Own For 2015: 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 GRIs 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]

  Take George Risk (RSKIA). All of their competitors moved overseas. Theyre still in Nebraska. Management doesnt really claim they can either be better or cheaper than their competitors. They know they cant be cheaper. And as far as better this isnt dark chocolate theyre selling. Beyond customization, timeliness, and reliability Im not sure the idea of quality has much meaning in that busi! ness. Its either frustration-free or its not. The two things George Risk can be are timely and customized. Both of those things are easier to be for American customers if you are manufacturing in the U.S.

• [By Geoff Gannon] things I said was that I knew George Risk's materials cost was higher than some competitors' selling price. The fact that any company could survive under conditions like that immediately suggested that dollars paid for the product was not the key concern for this product.

  Perceived costs had to involve other concerns like customization, shipping speed, reliability, etc. Because it was a low cost product going into a higher cost product going into very high cost projects it seemed likely there was the opportunity to raise prices if needed. And that's what they ended up doing. The important clue for me in that investigation was the severe cost disadvantage George Risk had. You couldnt compete at such a cost disadvantage unless price was less important than I initially thought.

  I think you will find that most of these insights are not available in the financial statements. They come from reading the 10-Ks of all companies in the industry, reading articles about the companies, listening to all conference call transcripts, etc.

  For example, there is not much in the financial statements of Carnival (CCL) that explains how the cruise business really works. But all of the companies in the industry (CCL, RCL and NCL) freely discuss the economics of their business in great detail. They break out costs before and after fuel. They give you per-passenger prices of how much newly built ships cost. They give you lots and lots of details. They explain how they price their product (the way airlines do) and so on. There is an extreme level of detailed explanation of the business in the various conference calls, 10-Ks, etc.

  A great source for this information is going back to the time the company went public or at least finding the S-1 of a competitor! . When a ! company goes public it often gives much more detail into product economics, etc., than it will later on when it reports annual results.

  That is also a good place to learn ab out market share, com

• [By Geoff Gannon] n. When it traded around $4.50 (its 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 closely tied to U.S. construction activity.

  All this means it was no blue chip. Not that it didnt have a moat. I felt it did. And certainly not that it wasnt 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 its 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 cant 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 to! wards LIF! O accounting, quicker depreciation, higher taxes paid as a percentage of reported income, and lower share issuance. There are exceptions. Many

• [By Geoff Gannon] ombination of not really cheap on a P/E basis and just barely cheap on a cash basis and it was connected to homebuilding.

  I could go on like that. But Im not sure I understand why knowing anything about the perceptions of others actually helps my own investment decisions. Im also not sure the reasons Ive offered for the cheapness of those stocks are actually the reasons anybody else had for selling the stock, not buying it, etc. In fact, I think those are just plausible reasons I made up

  But thats not the problem with wanting to know why a stock is cheap. The problem is how that knowledge or the quest for it directs your attention. And attention is the scarcest resource an investor has.

  Once you know what somebody elses perception is, you try to either prove or disprove that perception. In essence, I see the problem of thinking about market sentiment of worrying about the Keynesian beauty contest as being like one of thos e optical illusions. Like the duck-rabbit illusion. In fact, this concern of mine is one of the reasons why Ive suggested investors read Kuhn.

  They often talk about some past period like the 1920s or 1950s with a total misunderstanding of what people were looking for in a stock back then. Of how they thought about stocks. Of what they thought stocks were. This isnt a misanalysis of the facts. Its a misclassification.

  When Ben Graham started on Wall Street there was none of this Stocks for the Long Run stuff. There was no talk of asset classes. There were investments called bonds. And there were speculations called stocks. And it was heresy when Ben Graham basically said a cheap stock is a better investment than an expensive bond.

  You become a bad financial historian when you confuse your own perceptions your own way of classifying stocks and noting the aspects ! of a stoc! k with how people really thought about stocks back then.

  In the same wa

source from Top Penny Stocks For 2015:http://www.topstocksforum.com/top-computer-hardware-stocks-to-own-for-2015.html