3 Security Stocks pick from Dr. Ge

COGT, WBSN and SFNT - 3 security stocks pick from Dr. Ge, and here is the original blog. I like security industry, and I like distressed stocks, a combination of both - It certainly is worth a research. I took a quick look, and posted my comment in Dr. Ge's blog. Interested in 2 of them, I decided to post my thoughts here too, for further follow-ups.

Finance
COGT: Competitive Return on Eqity/Asset rate, and decent profit margin. 300m cash position, no debt. Observe steady revenue growth in the last 3 years. Some concern: about issuing sizeable stocks in the recent 2 years to support heavy capital investments.

WBSN: demonstrated very steady revenue growth in the last 6 years, and kept high profitability and efficiency. High P/E, health cash flow and purchased back stocks in recent 2 years.

SFNT: This company has virtually no profitability, and no organic revenue growth in the last decade. (noted its recent years revenue growth is in conjuction with M&A activities).


Business
COGT: I don't know much about AFIS technology. Believe this business has potential in long run, but doesn't think it has very high entry barrier (maybe it has). How does it face the competition from much larger vendors? - Motorola, NEC, etc. Currently over 50% revenue comes from top 2 customers - DHS and CNE, that could make the stock volatile and speculative.

WBSN: Websense has tough skin, and is a survivor in this industry. It had a wide range of customer bases and product lines. Much less risky.


Among those 3, I think Websense is a safe pick, Cogent could be very rewarding, but bearing some risks in the next 1-2 years (who knows what President Bush will do next?) and stay away from SafeNet.