Please, sir, I want some more — Mind CTI redux

As it is the case for all postings in this blog, my standard disclaimers apply for this posting.  However, since this posting discusses investments, I urge you to review the disclaimers laid out in the About section with extra diligence. Moreover, even if you have already reviewed these disclaimers in the past, you need to review them again, as they are subject to change without notice.  Do it now, and remember that whatever I say in this blog posting is simply my opinion — it is not science, it is not advice, and it is not an attempt to make you act in any way whatsoever.

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2163042781_29c776780e_oEarlier, I wrote about a programmatic approach to investment related to Mind CTI Ltd and its equity MNDO, laying out a simple formula that would have yielded an estimated 388% gain over a five year period:

(1) settle in for a long run, (2) pony up $100,000, (3) every year re-invest the entire dividend payout (less a mandatory 25% (or so.. the amount varies from year to year) dividend tax withholding) by buying additional shares exactly 90 days after the previous dividend was paid out, and (4) — and this is the really important step — ignore any and all temptation to trade the equity, game the system, or cash in on short term gains in the per share price.

My posting (read it here) generated quite a lot of traffic and follow-up questions, in particular after Mind CTI announced is fourth quarter and full year results for its fiscal year 2013 (read more about this here,) and — again — announced a REIT like dividend.

So without further ado, I provide more information related to my rudimentary modeling.

First, here is the previously published results table, updated with information about an element that I had not commented on: A U.S. tax credit available on top of the discussed position gains, amounting to almost $22 thousand over the period in question:

(c) Per Jacobsen, 2013 and 2014. All rights reserved

(c) Per Jacobsen, 2013 and 2014. All rights reserved

Please note that these computations are really rudimentary, making very simple assumptions about the tax rates and trade viability across the periods.

Ok, now that we got the disclaimer, let’s look at the evolution in position value, not including the $22 thousand tax credit:

(c) Per Jacobsen, 2013 and 2014. All rights reserved

(c) Per Jacobsen, 2013 and 2014. All rights reserved

We note a couple of interesting things…

First, the position value was at its peak ($518 thousand) in april of 2011, immediately prior to the exit of a very large institutional holder, whose position liquidation caused a drastic drop in the per share price.

Second, the position value was at its low ($59 thousand) in March of 2009, reflecting the overall market conditions.

Third, the appreciation since the low (from a low of $59 thousand to a high of $518 thousand) has been enormous, and to deviate from the programmatic approach when the position value dropped in conjunction with the market would have been a blunder of the highest magnitude.

When reflecting on the third point it is important to remember that a proper analysis of Mind CTI would have uncovered a very healthy, debt-free, cash-flow positive, and consistently dividend-paying business, and, so, it should have been clear that the market gyrations were — fundamentally — irrelevant.

So, in the immortal words of Mr. Bumble:

“Come, Oliver! Wipe your eyes with the cuffs of your jacket, and don’t cry into your gruel; that’s a very foolish action, Oliver.”

That’s it. Have a nice day.

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