Stockpickr: Signs of Life in Post-Selloff Rubble

Gaming company Cryptologic(CRYP Quote) has been hit hard by recent U.S. legislation that puts a complete clamp on all online gambling. Canada-based Cryptologic sells the software used by many offshore gaming sites.

Although the company's revenue and earnings have been severely hit by the new laws, it's worth noting that it has been diversifying away from onshore revenue for the past five years. For instance, it just sold a license for its online poker software to an offshore gambling site owned by Playboy.

With a $323 million market cap and $126 million in cash, Cryptologic has an enterprise value of $196 million. It is expected to earn $1.18 a share next year, giving it a forward P/E of 20.

Super-deep-value investor Mohnish Pabrai recently disclosed in a Securities and Exchange filing that he owns shares of Cryptologic. Pabrai is a very Buffett-esque investor; I profiled and interviewed him for my book Trade Like Warren Buffett. Mohnish also owns shares of Berkshire Hathaway(BRKA Quote), Universal Stainless(USAP Quote) and several other names.

Additionally, the Cheetah Capital Value Fund holds Cryptologic in its portfolio. Its comment on Cryptologic is that the company "is perceived incorrectly as a high-risk, volatile stock, although it is very profitable, still growing rapidly and, most importantly, is selling at huge discount to intrinsic value." Cheetah also owns shares of KongZhong(KONG Quote); crushed lender New Century Financial(NEW Quote); and the "Canadian Buffett," Fairfax Financial(FFH Quote).

Check out Stockpickr's full list of the Dogs of the Magic Formula. Additionally, we have two other portfolios that keep track of various aspects of the Magic Formula system, including the top dividend yielding stocks among the Magic Formula winners and the top 20 Magic Formula stocks.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Cryptologic, KongZhong and True Religion Apparel to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.