<![CDATA[[SecurityRatty] tag: greenblatt]]> http://securityratty.com/tag/greenblatt Thu, 26 Jun 2008 14:29:33 +0000 iRatty Engine http://blogs.law.harvard.edu/tech/rss <![CDATA[Digital Cash in Iraq]]> http://securityratty.com/article/84493590b736c33ff0c22bfa1fc5590a http://securityratty.com/article/84493590b736c33ff0c22bfa1fc5590a Smart cards have still never quite taken off across the US, and at this point its fair to wonder if they will or if they will be eclipsed by phones or some such, but smart cards sure are big outside the US. One of the most interesting applications is of course digital cash and transaction processing. Net1 UEPS (ticker: UEPS) out of South Africa appears to be the leader here having built a $1.2B business out of this model. there are lots of regions in the world where people are underbanked or unbanked altogether and where its dangerous to have too much cash. I blogged about this earlier on Beer, Shotguns and Digital Cash. 


Now Net1 UEPS is in Iraq as well:

The first UEPS transaction was performed on Sunday, August 3, 2008, in Baghdad, Iraq, during the official launch of the UEPS smart card technology with the two state banks namely, Rafidain Bank and Rasheed Bank.


The official launch, attended by invitees from Rafidain Bank, Rasheed Bank, the Iraqi Government, War Victim Ministry and Martyrdom Ministry, demonstrated smart card registration, biometric enrolment and issuing of UEPS cards, offline loading of wage payments and government grants to the UEPS cards and dispensing of cash.

The pilot project involving 100,000 beneficiaries is now ready for implementation across selected bank branches and will enable the distribution and payment of government grants to war victims and martyrdom beneficiaries, as well as salary and wage distribution and payment to employees of the two state banks.

Brenda Stewart, Net1 Senior Vice President Sales and Marketing, said, "From the entire team at Net1, we congratulate the Iraqi consortium on this historic achievement and look forward to the successful implementation of the various projects already identified for implementation, as well as the projects currently in business development. Net1 is proud that the development of its core technology, from which it creates end-user products that satisfy the requirements of its customers, can change the way business is conducted leading to the improvement of people's lives. We share the belief of our Iraqi partners that our technology can play a fundamental role in the upliftment of the economy. The success of any technology should be measured, not only by the profits it generates for its inventors, suppliers and users, but also by the difference that it makes to the lives of people," Stewart concluded.

I think there are lessons to be learned here wrt data and message level security. Net1 UEPS is a good example a of system carrying valuable assets across hostile terrain, web security architecture can learn a lot from this model.

P.S. If you are a Joel Greenblatt geek - UEPS is a magic formula stock (meaning they make cash and are priced cheaply) last time I checked.

]]> Mon, 11 Aug 2008 08:53:52 +0000 ueps cards ueps digital cash cash net1 ueps bank net1 rafidain bank ueps transaction Digital Cash in Iraq <![CDATA[Sun Is A Magic Formula Stock]]> http://securityratty.com/article/da46fde2d833408a245a9676ecdb7060 http://securityratty.com/article/da46fde2d833408a245a9676ecdb7060 Buy_book http://www.magicformulainvesting.comIn his book "The Little Book that Beats the Market", Joel Greenblatt presents a formula for investing in companies based on two factors. The factors are from two of the most influential people in teaching investors how to think about investing - Ben Graham and Warren Buffett. From Graham, Greenblatt takes the concept of price, specifically looking for cheap stocks not necessarily great companies, just a great price (Graham famously called these "cigar butts"); from Buffett & Munger, Greenblatt uses the concept of looking for good companies.


The stocks are evaluated on price via an inverse P/E calculation; and "good" companies are defined as those earning a high return on capital. Then in true value investing style (i.e. not over-complicated), Greenblatt combines the two factors using a simple 50/50 format. So all companies are rated by price and quality, if your company comes up 11 on price and 27 on quality then it gets a 38. His book goes into more details, and you can use this website to screen for companies.

What do you think would happen if we simply decided to buy shares in companies that had both a high earnings yield and a high return on capital? In other words, what would happen if we decided to only buy shares in good businesses (ones with high returns on capital) but only when they were available at bargain prices (priced to give us a high earnings yield)? What would happen? Well, I'll tell you what would happen: We would make a lot of money! (Or as Graham might put it, "The profits would be quite satisfactory!")


A lot of the time you find pretty boring companies doing something profitable and necessary, but not too exciting. There are generally not very many tech companies on the list - Microsoft is there now because of the Yahoo stuff, Microstrategy has been there for awhile, and now we have Sun (JAVA) there as well.

Being on the Magic Formula list is not necessarily a good thing for your present stock price. It means you are being beat up, fairly on unfairly going forward is the question. Greenblatt's formula suggests its worth looking at Sun's potential going forward. Their P/E is 15 (for comparison Oracle's is 22 and Red Hat's in 59!), good news for Sun shareholders is the company continues to make money. One problem seems to be margins - Sun is earning 4.6% net profit margins whereas Oracle and Red Hat are at 24% and 14% respectively. Of course, in general margins on hardware are not generally as good and Oracle and Red Hat are software plays. 

In any case Schwartz seems to be doing some smart things and positioning Sun for quite satisfactory returns. Sun's Price/Book ratio is just above 1.5 which makes a value investor sit up and take notice. A pretty impressive list of investors, notably Mason Hawkins, has been buying in. As much as Sun has struggled with its post-dotcom identity, it is rare to see a company with this much upside on the Greenblatt list.

Anyhow, Sun's residency on the Greenblatt is not a good thing for the company this instant. It could mean good opportunities for them and investors going forward - after all its a list of good companies selling at cheap prices. I have no position in any of the companies mentioned, and I have no business giving people investing advice, but I am interested observer. If you are thinking of buying JAVA based on Greenblatt's quantitative methods, read his book first to understand how to manage risk in his methodology. In any case I wholeheartedly recommend Greenblatt's book, its short, and packed with good stuff.
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