3 top stocks in review: How are my selections faring?

Are My Net Fone, Clover Corporation and Beyond International worth buying today?

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Every month since September 2013, The Motley Fool has published a selection of top stocks from contributors to the website. It's time to check in on some of those stocks, gauge their (business) performance after the half-yearly results and consider whether they are still worth holding. Here is a review of the first three stocks I recommended.

My top stock for September 2013 was My Net Fone Limited (ASX: MNF), a small telecommunications company with both retail and wholesale divisions selling capacity on its nationwide network. Operating cashflow for the first half of FY 2014 came in at about $2.9 million, and NPAT was just under $2.4 million. One positive development was that the gap between payables and receivables has narrowed from $2.9 million to $1.6 million. Pleasingly, the company has now paid all the deferred consideration for past acquisitions.

When I recommended the company, shares were trading at $1.38, but today they are trading at $2.10, a gain of over 50%. The company will almost certainly report higher earnings in the second half, and has forecast a profit of $5.5 million for FY 2014. My Net Fone is therefore trading at a forward P/E ratio of over 23, and I have sold 25% of my holding. I would not buy shares at current prices, but I'm happy to hold.

My stock for October 2014 was Clover Corporation Limited (ASX: CLV), a company that turns fish oil into powder for addition to processed foods and baby formula. I didn't end up buying shares in Clover because of my concerns about margin compression. As I wrote in October: "Clover faces increasing competition, so investors should watch their margins. Decreasing margins can result in lower profits, even when sales are up."

Since I recommended the company, the share price has appreciated from 52c to the current price of 57c, and shareholders have received a dividend of 1.5c. The company should report its half-year results in March, and shareholders must expect poor results. At the 2013 AGM, the chairman reported that sales for FY 2014 are expected to be down 20%-30%, due to the recall of Fonterra's milk products.

Shareholders unwilling to hold for the long term should sell at current prices. Long-term holders will be watching whether Clover's pipeline of new products can gain traction. If I owned shares in Clover, I'd probably sell, but not in a hurry.

My top stock for November has performed poorly. Beyond International Limited (ASX: BYI) is a television content producer and distributor that I picked due to its agreement to form a joint venture with Seven Network. The share price has dropped 23% since I picked it amidst an excited market. While the company has decent long-term prospects, my timing was terrible.

The mistake of picking it right when the market was excited was compounded by the fact that the company has proven to be incapable of running its new division, Beyond Digital, at a profit. Disappointingly, earnings in the company's core division, production and copyright, were also down in the last half. I'd prefer not to own shares in a company that I think may be in denial about the poor acquisition that was Beyond Digital. However, shareholders might benefit from waiting for a contribution from the company's new joint venture with Seven Network.

Foolish takeaway

It's too early to know if Clover Corporation will play out as a satisfactory investment. However, the temporary impact of the recall is likely to be more severe than I had guessed. Beyond International was a really bad call on my behalf, because it had precisely zero margin of safety at those prices, and I apologise unreservedly for the mistake. While Beyond shares are down over 20%, My Net Fone shares are up over 50%, so I hope that redeems me somewhat.

Motley Fool contributor Claude Walker (@claudedwalker) always welcomes feedback and still owns shares in My Net Fone.

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