It’s time to put some money to work immediately.
I don’t profess to know when the markets will turn, or how long it will take, but I do profess to know that there are quality companies out there that are begging to be purchased, if only in small increments at the present, and held on to for years to come.
The three companies that I have added to my portfolio are probably no secret to anyone who has been following my recommendations for some time.
They are:
- Rick’s Cabaret (NASDAQ: RICK)
- eHealth (NASDAQ: EHTH)
- PROS Holdings (NYSE: PRO)
I am advocating purchasing 1/4 position in each one.
I’ll be writing full company spotlights and the reasons for my purchases in much greater detail in upcoming posts, but with the decline in the overall market, dipping our toes in the water and purchasing these great companies at these levels was something that needed to be done now.
Below are brief explanations about what the companies do, my reasons for adding them to the portfolio, and some of the risk factors you should be aware of before purchasing shares.
Rick’s Cabaret: Buy 1/4 Position around $7.00 per share
Rick’s Cabaret International, Inc. (NASDAQ: RICK): Rick’s Cabaret International, Inc., owns and operates upscale adult nightclubs serving primarily businessmen and professionals.
Rick’s nightclubs offer live adult entertainment, restaurant, and bar operations in Houston, Austin, San Antonio, Minneapolis, Minnesota, New York, Dallas Fort Worth, Charlotte, and other cities under the names Rick’s Cabaret, XTC, and Club Onyx.
Rick’s also owns and operates adult entertainment Internet Web sites, including xxxPassword.com that features adult content; CouplesTouch.com, a personals site for those in the swinging lifestyle; and NaughtyBids.com, an online adult auction site that contains consumer-initiated auctions for items, such as adult videos, apparel, photo sets, adult paraphernalia, and other erotica.
As of September 30, 2008, Rick’s operated 19 adult nightclubs.
A little about Rick’s
Rick’s Cabaret has been in business since 1983, and specializes in providing a safe and upscale environment for adult entertainment.
The adult entertainment industry is fraught with mom and pop clubs that run without corporate governance with a very unprofessional and low-scale business model, and usually are substandard when it comes to quality entertainment and amenities.
Rick’s differentiates themselves by providing an atmosphere where they can offer a unique quality entertainment environment that includes highly experienced and well screened entertainers, high quality mangers hired from within the adult entertainment industry, complying with all local, state and federal laws at all times, and finally, providing an atmosphere and ambiance, including exclusive VIP rooms, that appeal to upscale clientele.
Why I bought Rick’s
- Best-in-breed player that is significantly increasing its market share in a largely fragmented industry via intelligent acquisitions.
- Rick’s will grow revenue 90% this year, 60% next year and is growing about 10% organically.
- Super high gross, operating and net margins
- Strong cash flow and free cash flow generation
- High insider ownership (CEO owns about 13% of the outstanding shares)
- Unbelievably cheap valuation using any metric: Discounted Cash Flow, P/E, PEG, P/CF, P/FCF, etc.
