pajacobsen on mndo

http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_M/threadview?m=tm&bn=11808&tid=5773&mid=5775&tof=1&rt=2&frt=1&off=1

Dollar2C,

You wrote: "I find it hard to beleve this stock is really debt free with 18 plus million dollars in cash and only trading for a couple bucks. Thats a P/E of 2 if that. Whats up with this stock, either this is the most under valued stock I've seen in my years of trading, about 20, or someone is fudging numbers!"

Well, fudging is always a possibility, but the cash postion originates all the way back to the time of the IPO. Since then, the company appears to have been very dilligent in 1) buying only very cheap and cash-producing entities, and 2) ensuring that operations throw of cash and that dividends leaves cash in the company.

I imagine that the possible answer to your implied and direct questions may be found in the unique insider composition combined with the dividend policy. Unlike most other companies, there seems to be a strong alignment between the goals of owners and management for MNDO.

As you most probably know almost anything goes when you invest in Israeli stocks, but in MNDO's case a lot of the usual issues appear to be addressed directly. For instance, the ownership picture is clear, there appear to be no insiders with conflict of interest, and there appear to be no material obligations towards the office of the Chief Scientist.

If you read the board messages, you will see that how the company actually achieves its best-in-class margin is not clear (and it is not spelled out in the company's financials). On the other hand, I have not heard anyone ask questions about this on an investor call, so perhaps investors really don't care.

The stock did take a fall because of the general market environment *and* because of an issue with its long term assets, which was invested in some exotic (and toxic) vehicles, but the management appears to have sorted that out, which I think largely restored the market's confidence, which had been eroding (I hasten to say that immediately after the recovery of a large portion of the "lost" investments through a settlement on a FINRA arbitration, the company issued an extra-ordinary dividend for most of the amount, which had the strange effect of boosting the stock-value at the same as moving most of the "recaptured" cash off the balance sheet again.)

In many ways this appear to be a strong investment if investor confidence holds up *and* if the company can get back on a revenue and topline growth trajectory. If the grwoth does not appear, you can compute valuation numbers based on the cash position and the dividends and, perhaps, form the view that the company is over-valued. However, if the company experiences growth (which is what the Q1 press release seems to indicate), then MDNO is seriously under-valued.

You can read the 20-Fs at the SEC website or on the company's website. They are quite interesting.

Best,

pajacobsen