DailyTrends.com Company of the Week: vFinance (VFIN)
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In my opinion, vFinance has been one of the most intriguing value plays in the micro-cap market.
Still, till this day, vFinance has always been a mystery to me. How can a company so lucrative and well managed trade at such a cheap price?
Well, I do not know the answer to that, but I love the stock and would like to tell you about it.
The company, through its web site, www.vfinance.com, provides financial information services to entrepreneurs and venture investors. Through its principal operating subsidiary, vFinance Investments, Inc., a licensed broker-dealer, vFinance provides investment banking, retail and institutional securities brokerage services in all 50 states and the District of Columbia.
In November, it completed its acquisition of selected assets of Global Partners Securities, Inc., including its subsidiary, EquityStation ("ESI"), subject only to NASD approval. vFinance estimates this acquisition could increase revenues by more than $6 million annually.
I spent time this week with the Chairman and Chief Operating Officer of the Company, Tim Mahoney.
Lahiji (DailyTrends.com): Tim, How long has vFinance been in business and what exactly is the function of your web site: http://www.vFinance.com?
Tim Mahoney (Chairman of vFinance): We formed vFinance in 1999. The web site has been in operation since 1995 and is one of the first 10,000 URLs on the world wide web. It is the number one destination for entrepreneurs looking for capital and investors looking to invest in start-up companies. As a result, the company has the most precise tool for identifying the new technologies and the new industries of the future. This information is very powerful as it provides our retail brokerage clients and our institutional clients invaluable insight into investment opportunities. It also provides us an ongoing stream of investment banking opportunities both to provide banking services to emerging firms or as potential acquisition targets for our large- and mid-cap clients.
Lahiji: How many offices do you currently have in the US?
Tim: We have over 25 offices.
Lahiji: What has been your most profitable division in the last few years? Are you expanding the amount of brokers representing you in the last 12 months?
Tim: In terms of total profit dollars, it is retail brokerage. When we went to a pure independent contractor model we accomplished two goals: 1) we succeeded in insulating the company from being choked by fixed overheads, and 2) the focus of the business went from selling our retail clients financial products to selling our network of independent contractors a broad spectrum of services they need to operate their businesses. As a result, our margins are typically higher than our competitors.
Now that we implemented the new business model in 2004, our focus for 2005 will be recruiting independent contractors.
Lahiji: Please tell us more about the acquisition you have this year of EquityStation? Is it going to be accretive both in revenues and income?
Tim: The Global acquisition, which includes EquityStation, was critical to completing our services strategy to institutions. Today we can offer the Hedge Fund and Portfolio Managers an array of trading, research and investment opportunities that can help them achieve their business objectives.
As we have stated, we believe that the Global acquisition will increase revenues by $6M. Our goal, as we have demonstrated with all of our acquisitions, is to make them profitable and accretive.
Lahiji: What are your goals in 2005?
Tim: We want to continue to build our company. We have historically demonstrated an ability to grow in poor market conditions. We also have demonstrated that we know how to grow through acquisition. Our efforts over the past 4 years have been to assemble the service offerings we need to be the premier middle market financial services company servicing high net worth investors, institutional clients and mid- cap companies looking to grow. This year our focus is going to be integrating the service offerings through coordinated marketing programs to build our value proposition to our clients.
Lahiji: Finally, do you believe that it is a great time to be an entrepreneur, given the fact that most large companies are starting to outsource jobs at a convincing rate?
Tim: It is always a great time to be an entrepreneur! People in our industry thought we were crazy starting vFinance when we did. Our strength is that we have great people and a clear vision on what we need to achieve as a firm to build shareholder equity.
Key to that vision is the recognition that we are in a new economic reality. Some call it the Innovation Economy. This means that for America to stay in the forefront, we have to continue to be the leader in attracting entrepreneurs that invent the new technologies and start the new businesses that will continue to give our workers the highest standards of living. When you look at the national platform vFinance has created, the breadth of services we provide to the Angel, Institutional and Entrepreneur and the insight our web site provides, we believe that we are uniquely positioned to profit from this economy.
END OF INTERVIEW
It has five million in cash, virtually no debt, six consecutive quarters of profitability, and one of the strongest balance sheets I have seen in this space.
This stock should be a lot higher, and once investors find out of its existence, it in fact will be a lot higher.
Did I tell you it has a P/E of 3?
Take a look for yourself. You will be amazed. Fund owns shares. I am purchasing some too after members buy.
Chris Lahiji will be available to take your questions until Thursday, January 13. Please use the form below to submit your questions.