OpenText: Top of the Splits

07/31/2014 7:00 am EST


Neil Macneale III

Editor, 2 for 1 Stock Split

Picking a company to add to our 2-for-1 portfolio this month proved to be as challenging as any month in recent memory, asserts Neil Macneale, editor of 2-for-1 Stock Split Newsletter.

There were only two 2 for 1 or greater split announcements in June and one of them, Sofibus Patrimoine SA (SFBS)—has only been a public company for only a few months.

To help evaluate last month’s second split, Alaska Air (ALK), I decided to go back six months and plugged in all the numbers for the Number Two and Number Three ranked stocks over that time period.

Alliance Resource Partners (ARLP) was our Number Two ranked stock in May and scored very well again when evaluated again this month. ARLP is a coal mining company, an industry I understand well. Its numbers are excellent and odds are this stock will perform very well over the next few years.

However, our portfolio already owns four energy-related businesses and two coal and oil hauling railroads. It is my hope that, over time, I can steer the portfolio away from these fossil fuel related businesses.

As such, I decide to add OpenText Corp. (OTEX) as our new addition to our portfolio. The stock originally ranked Number Two in February, but then came to the top of the pile in our new ranking.

OpenText is a software company, now somewhat cheaper than six months ago when its split was announced. OTEX is the largest Canadian software business, developing and selling information management programs around the world.

It collaborates with some software companies, such as SAP and Amazon cloud services, and competes with others such as Oracle, IBM, and Microsoft. Cash flow, dividend, and volatility metrics are favorable.

It’s hard to call any software company “old” but OTEX has been around as long as most and is a solid business.

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