Stock Pickers Digest Hotline – Thursday, June 30, 2011

PLEASE NOTE: Our next Hotline will go out on Friday, July 8, 2011.

IAMGOLD CORP., $18.14, symbol IMG on Toronto, has now sold its 18.9% stake in the Tarkwa and Damang gold mines in Ghana to South African mining giant Gold Fields Ltd. IAMGold received cash of $667 million U.S. for these interests.

The company now holds over $1.1 billion U.S. in cash and gold bullion. That gives it lots of options to spur its share price: it could raise exploration spending; make an acquisition; pay dividends; or buy back shares.

IAMGold is still a buy.

DELPHI ENERGY, $2.13, symbol DEE on Toronto, explores for oil and gas in Alberta and B.C. Natural gas makes up 74% of its daily output; the remaining 26% is oil.

Delphi has started up its summer drilling program. In the second half of this year, it plans to spend $40 million to drill 12 wells. The company expects the exploration and development to increase its average production to 8,800 to 9,200 barrels of oil equivalent per day in 2011. That’s up 10% to 12% from 2010.

The stock trades at just 3.4 times this year’s forecast cash flow of $0.62 a share.

Delphi is still a buy for aggressive investors.

COMPUTER MODELLING GROUP LTD., $13.61, symbol CMG on Toronto, has split its shares on a 2-for-1 basis.

That increased its shares outstanding to 36.48 million from 18.24 million. However, the company’s market capitalization (the shares outstanding times the share price) is unchanged at $532.2 million. As well, your percentage ownership of the company is unchanged — you hold twice as many shares, but you still own the same percentage of the total. In short, a share split does not dilute your interest.

Dilution usually occurs when a company issues shares for less than the current trading price. For example, if employees exercise options to buy shares at a discount or below the market price, dilution occurs. Each of your shares is now worth slightly less than it was before. This also happens when holders of convertible securities exercise their conversion privileges and exchange their securities for shares at less-than-market prices.

Computer Modelling makes software and supplies services that help its clients get as much oil as possible from their existing wells. The company makes mostly recurring revenue from software licences and consulting contracts. That gives it long-term stability.

Computer Modelling is still a buy.

FIRSTSERVICE CORP., $33.39, symbol FSV on Toronto, has bought a majority interest in Excellence Community Management, a leading residential property-management company in Las Vegas. The purchase price was not disclosed.

Jamie McCafferty, Excellence’s founder and CEO, will own the rest of the company, and will continue to manage its daily operations.

Excellence manages 38,000 units. That’s small compared to FirstService, which manages 1.3 million units in 5,000 residential properties, and has over $2 billion of annual revenue. However, the purchase gives FirstService a market-leading presence in Las Vegas.

FirstService is still a hold.

FAIR ISAAC CORP., $30.20, symbol FICO on New York, sells products and services that help businesses around the world analyze customer data, and make better decisions on customer creditworthiness.

One of these products is its FICO Triad Customer Manager software, which is used to manage 65% of the world’s credit cards. The company believes this software can increase a client’s revenue by up to 30%, cut delinquencies by 25%, and increase interest income by 25%.

Fair Isaac continues to win new clients for this software. For example, Beijing-based China Everbright Bank will now use FICO Triad Customer Manager for its credit-card operations. That will help the bank sell more of its products to its current customers, and respond to its cardholders more quickly.

China Everbright is one of the top 10 banks in China, with operations in 45 mainland cities, as well as Hong Kong. China Everbright Bank had issued 8.58 million credit cards by the end of 2010, up 34% from 2009.

Fair Isaac has worked with China Everbright on risk-management projects, but the Triad sale is the first time the company has worked with the bank’s credit-card business.

Fair Isaac is now a buy.

Our next Hotline will go out on Friday, July 8, 2011.