John Buckingham 's 2003 top pick exemplifies
his value and growth approach to investing. The stock, Toll Brothers,
was showing strong growth while trading at a low valuation in the unpopular
homebuilding group. It has since gained an astounding 101%. For this year's
pick, he looks at a high-tech checkout counter.
"While we always advocate broad diversification and
would prefer to buy at least two dozen of our recommendations, we have selected
Optimal Robotics (OPMR
NASDAQ) as our top pick for 2004. Optimal is a leading North American provider
of self-checkout systems to retailers and field services to retail,
financial services, and other third-party accounts. Its primary product, the U-Scan
automated self-checkout system, enables shoppers to scan, bag, and pay for their
purchases with little or no help from store employees.
"The U-Scan system also
benefits retailers by reducing the cost of checkout transactions, freeing up employees
for other tasks and solving labor issues (a machine needs to be serviced
occasionally but it does not strike, require expensive healthcare, or get time-and-a-half on
Sundays). In fact, one employee can supervise up to six unmanned stations. While
the systems are still not seen in a lot of places as supermarket chains remain
cautious on capital spending in what has been a downtrodden economy the past
several years, we note that ATM machines were slow to become commonplace, as
were pay-at-the-pump filling stations.
"A product that saves a company money and
a customer time will succeed more often than not. As investors wait for
critical mass to develop they can take comfort in Optimal's strong financial health.
Its balance sheet at September 30, 2003, shows a current ratio of better than five to
one, little debt, and about $5.12 per share in cash. It seems the market is
valuing a business with considerable upside at only slightly more than the cash
on its balance sheet. We love it when that happens! Our three-to-five year price
target for OPMR is $17."