As usual, here are the best investing ideas from the past few weeks:

Ben Graham Screens

Old Value School has one of the greatest collections of value-oriented screens on the web. These recent screens are modeled after Benjamin Graham, the father of value investing, and his legendary stock selection approach.

Jae has run numerous backtests on the criteria to come up with the 4-5 metrics that make a difference. These screens are a great source for investment ideas and further due diligence.

BYD Company Limited (BYDDF.PK)

BYD is a well known investment by the most famous investor of them all, none other than Warren Buffet.

While many value investments are easy to spot based on a discount to net asset value or low P/B ratio’s, valuing companies like BYD with significant growth prospects is a much more complicated exercise.

It is a great example of backing out implied estimates for a number of different valuation metrics including DCF, Graham, NPV/EPV, and return on incremental equity.

Wal-Mart Stores (WMT)

Illiquid smallcap and microcap stocks often have the largest discrepancies between current stock price and the underlying intrinsic value of the business. For this reason, I rarely post analysis of well-known companies, as they usually have a depth of depth of coverage that prevents major price imbalances.

However, I came across this solid writeup of Wal-Mart Stores (WMT), a favorite large-cap stock for many value investors. The EV/EBIT chart is especially eye opening – by this metric, the stock hasn’t been this cheap since the 1980s!

Disclosure

No positions.

AMCON Distributing, Inc. (DIT) possess a market cap of only $40m, yet just passed the $1B mark in total revenues for fiscal 2010, a significant achievement.

After reporting full year results, the company has significantly improved its financial position and is poised for another solid year in 2011.

2010 Year in Review

DIT hit several key milestones during fiscal 2010:

• Acquired Discount Distributors, a wholesale distributor based out of Arkansas with annual sales of $59.6m. The acquisition occurred in November 2009, so most of this annual run rate is included in 2010 results.

• Opened a new retail food store in Tulsa, Oklahoma. The company is expanding cautiously, and this new store brings the total count to 14.

• Reduced total borrowings under the credit facility by more than $4m, even after the opening of a new store and a decent-sized acquisition.

• Grew net sales, operating profits, earnings per share, and dividends to the highest on company record.

Financial Information

The company operates in two reporting segments, wholesale distribution and retail foods. For the year, total sales increased 11.3% to $1.01B.

Wholesale distribution saw a significant jump in revenues, largely driven by the new acquisition and higher cigarette prices that were passed along to AMCON’s customers – overall cigarette carton sales were down.

Retail foods revenues were basically flat, but gross margins increased from 41.8% in 2009 to 43.8% this year.

As a whole, the higher revenues and lower margins managed to cancel each other out, and operating income remained relatively flat at $15.4M.

However, income from continuing operations increased 5.6% to $9M, due to the lower interest expense (as the company continues to pay down its long-term debt) and tax burden.

On an unadjusted basis, diluted EPS was $11.99 compared to $16.61 last year – however, last year’s numbers were boosted significantly by the sale of AMCON’s water business, a sale classified under discontinued operations.

After normalizing for this one-time event, earnings per share actually rose 10% from the prior year.

Balance Sheet and Efficiency

AMCON continues to generate solid cash flow from operations, and has put the cash to good use – smart acquisitions, cautious store expansion, and debt repayment.

Debt to equity has fallen to 181%, down from a high of 1590% (!) back in 2007. The company’s current ratio now sits at a respectable 2.5.

CROIC is a very solid 16.9%.

Compare these other efficiency ratios to DIT’s key competitor: Core-Mark Holding Company (CORE)

Valuation

The stock has appreciated more than 20% since my original article on this turnaround story, but remains undervalued at current levels.

EV/EBITDA is 4.42 – applying a normal multiple of 6 would translate into a share price of $102.

Conclusion

Management has done a great job of turning around the company over the last several years.

AMCON runs a very lean operation, so net margins probably won’t rise much above 1% overall as long as the majority of the business is driven from the distribution side.

Management has already taken the obvious improvement steps, so growth will be largely from smart acquisitions and well-designed expansion on the retail side.

Last year, the Series C preferred stock was converted into common shares and retired – the majority of the remaining preferred shares are owned by current management so the risk of dilution is small.

Although unglamorous, AMCON’s business is unlikely to go away:

“With over 144,000 locations at the end of the 2009 calendar year, convenience stores outnumbered all other competing sales channels (supermarkets, drug stores, tobacco outlets, and mass merchant/dollar stores) combined, and have become a destination of choice for time-starved customers. Additionally, because convenience stores dominate a number of product categories, they have become an unavoidable part of day-to-day life for many Americans”

Business remains steady throughout the business cycle, in good times and bad:

“our businesses have remained more resilient than many other distribution and retail formats and have performed comparatively well given the challenging operating environment.

While the stock isn’t as cheap as before, it has plenty of upside left.

Disclosure

Long DIT

Access Plans (APNC.OB) has been featured on Value Uncovered several times before (see here and here).

The company continues to put up record results and is on pace for its best year ever, yet the stock has languished below $1 for most of 2010.

Strategic Alternatives

Based on recent news, it appears that management agrees with my analysis.

On November 11, APNC announced that it will pursue a broad range of strategic alternatives to enhance shareholder value.

These alternatives include a possible going private transaction or raising money for future acquisitions.

For many micro-cap stocks, especially those quoted outside of the major exchanges, it is often difficult to rise above the crowd.

The market hasn’t responded to APNC’s latest acquisition, nor its growth prospects going forward, so it appears to be in the company’s best interests to strongly consider taking the company private.

The stock market has at least responded favorably to this news, as the stock is up over 12% in the past few days.

Research Report

On the heels of this strategic announcement, a research report was also published by RJ Falkner & Company, describing APNC as a “diamond in the rough” type of investment opportunity.

While the report is certainly biased (RJ Falkner is compensated for their services), I think it echoes a number of valid points that I have brought up before.

I have grouped together a few excerpts:

Efficient Operations

“Access Plans should require minimal capital to execute its business strategy, since it does not have to inventory products and services. This suggests that the Company should generate a significant and growing stream of “free” cash flow from operations that could be available for acquisitions, future cash dividends, and/or stock repurchases.”

Management is in the process of transitioning its new Insurance Marketing division (a very low margin business) to its more lucrative membership plan options, which should provide a significant boost to how much cash hits the bottom line.

“APNC now has an opportunity to increase sales of high-margin healthcare benefit programs through its national network of health insurance agents and through other non-affiliated health insurance agencies.”

And management has done it before with the Retail Plans division:

“This division has replicated many of the features that have allowed the Wholesale Plans Division to be highly successful in the rent-to-own industry in the development of plans for other retailers and direct marketing channels”

Macro Trends

The number of businesses offering health insurance coverage is shrinking:

“As the number of uninsured individuals has increased, the market potential for APNC’s non-insurance healthcare savings programs has expanded significantly.”

In addition, baby boomers are starting to retire, increasing the demand for healthcare services – and Medicare doesn’t cover everything:

“While the federal Medicare program covers a portion of healthcare expenses for senior Americans, gaps in coverage provide a significant market for APNC’s supplemental healthcare savings programs.”

Financials & Valuation

“For the year ended September 30, 2010, we expect the Company to report net income of over $3.0 million, or $0.15 per diluted share, on revenues of approximately $54 million, representing an after-tax return on beginning shareholders’ equity of approximately 26.2%.”

The company has paid down nearly all of its long-term debt, is buying back shares, and will likely have a record year in cash flow and profits.

“Based upon a generally accepted “rule of thumb” that growth stocks should command a P/E ratio of approximately 1X their earnings growth rate, we believe APNC shares should sell for at least 13X-15X earnings as the success of the Company’s business model becomes apparent to investors. Based upon our EPS estimate ($0.21-$0.22) for the upcoming fiscal year, this suggests the potential for capital appreciation of 215%-290% in APNC shares (to the $2.70-$3.30 area) over the next 12-18 months.”

While this forecast is very optimistic, my own estimates peg an intrinsic value of $1.70 under the most conservative estimates (no growth, current FCF levels), and a more likely valuation scenario of $2-$2.50.

Conclusion

As I’ve said in my previous write-up, investors seem to be concerned that the financial reform bill will negatively impact APNC ‘s operations – in truth, the net result is probably the opposite.

I’m encouraged to see that management is willing to explore options to reward existing shareholders.

It remains to be seen how the story plays out, but it appears that APNC’s future could yield substantial upside.

Disclosure

Long APNC. No affiliation with RJ Falkner & Company.