FOLLOWING THE MONEY

CVO

I opened a small position on CVO. This purchase is really "following the management". Mr. Burton has a very successful track record. Everything he touches has turned out gold. While the easy money has been made, I believe there still some room to grow. The company is on the verge to make some money, as early as Q1/06, and the company guided the 2006 EBITDA at approximately $150 million. It is traded at about 5X of its EBITDA. It appears to be a reasonable valuation.

SCSS

The screen this morning produced this little company in an unexpected place, a mattress producer and retailer. I really like this company (market cap about 1.2 billion) because of its strong growth potential. The company's long term growth targets: same store growth of 7%-9%, revenue growth: 15-20% and EPS growth: 20-25%. That is a very ambitious long term growth target. The company has very high ROE (37.5%) and high ROC. Clean balance sheet with no debt and significant amount of cash. It is free cash flow positive. It has recently guided its 2006 at high end of its long term growth target. The only drawback is that it is slightly expensive, trading at approximately 26X of its 2006 EPS, but about 20X of its 2007 EPS. I am also concerned a littel bit of the slow real estate market and potential slow down of consumer spending. Having said that, I believe the stock could has a "4" handle by the end of this year, and the down side risk is really limited. I intend to open a small position soon.