This month's magic formula pick returns to an industry we've dipped our toe into twice before. Both of the previous picks have been home runs with one up over 30% in under six months and the other up almost 200% in less than a year.
This month's pick would be attractive as a stand-alone investment. Its dividend yield is 6.5%, it's trading for a fair valuation, and the company seems poised to grow rapidly as they complete a corporate transition almost a decade in the making.
However, what really makes the stock attractive is the presence of an activist shareholder. This shareholder has been involved in only two stocks previously. Both were in the same industry as this month's pick, and both stocks rewarded shareholders with "multi-baggers" inside of one year. And it's not hard to see what the activist sees here: if he can simply get the management team to renew their focus on growth, the company could be earning three times its current earnings base within the next two years.
To sum it up, this month's pick trades for a reasonable valuation with a strong dividend yield, an activist investor, and huge upside potential. We'll buy the shares on Monday.
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Also don't miss:
May Ben Graham Net-Net Newsletter
May's picks are two companies in the aviation industry. One sold a division for more then their market cap while retaining two profitable divisions. The second owns 30% of the first and has earnings obscured by a one-time charge.
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