What do I own and why?

On the right-hand side of the page (below the ad and the blog archive segment) is my standing list of stocks that I own.  If you click on any of them then you will see that stock's Google Finance page (This blog is hosted by Google, and it seems only polite to default to their Finance pages).  If your browser allows Flash then on that page you'll see, among other things, a nicely interactive chart that flags important events for that stock within the chart's timeline format.  Important events include splits, dividends, and news items.

The news items may not be that relevant, though.  I'm guessing that Google has some algorithm that chooses which news items to display for a given unit of time, and it's probably something simple like Most Popular and Company Name.  For my 3D Systems stock, especially, I've found that news items sometimes have NOTHING to do with the stock itself.  News items are sometimes about 3D television systems, for instance, but 3D Systems - the company - is in the rapid-prototyping business which is sometimes known as 3D printing.

For more complete and truly relevant news - and other important resources - I find myself continuing to use Yahoo Finance, even after years of trying other resources as they become available.  Yahoo has one resource, in fact, for which I have yet to find a comparable substitute, and that is their Key Statistics page for any given stock.  With that in mind, below is my list of stocks once more, but this time each link will take you to the Yahoo Finance Key Statistics page.

3D Systems Corporation (Public, NYSE:DDD)
ABB Ltd (ADR) (Public, NYSE:ABB)
BAB, Inc. (Public, OTC:BABB)
MIND C.T.I. Ltd. (Public, NASDAQ:MNDO)
Netflix, Inc. (Public, NASDAQ:NFLX)
Sigma Designs, Inc. (Public, NASDAQ:SIGM)
TICC Capital Corp. (Public, NASDAQ:TICC)

I'd like you to look at the Key Statistics pages for the first five stocks in my list, especially.  As you do, you may notice that there are certain commonalities involving four items on each page:  EBITDA, Net Income, Cash, and Debt.

EBITDA and Net Income are positive for these five stocks.  This tells me that the stocks in question are actually profitable.  They're making more money than they're spending.  This seems like an obvious thing to look for in a stock, but a lot of really excellent stocks may still be in a startup phase where they haven't yet had a profitable quarter, or may be suffering under a lack of demand associated with the ongoing crisis and therefore not currently profitable.  That doesn't make them bad stocks, necessarily, but right now I'm looking for a very low degree of risk.  For this reason I prefer to limit myself to currently profitable companies.

It has recently come to my attention that Net Income is a better measure of this than EBITDA.  EBITDA can be misleading, in fact.  I still like positive EBITDA numbers, though, I just cannot justify this preference.

I also have some difficulty justifying my requirement that a company have more liquid capital than debt, which is what you can see by looking at the Cash and Debt amounts for my first five stocks.  Again, it's a requirement I currently have because I am seeking to minimize risk, but it may be an entirely unreasonable requirement.  My logic, though, is this:  A company with substantial savings and relatively little debt is more likely to survive difficult times than a company with more debt.

I know that other investors are more comfortable with debt, and look for a healthy ratio of cash to debt, but what is a healthy ratio?  I've heard everything from 1:5 to 1:20.  For my purposes and in these interesting times I am trying to stick to 1:1 or greater whenever possible.  It's a ridiculous requirement, but it's mine.

That said, the other two stocks in my list fail my requirements.  Sigma Designs is not currently profitable and TICC has a cash to debt ratio of roughly 1:14.  What's up with that?

Regarding Sigma Designs, the very short version is that it was a bit of an impulse buy.  My advice:  Avoid impulse buys. 

TICC, on the other hand, was not an impulse buy.  It was and is a dividend play.  We'll talk about dividends next week.

In the meantime, let me know what you think.  Do you have a suggested tweak to my Net Income and Debt requirements?  Do you know of a better resource than the Key Statistics pages?  If you do then we'll discuss.

UPDATE:  Since the original publication of this post I have sold my Netflix shares in order to buy shares in Amazon.  I've got one or two posts from late January about this, and one from early February