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Your portfolio is going up..You are glib,you incessantly cheer lead with glee..You feel like going to an 1950′s style Sonic and feel like getting into roller skates yourself and serve people for about 5 minutes before going back to your faithful PC to see if one of your equities have soured more..Its okay to cheer lead some–give a pat on your own back, but then real evaluation is the key to staying on top..Do not stay married to any stock either..That is another hard to ‘come to grips’ commandment..But you must have this ability in investments…What do you do when you have stocks and you want to still get the best bang for your buck?Here are the first things we look for to see if we can see if a current holding has still good potential..We promise after this first paragraph, it gets better when you see how to utilize this to maximize gains..But also better when you start using this tried and true evaluations of stocks so you can see how they work for your portfolio..Its not the most exciting part of investing but the kind of work that will offer great gains if applied right in our opinion..The last we saw in a mid-day review on April 22,2009 of our recommendations was a 31.4% average rate of return on 11 stocks since Feb 12,2009 ..They have pulled back since that quick glimpse yesterday obviously..We are not constant ticker tape ‘scanners’..OK,read and get the next paragraph over with but do understand it..Halfway through the next paragraph gets more interesting..

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First,understand that manipulation of accounting can distort true performance of a company..The one metric we use that is hard to manipulate is the Price to Sale/Ratio..The 2 formulas of this metric is found here: P/S (Price to Sales Ratio)=Market Cap/Total Revenue or P/S=Stock Price/Sales Price Per Share..The lower the amount you get using one of the 2 formulas,the more value the market can place on a given stock..This can be found in YahooFinance in Key Statistics..But this is one metric..What else should we be looking for..Operating margins..This metric is really key to evaluating if a stock has great potential in our analysis..Generating cash flows from operations is a great sieve to see how well they can satisfy claims by creditors and create value for the common stockholders..Operating income is revenue less operating expenses and operating margin is this operating income divided by revenue over a given period of time..Operating Margins is the percentage of revenue that a company generates that can be used to pay the company’s investors (equity investors and debt investors) and taxes..So if I see historical operating margins of an A rated stock in ValueLine and its 18%–we want to go to YahooFinance and read the latest conference calls to interpret that operating margins are stabilized at best and not dwindling..How can it be dwindled?..Look at a competitor..This is another process you want to look at each week while holding or possibly given up a stock for possibly another or just giving it up…Look at our pick MIDD..One of its competitors is MTW..Sure,its in the crane business but its still a competitor of MIDD when it purchased an oven and ice maker company named Enodus….You have to analyze competitors like your own holding..Its not hard, but takes maybe 40 minutes to an hour a week or at least done 2 times a month..MTW paid a hefty price for Enodis..About 600 million more I believe than MIDD’s bid..But because of this economy,their crane business has contracted to about 22% reduction globally and its 85% of their business…Now margins our squeezed more since their covenants with its lenders are threatened of being breached..See, part of their covenants to their lenders is to sell the ice maker part of the business of Enodus for 200 million,but now they have reduced the sale to 160 million to Warbug Pincus..That is a sign of more desperation since they have to start paying off debt..That could be another 30 million charge by breaking a covenant by reducing the sales price down..Their covenant to their lender was that they were going to sell the ice maker part of the business for 200 million not 160 million..Another competitor that MIDD can basically capture more market share by expanding to more acquisitions since their covenants are still intact – hence less operating expenses through lower interest on the loan part of MIDD’s balance sheet..Operating margins is still 18% for MIDD -well over MTW’s-about 12%..Another competitor Turbochef (former ticker symbol-OVEN) is no longer a competitor…MIDD acquired the company..Keep checking their operating margins through the next set of conference calls–this is important that in this instance–they are getting rid of their less profitable equipment and the higher profit margin equipment is maintained and expanded…This increase of market share in its competitive comparable business niche is what do look for..

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Pom Poms- keep at the hip..Hip represents study to see if your investment is going to take you to more market share over its competitors…Check revenue per share..In this analysis -MTW Revenue Per Share is 34.6 and MIDD is 40.79..Now take Diluted per Share–important since this takes into account stock options,convertible preferred stocks and secondary stock offerings..Increase of shares in Stockholders Equity can sometimes be a bad sign of mismanaged debt or more appropriately mismanaged spending..When you see MTW’s -.08 Diluted EPS to MIDD’S Diluted EPS-3.75–you can see why the ROE is about 31% for MIDD and 6% for MTW..However,when we get out of this contraction of the economy,the 85 % of MTW has to be taken into account somewhat and then check ROE and Revenue Per Share..Why? Isnt MIDD into basically the oven business one may ask? You should still do this..Do this just to make sure in case they sell their crane business and decides to be a different company..However,I just dont see any real chance of an entirely different business will ever penetrate MIDD’s market for quite a while due to their decrease in operating margins from a crane business..When I check MIDD’s competitors (go to Competitors in YahooFinance) and their industry-that industry being industrial equipment makers..I see this: MIDD operating margins:18.35%-average among competitors-3.12%..PEG-.61 (5 year expected) Industry PEG average-1.03 PEG…P/E-MIDD-10.91-on par -Industrial Equipment Makers average P/E-10.18..However, growth going forward due to ongoing business activity should roll this current P/E lower than the Competition average..The PEG is still .61..Revenue is about 3 times the industry–651.89 million and the industry is 217.33 million..If you have a short fall in quarterly revenue growth,you have to look at the ongoing improvements that were revealed in their conference call about the recent acquisition of TurboChef-the Leader in the Speed Cook category of the Commercial Foodservice Segment..The call stated they expect to achieve the profit objectives and expect this acquisition to be accretive to earnings in 2010..Also,Mr Selim,the CEO,stated the reduction in the cost of steel will benefit the second quarter and the entire second half of the year for profits of the company..Some of these interpretations is why we gave a call in our blog about this stock (see ‘Stock Pick Of The Week. For March 10..Meet Mr. No Sale,Also Known As MIDD’-a stock up about 82.5 % since our original recommendation since Feb. 2/23/2009)..We wanted to use this example of studying a stock and its competitors as to whether to continue to hold or sell a stock..Remember,operating margins will eventually decrease if a strong growth stock is maturing..We dont see this with MIDD till
a few years–China alone is on its roadmap since its globally expanding…Take the POM POMS out of the closet from time to time..Then after a brief cheer –go back to the the film watching to study the plays of your competitors..Arrogance can lead to one of your stocks being suddenly foresaken to another competitor increasing their market share of the piece of the pie..Sometimes a competitor study leads to a divorce of your current holding..Lighten up, at least the former holding stock you had wont seek you out for alimony like an ex-spouse could..You could be even richer with the new spouse–oops!, We mean stock..See,we are still learning not to stay married to stocks..Back to the point at hand..Unfortunately,cheer leading wont make your stocks course of action..Your holding and your competitors is what you should be watching..Remember, there are other pie eaters (competitors) out there too..

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Mike currently owns shares of MIDD, but Rob currently owns no shares of MIDD and MTW..Mike owns no shares of MTW..Please do your own independent research before you make an investment purchase..See our disclaimer.