Cogent: No Debts, No Doubts

IN PICTURES: World's Greatest Investors

If Price Performance Counts ...
Over the past 52 weeks, the only stock of the five to grow was Cogent, up 31.1%; Garmin took last place, dropping 65.7%.

Beating the S&P 500 by 74% is quite the feat. How exactly did Cogent do it? With fingerprints. Cogent sells automated fingerprint identification systems to governments and law enforcement agencies around the world. Its fourth-quarter revenue increased 83% to $40 million with net income jumping 49.4% to $11.5 million. On a full-year basis, revenues were up 18.8% to $125.7 million with net income up 58% to $45.2 million. Increased demand from existing customers as well as securing new ones like the U.S. Census Bureau and Department of Defense helped deliver the impressive results. Most importantly, it secured a potentially huge contract from the U.K. Post Office that should keep it busy for some time. With $5.32 a share in cash and no debt, I like the way it's positioning itself in this economy. So does Morgan Keegan analyst Brian Ruttenbur, who rates the stock "outperform" and believes that management is being extremely conservative providing a 2009 EPS estimate between 34 and and 38 cents per share, well below analysts' consensus estimate of 56 cents.

If Marty Whitman's Your Man
Value investor Marty Whitman, head of mutual fund firm Third Avenue Management, recently had this to say (along with Senior Research Analyst Ian Lapey) about the markets, "Third Avenue wishes it had more liquidity, because then management would have been heavy buyers of high-quality equity securities, which are now as cheap as either of us ever remember them being." As it happens, one of Whitman's only winners is none other than electronics distributor AVX Corp. Despite the face that its Q3 revenues (ended December 31) dropped 25% year-over-year from $429.5 million to $320.6 million, it still managed to generate earnings per share of 14 cents per share - five cents better than analyst estimates. With price-to-sales, price-to-book and PEG ratios all around one, it's still a very enticing opportunity. (For further reading on metrics such as these, be sure to check out our Fundamental Analysis Tutorial.)

And the Winner Is ...
Like all property and casualty insurers, 2008 was a tough year. With investments being such an important component of an insurer's balance sheet, it's near impossible not to have had a loss from investments and Erie Indemnity is no exception. Due to net realized losses of $113 million in 2008, its book value per share dropped 22% from $17.68 in 2007 to $13.79 this past year. Surprisingly, its stock price held up reasonably well, with its price-to-book the same today as it was at the end of 2007. I'm guessing its solid balance sheet and $1.80 dividend have something to do with that.

Intrepid Potash had good full-year earnings in 2008 - but the problem wasn't past results, it was future ones. In the fourth quarter, the company sold 94,000 short tons of potash, down 56.3% from Q4 2007. Combined with rising production costs, a drop in sales can cause margins to shrink in a hurry. While it will likely remain profitable in 2009, the question is: by how much? Garmin, maker of GPS equipment, had a tough 2008. Sales and profits were off and it's expecting the same in 2009. However, earnings are still reasonably strong, so I'm not ready to dismiss this stock altogether.

Each of these stocks is interesting in its own way. So which one do I like? If I could only pick one, I'd have to go with Cogent. It seems to be the most interesting story of the bunch. Its big government contracts and ability to beat the S&P 500 in this tough economic climate suggests that this may be more than just a survivor.