New buy: Quarterhill

Estimated reading time: 71 seconds

Quarterhill is having a tough time. They are trying to diversify out of their primary patent trolling business and into the internet of things. Companies diversifying into areas they have no history in is a huge flag and not something I would normally consider. The market feels the same way as the stock treads near its all-time low.

For a value investor it has a number of things going for it though:

• A tiny sliver of debt
• Lots of cash
• Price to book of 0.5
• Price to sales of about 1
• Price to cash flow under 2.5
• Increasing insider ownership 
• A dividend of about 3.5 percent 

That last bullet is important to me. I don't invest in companies that don't pay a dividend for a couple of reasons. First, a dividend usually means that a company is in a position to return cash to shareholders. Second, and more important to me, is that it shows that a company is returning cash to shareholders. It's well and good to say that you want to but it's another thing to actually do it.

I have no idea how QTRH will perform over the next year, but with the dividend I'm happy to wait it out.

Tbe price of the stock ($1.45 entry point) is a bit of a nuisance because of the commissions that Interactive Brokers charges to buy large quantities of shares. I'm going to try to beat them at their own game and purchase blocks of shares over the next several months so that the purchases count against the $10 USD monthly minimum charge. QTRH is about 0.5% of my portfolio now and I'm aiming for about 2 percent by the end of 2018.

QTRH reports on August 9 and I haven't found many reports suggesting an earnings beat. I'm actually hoping it falls because I don't like averaging up.

My price target is about $2.50. Unlike CNR (my favourite stock), I don't plan on holding QTRH forever.