The Japan Smaller Capitalization Fund (JOF, 7.21), which describes itself as a nondiversified fund seeking long-term capital appreciation, has at least 80% of its assets selling on various Japanese exchanges.
The company generated $188 million in free cash flow last year, six times its debt obligation of $31 million, giving it the most attractive long-term debt/total capitalization level among all companies appearing in our table.
He also likes to see low debt levels (his fund's long-term debt to capitalization is 27%; the S&P's 48%) and above-average revenue from new products, which indicates a company has been investing its cash in future expansion.
Debt as a percentage of capital is long-term debt plus capitalized leases, divided by total capitalization.
For help in that area, we also eliminated companies with long-term debt to total capitalization greater than 25%.
Idex' long-term debt to total capitalization currently stands at 31%, down from a five-year average of 39%.
Expressed as a percentage of total capitalization, long-term debt has dropped to 31%, versus 92% in December of 2002.
To find value, the managers screen companies based on ratios of total capitalization -- market capitalization plus long-term debt -- to earnings before interest and taxes, or EBIT.
For investors with a high-risk tolerance and a long-term investment horizon, small-capitalization stocks are the place to be.
Return on capital: We define total capitalization as long-term debt, common and preferred equity, deferred taxes, investment tax credits and minority interest in consolidated subsidiaries.
