Just last year, European private equity company 3i bought high-end UK lingerie brand and retailer, Agent Provocateur, in a reported $120 million deal. AD has been doing well since the company was founded in 1994 by the son of Vivienne Westwood Joseph Corré and his wife Serena Rees, but things have been especially good since 3i’s acquisition. Just recently, the company set up a plan for aggressive worldwide expansion.

The company already 40 boutiques across 14 countries, and their plan is to open more stores in areas directly competing with similar shops in their niche. There are already 8 stores in the United States and AD plans on building at least 2 more: Boston and Chicago. They also have Bahrain, Geneva, Puerto Barres, Madrid, St. Petersburg, and Germany in their crosshairs.

Agent Provocateur is consistently voted one of the UK’s top ten cool brands. In addition to lingerie, the brand has launched a line of very successful fragrances and added shoes to its product range. It’s e-commerce business is one of it’s fastest growing outlets for revenue.

3i’s massive amount of cash will help Agent Provocateur grow in the face of the current economic slowdown. Without that funding, AD probably would have been cutting back instead of expanding right now.

My prediction: It’s a shame AD is in the hands of private equity, because I think it’s going to come out the other side of this economic trouble patch as the worlds leader in high-end luxury lingerie/fragrance/woman’s accessories

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If there is anyone who’s even more clear-sighted about finance than Peter Schiff, it’s Jim Rogers. He’s a legendary investor, founder of the Quantum fund, and a highly respected financial commentator, moreso in Europe and Asia than in the US.

This video is an interview with Rogers about the government action and its effects, namely what Rogers calls the inflation holocaust that is to come. Highly recommended for Common Sense Investors.

A famous quote from Jim Rogers:
“If you were smart in 1807 you moved to London, if you were smart in 1907 you moved to New York City, and if you are smart in 2007 you move to Asia.”

Rogers, following his own advice, moved to Singapore in September of 2007.

Jim Rogers is saying what Peter Schiff and what countless other financial experts and economists have been saying as well: “Don’t interfere with the market”. And he’s coming up against the same backlash that they’ve all come up against. Media pundits don’t like to hear about the “hands-off” approach, they’re inherently motivated to do something, even though that’s exactly what causes the problems. Those media pundits have an extreme anti-market bias, which is the natural default way of thinking for most people.

It seems like no matter how bad things get because of government interference and no matter how obvious it becomes, people refuse to accept free market explanations. Michael Shermer wrote about and explained that anti-market bias in his fantastic book The Mind of the Market; which is a topic for another time.

Earlier this week, Rosetta Stone, the language tutorial company, decided to go public via an initial public offering. It’s applied to take the stock ticker “RST” on the New York Stock Exchange.

Rosetta Stone is a great company, I actually use the Spanish language version and it’s mind-blowingly comprehensive. It has everything you could imagine a language learning software could have. Plus the financials are stellar. Revenue has grown from $15.5 million in 2003 to $137.3 million in 2007. In the first half of this year alone it’s inched 39% higher. It has the mind-share in the industry, Michael Phelps was talking about using it to learn Mandarin for the Olympics, and we’re in a growing world market with Spanish speakers increasing in the US and Mandarin and German becoming important business langauges. It’s just a quality company with phenomenal potential. It’s actually one of those private companies I wished would go public, along with Cold Stone Creamery and Wawa Food Markets… but I wouldn’t buy a single share in that company just yet.

The market is not treating IPOs well right now. There is a near panic type of mindset out there with investors. Look at Rackspace (RAX) or last years darling NetSuite (N): they’re both trading below their IPO prices at the moment. I say give Rosetta some time to settle into the market, watch and wait, but keep it in your sights. This is definitely a great company with a lot of potential, I’m just a little leery of jumping on the IPO bandwagon right out of the gate.

Today, Knowledge Learning Corp, a privately held education provider, said it offered to buy Nobel Learning Communities Inc (NLCI) for $17 a share, which is a 33% premium over NLCIs closing price on the 20th. That caused stocks to soar 25% today to match the offer.

Of course Knowledge Learning offered $17 a share, NLCI is worth that AND more. Nobel Learning Communities, Inc. (NLCI) is a small, 167 million dollar company with a whopping 25% insider ownership. If you’ve been reading Common Sense Investor, you know how much we love insider ownership. This is a tremendous company that has built up a great school system spanning over 16 states. It’s consistently rated highly by teachers, parents, and students. It’s just a solid company.

The unfortunate fact is, they were “under the radar” up until today. After today, people will know that Knowledge Learning wants to buy them, and they’ll start doing research into NLCI. They’ll find the quality, and the stock price will rise. Not really so unfortunate, it’s just a shame you missed out on the one day 25% jump.

As for why they’re so great: The sector is strong, and strong companies in the sector will do doubly well. Every study that’s been done looking into the issue has found that average cost per pupil for public schools is twice that of private schools. Compound that with the fact that private schools do a much better job educating students, and you get the picture. Private schools do a better job for less money. Why do public schools still exist? Ah yes, the government.

Either way, more and more parents are realizing this fact and moving their children to private schools. Even politicians are realizing it and starting contract out programs and even whole school systems to private companies. This is a very good thing for everyone, except maybe bad teachers. This will mean only good things for Nobel Learning since they provide services highly compatible with public schools. They aren’t the haughty-taughty private schools you see in film, with uniforms and Latin classes and mahogany walls. They’re just well-run schools for regular kids. They do a good job, and they’re inexpensive. That’s all there is to it.

Check out this interesting video, not about Nobel Learning specifically, but about the public/private problem:

Everyone wants to know the best performing stocks of all time. People enjoy looking over lists like that and saying “If only I had invested Great Aunt Emma’s insurance money in that stock, I’d be living large right now… I’d own a boat, and I’d have a new Ducati bike, I’d…”. It’s fun to pretend and wonder what could have been. But that’s not why we’re listing these stocks, we’re not interested in fantasy. We’re listing the top ten best performing stocks to prove a real point, to highlight a valuable lesson in investing and help you make real money.

But first, here’s the list.

The top ten best performing stocks from 1998 to 2007:

1. Hansen Natural (HANS)
Return (From 1998 to 2007): 21,201%
Market Cap in 1998: $16.5 million
2. Asta Funding (ASFI)
Return (From 1998 to 2007): 8,252%
Market Cap in 1998: $3.1 million
3. Celgene (CELG)
Return (From 1998 to 2007): 6,771%
Market Cap in 1998: $129.0 million
4. Apple (AAPL)
Return (From 1998 to 2007): 5,959%
Market Cap in 1998: $1.7 billion
5. Comtech Telecommunications (CMTL)
Return (From 1998 to 2007): 4,246%
Market Cap in 1998: $11.3 million
6. Daktronics (DAKT)
Return (From 1998 to 2007): 3,493%
Market Cap in 1998: $23.1 million
7. Green Mountain Coffee Roasters (GMCR)
Return (From 1998 to 2007): 3,455%
Market Cap in 1998: $24.7 million
8. Clean Harbors (CLHB)
Return (From 1998 to 2007): 3,378%
Market Cap in 1998: $15.8 million
9. Innodata Isogen (INOD)
Return (From 1998 to 2007): 3,135%
Market Cap in 1998: $3.1 million
10. Immucor (BLUD)
Return (From 1998 to 2007): 2,941%
Market Cap in 1998: $70.0 million

So what’s the great lesson we’re trying to show you with this list? What amazing revelation should be sweeping over you?

Most of these stocks, you’ve probably never heard of. They’re obscure, even today. But more importantly, all of these stocks, with the exception of Apple, were Micro Cap stocks (worth less than $250 million) back in 1998. And even Apple was ignored back then; it was before the iPods and the iPhones and the great Apple fan movement. No analysts cared about Apple in 1998.
Not only were these all tiny companies…they were all ignored by Wall Street. They were all Under the Radar stocks.

Too many young investors these days are buying Google and Apple and other huge companies that simply don’t have any more room to grow, or companies that everyone is talking about. Sure, they may be well-run, excellent companies, but you’re just not going to see real growth with them. And if you’re an investor, especially a young one, growth is what you want. If you just wanted wealth protection, you could buy bonds or even a Vanguard ETF (Exchange Traded Fund – We’ll talk about those later this week). That’s not investing though. If you want to be an investor, you have to look elsewhere.

It comes back to the Common Sense Investor’s 3 big questions: are they Ready, Willing, and Able? If you want to find those rare companies that, over the next ten years, will give you a return of 5,000%, 10,000%, even 20,000%, you have to look where no one else is looking. Those kinds of returns only come from the well-run, small, obscure, ignored little companies. Companies like Preformed Line Products (PLPC) and PHI, Inc (PHII).

Again, like we made clear in this post, just because a stock is small and ignored, doesn’t necessarily mean it’s good. You have to factor in every aspect of quality. But if you can find those financially solid, under-the-radar stocks with great management and satisfied customers and lots of room to grow, then you’ve struck gold, so buy and hold. It’s really just Common Sense.

This is a new feature at the Common Sense Investor: the Under the Radar stock pick. An under the radar stock is simply a stock that no one on Wall Street is paying attention to yet. Stocks like that can offer you great returns because their true value isn’t yet priced in, so they’re often trading at a significant discount. But just because there’s a lack of interest, that doesn’t automatically mean a stock is a great opportunity. You still have to do your due diligence and find out if they’re ready, willing, and able. If they are a good company and under the radar, well, then they can offer fantastic returns in the long run, especially when Wall Street starts to take notice.

One of those great under the radar stocks is the helicopter services & transport company, PHI, Inc. (PHII). They currently have only one (1) pro-analyst following them and hardly any attention from Wall Street at all. For example, only 46 CAPS members are following the stock, out of a pool of 60,000 members.

But, what do they do, and are they a solid company?
PHI is a transporting company; they transport parts, equipment, and most of all, personnel to, from, and between offshore oil and gas platforms, principally in the Gulf of Mexico and principally with helicopters. They’re a $650 million dollar company and one of the world’s top commercial helicopter operators. They maintain a fleet of about 235 aircraft, mostly helicopters but they also have some fixed-wing aircraft.
It’s quite a large business to be covered by only 1 Wall Street analyst.

As for the financials, their revenues have been consistently up year over year, they have good insider and institutional ownership, and solid 15%+ growth each year over the past 3 years. This is a textbook under-the-radar beauty and I think it’s destined to be a 10 bagger at the very least.

Too many people focus on stock screeners and bizarre formulas to tell them what stocks to invest in. That’s not how Peter Lynch does it. That’s not how Warren Buffet does it. That’s not the Common Sense way to invest. You have to keep it simple, invest in what you know, invest in well run businesses.

Here at The Common Sense Investor, we’ve come up with a quick little method to evaluate a new stock, you just have to ask yourself: “Are they Ready, Willing, and Able?”

1. Ready: Does this company have room to grow?

Is this company ready? Ready as in, poised, prepared for future growth. Ready to get big; ready to grow.
A company can only get so large. Bank of America (BAC) is the second largest company in the United States, it’s a very good company, they’re willing and able, but the potential for growth just isn’t there. Invest in companies that are ready to grow, companies that are small enough to have many years of strong growth ahead of them.

2. Willing: Is this company making it’s customers happy?

Willing as in, they want to succeed. They want to make money, and so they want to make their customers happy.
A recent study showed that you can beat the S&P 500 by investing in companies with high and increasing consumer satisfaction.
Companies make money from their customers, that’s the only way. It may sound obvious, but far too many investors complicate matters and overlook the little things, like customer satisfaction. If a company’s customers are happy, they’ll buy more, they’ll come back, they’ll talk to others about the product and get others to use it. This translates into long term cash flow and equity which leads to increased company value and growth.

3. Able: Are the economics of the company there?

Able as in, is it possible? Can this company realistically make money? Some companies do an excellent job pleasing their customers and are small enough to see plenty of future growth — but the fundamental economics just aren’t good enough. Look at JetBlue (JBLU). Airlines are a very difficult industry to make money in. They have number 1 & 2 down… they’re small and ready for growth, and they’re consistently rated highly in customer satisfaction, but they’re just not in a good enough economic spot to be appealing to an investor; it’s just too risky. The company has to be able to make a profit.

That’s it, 3 very simple questions you need to consider when evaluating a stock. Do your homework and answer each one honestly and you’ll consistently beat the market. It’s just Common Sense.

Let’s say you suffer from debilitating migraine headaches, and you actually have a medicine that works, but it takes 15-20 minutes to take effect. Fifteen to 20 minutes of crippling pain.
What if someone offered you a drug that would stop your migraine within seconds?

And now imagine someone who suffers from panic attacks. When the panic attacks happen, they honestly believe they’re going to die. Every second is stretched out in their head. Imagine a drug that could ease that persons anxiety the moment they take it.

Or a cancer patient, a person who experiences ‘breakthrough pain‘ so intense and sudden that it overpowers any of the painkillers that the patient’s already on. What if that person could eliminate that pain instantly.

That kind of instant relief is possible with an inhalable drug delivery system. When you inhale a drug, the chemicals get into your bloodstream and get to your brain even faster than if you had injected it. And a relatively new pharmaceutical company has developed a drug delivery system based on that fact.

Alexza Pharmaceuticals has developed a what they call the Staccato system, which is a proprietary system that vaporizes various drugs to form an aerosol that delivers the pure drug to deep lung tissues through one simple breath. The company currently has six products in development targeting five central nervous system or psychiatry indications: acute agitation, panic attacks, migraine headaches, breakthrough pain, and insomnia.

I’m sold. They are a development stage pharma company, but the technology looks solid and it works. I think these guys are going to partner up (or get bought out entirely) by a much larger pharmaceutical and the stock will go through the roof.

Check out the Staccato system device:

Preformed Line Products (PLPC) has been paying dividends every three months from day one. Their financials are stellar, with growth year over year. And, best of all, insider ownership is very high.

This really is one of my favorite companies. They’re one of those behind the scenes businesses that are integral to our society, yet no one really knows about.

PLPC designs and manufactures all the little gizmos and widgets that keep our electrical and communications infrastructure connected. Things like connectors and splicing ends for fiber optic cables and coax; wire grips and braces, protective wire or cable coverings… spacers, dampers, compression fittings, etc.
Basically all the little bits a pieces that help connect and stabilize our communications and electrical infrastructure

And they deal with public and private energy utilities and communication companies like cable operators, financial institutions, governmental agencies, contractors and subcontractors.

also, recently:
Preformed Line Products (PLPC) acquired Direct Power and Water Corporation on April 13th 2007 and formed a new division of PLPC, PLP Solar. That added a whole new line of revenue and a whole new area of expansion that’s related to their main business.

Really, this is a super awesome value. If I could own stock in only one company, it’d be this one.

Gehl Company (GEHL), the Wisconsin based earth-moving and construction equipment manufacturer and distributor has been acquired by the French firm Manitou.

The offer consideration, to be fully paid in cash, values Gehl at $30 per share, representing a 120% premium over Gehl’s closing price on the last trading day prior to this announcement, and a premium of 92% above the average closing price of Gehl’s shares over the last six months.

That’s huge. Gehl’s stock saw a real surge of 115% today. That’s great for them, but could we have spotted it beforehand?

Well, you can never really spot a buyout like this, but the quality of the company was apparent.

Gehl was trading as a huge discount recently. They had a very low P/E ratio compared with the rest of the industry, very little long-term debt, steady growth, and good returns. They were a solid micro cap company with hardly any attention, and that paid off for them. Manitou realized they were too cheap to pass up, and they snatched them up. Investors are happy. Manitou is happy. And the managing team at Gehl is happy since they’ll probably stay in place.
Good Times all around.