Tuesday, January 27, 2009

Raven Industries - RAVN

Raven Industries (RAVN) is an industrial manufacturing company consisting of three Raven divisions and one subsidiary: Engineered Films, Flow Controls, Electronic Systems and Aerostar International.

The company has practically no debt and has consistently grown sales and earnings in recent years. Raven Industries (RAVN) boasts an excellent ROI of 26.2% over the past 5 years, compared to just 12.8% for the S&P 500. The company has a long track record of success and the stock price should soon recover from close to its 52 week low of $20.60.

Raven Industries(RAVN) currently trades at a trailing P/E of 12.87 and I anticipate a 12-month price target of $40 as the economic outlook improves in the second half of the year.

Disclosure: At the time of writing the author did not hold shares in Raven Industries (RAVN).

Monday, January 26, 2009

Stem Cell Research - The Bubble of 2009?

It is anticipated by many that President Obama will lift the ban on federal funding for stem cell research, a historic move that is expected to boost the US health industry. Just last week, the Federal Drug Administration (FDA) revealed that Geron (GERN) will be allowed to initiate phase I clinical trials of its early-stage treatment for spinal cord injuries. Obviously, short-sighted investors welcomed the news.

Firstly, this is a phase I trial, it will be expensive to carry out and there is no guarantee of success. Geron (GERN) is burning through cash at a rapid pace (in excess of $30 million a year), which is obviously a very dangerous thing to do in a recession, especially for a company which has practically no sales! The company is trading at over 80 times annual revenue and at a yearly high. Clearly investors are riding the "Obama Wave" and this one has to come back down to Earth soon. This is clearly all hype and no hard evidence of profitability. Yes, Geron (GERN) may turn out to be the next "Microsoft of the biotech industry" and make some investors incredibly wealthy, but at this stage it's far too early to make that call.

Also in the news is the company StemCells (STEM) which holds a significant stake in ReNeuron - a company that is about to undertake clinical trials in the UK. StemCells (STEM) also hit new highs this week, despite having no evidence of profitability. Geron (GERN) and StemCells (STEM) do own close to 300 patents between them, however, the question remains whether their research can bring either company through to profitability.

In these difficult economic times I am not brave enough to roll the dice on GERN or STEM, and not lucky enough to know when to hold them and when to fold them. Stem cell research may prove to be the bubble of 2009 as weary investors try to recoup some of their heavy losses from 2008.
At times such as these, I will be looking to invest in solid, proven market leaders with low debt and a high degree of free cash flow. A decent dividend would also be nice.

Disclosure: At the time of writing the author did not hold shares in Geron (GERN) or StemCells (STEM).

Saturday, January 24, 2009

Ecology & Environment - EEI

Ecology & Environment (EEI) is an environmental consulting and testing firm. The Company offers a range of environmental consulting services, including environmental audits, impact assessments, surveys, analysis, monitoring, air quality management, pollution control, and environmental infrastructure planning.

The company boasts low debt, high insider ownership and has been successfully growing both earnings and sales despite the difficult economic climate. The stock price has appreciated greatly in the past three months from a 52 week low of $7.30 to its current price of $12.69. With a current P/E of 19, I would expect the stock price to trade sideways in the $11-14 range for the next 6 months before rising to a
12-month price target of about $16.

Disclosure: At the time of writing the author did not hold shares in Ecology & Environmental (EEI).

Friday, January 23, 2009

Dorchester Minerals LP - DMLP

Dorchester Minerals LP (DMLP) is the owner of natural gas and oil royalty properties. The company has practically no debt, high insider ownership, proven reserves and additional mineral interests.

The price of DMLP stock is mostly influenced by long-term oil and natural gas prices, and as such has suffered in recent months falling to a 52 week low of $14.80. DMLP currently trades at $17.74, well below the 52 week high of $36.49, which I believe presents real value as energy prices will resume their upward trend over the long term. While you are waiting for the stock price to recover, Dorchester Minerals LP (DMLP) boasts a generous 12.2% dividend yield.

While I fully expect renewable and green technologies to play an increasing role in energy production in the future, oil and natural gas will remain a major source of energy in the intermediate term. Dorchester Minerals LP (DMLP) currently trades at a trailing P/E of 7.4 and I anticipate a 12-month price target of $25 as the economic outlook improves in the second half of the year.

Disclosure: At the time of writing the author did not hold shares in Dorchester Minerals LP (DMLP).
As a Limited Partnership, capital gains are factored differently, so please consult with a tax adviser prior to investing.

Tuesday, January 20, 2009

Inauguration Day Musings

Well I don't know about you, but I wasn't really expecting an "Obama bounce" in the stock markets today. I know there are many people out there, from Wall St to blogspace that have been trying to feed the bull, but there really isn't a whole lot to get excited about. Sure, it is an historic day. Sure, Obama is a great orator. Sure, he gave a very inspiring speech, but at the end of the day the markets tanked! I think that any "Obama bounce" is already priced into the markets, perhaps we're not down quite as far as we would've been had he not won the election, but we're down none-the-less. Maybe we'll see a true bull run in a few years time? 2011-2012 anyone? Your guess is as good as mine!

I think I'm correct in saying that today marks the worst Inauguration Day in the history of the stock market! I think that says a great deal more about the country's outlook than Obama could express in his speech. We're not quite in as bad shape as countries like Iceland, Russia or the UK, but there is a lot that needs to be done in order to inspire confidence in the economy. The proposed stimulus packages may work, but what if they don't? Can the country handle that vast amount of debt? And cut taxes at the same time?? In my mind, for any plan to truly have the desired effect in righting the economy, it has to tackle the debt mountain that is piling up. Is the US Treasury too big to fall? I know it thinks that it is.... but what if overseas investors refuse to buy our paper anymore? What does that mean for the US dollar?

Maybe all the bulls were watching the ceremonies in Washington, leaving the bears to run the show for the day?! I for one will be keeping a close eye on how the markets open in the morning!

Sunday, January 18, 2009

Yanzhou Coal Mining Co. - YZC

Yanzhou Coal Mining Co. (YZC) is China's second largest coal mining company, with over 2 billion tonnes in reserves, and has recently expanded into Australia. The stock price of Yanzhou Coal Mining Co. (YZC) has been hit particularly hard over the past 6 months or so, and will in all likelihood continue to fall in the short term. However, I believe that the company has excellent longer term prospects.

China consumes more coal than the United States, Europe and Japan combined and continues to build new coal-fired power stations. While coal is considered to be the dirtiest of all energy sources, the environmental impact is less critical in the immediate future as greener technologies are just not economically viable in China at this time. Obviously this will change in the future, but for now China will continue to burn coal and lots of it.

The company has low debt, has shown excellent growth in recent years, and pays a 3.5% dividend.

Yanzhou Coal Mining Co. (YZC)
currently trades at a trailing P/E of 4.2, below book value, and a price of $7.05. I anticipate a 12-month price target of $13 as the economic outlook improves in the second half of the year.

Disclosure: At the time of writing the author did not hold shares in Yanzhou Coal Mining Co. (YZC).

Saturday, January 17, 2009

Buy the Rumor, Sell the Fact - Michael Maiello

Buy the Rumor, Sell the Fact by Michael Maiello takes a look at many of today's trading myths, maxims and slogans to see if there is indeed any truth behind them.

Buy the Rumor, Sell the Fact is not a book in the traditional sense, more of a collection of thoughts each taking just one to three pages. The author uses simple language to examine some of the market jargon that is often thrown about without any real thought to its validity. Some of his arguments are a little too simplistic, but I believe that was the intended point to the book.

The book is a fast read and makes a number of interesting points regarding trading myths that are widely accepted as truths. A recommended read for anybody who is new to the world of Wall Street.






Friday, January 16, 2009

Circuit City - CCTYQ

Circuit City (CCTYQ) is a specialty retailer of consumer electronics, or should I say "was"! Circuit City (CCTYQ) today announced after failing to secure financing from creditors that it would liquidate its remaining stores. The bankrupt retailer had a poor business model, despite over $10 billion in sales this past year, failing to effectively compete with Wal-Mart (WMT) and Best Buy (BBY), both of whom will benefit greatly from the demise of Circuit City (CCTYQ).

Circuit City (CCTYQ) is the first of my short picks of the year to declare bankruptcy.... who will be next?

Thursday, January 15, 2009

Versar, Inc - VSR

Versar, Inc. (VSR) is a professional services company which specializes in project management and infrastructure services for government and private sector clients. A number of analysts see this company as being like a mini Halliburton, and with its wealth of government and military contracts I tend to agree. Versar, Inc. (VSR) has high insider ownership, good growth and practically no debt.

The one unresolved question is how will the company's fortunes change following the Presidential switch in the next week? If the Obama adminstration is favorable towards Versar (VSR) then this will prove to be a very profitable investment. Some may say that the stock price has increased substantially since the Election, suggesting the change at the White House is already priced in, but I believe this one has a long further to run. The one thing missing is a nice dividend payment!


Versar, Inc. (VSR) currently trades at a trailing P/E of 12.3 and a price of $3.85. I anticipate a 12-month price target of $9.

Disclosure: At the time of writing the author held shares in Versar, Inc. (VSR).

Monday, January 12, 2009

Chase Corporation - CCF

Chase Corporation (CCF) is a manufacturer of specialty tapes, laminates, sealants and coatings for a number of industrial applications particularly in the automotive and electronics industries. The company recently reported disappointing first quarter results with a significant decline in revenues and EPS. However this is entirely expected in the current economic climate.

Chase Corporation (CCF) has strong conservative management and there is significant insider ownership. The company is well positioned to bounce back once the economy improves. The company has a healthy balance sheet with cash/equivalents of $4.3 million and no outstanding debt. The company will
likely benefit strongly from any infrastructure programs put in place by the incoming Obama administration.

Chase Corporation (CCF) currently trades at a trailing P/E of 8.81 and a price of $11.25. I anticipate a 12-month price target of $18 as the economic outlook improves in the second half of the year.

Disclosure: At the time of writing the author did not hold shares in Chase Corporation (CCF).

Sunday, January 11, 2009

United Foam Plastics Technologies - UFPT

United Foam Plastics Technologies (UFPT) offers a range of engineered packaging solutions and specialty products for a number of industrial applications. UFP Technologies (UFPT) trades at close to book value and has significantly increased both sales and revenue over the past few years.

The price of UFPT stock has suffered in recent months falling from it's 52 week high of $14.63 amid significant insider selling in the range of $12-$14 to a 52 week low of $3.92. UFP Technologies (UFPT) currently trades at $5.40 which I believe presents good value as insiders have been making modest purchases in the $4 range.

UFP Technologies (UFPT) currently trades at a trailing P/E of 5.79, with very little debt, and has recently broken through it's 50 day moving average. I anticipate a 12-month price target of $11 as the economic outlook improves in the second half of the year.

Disclosure: At the time of writing the author held shares in United Foam Plastics Technologies (UFPT).

Saturday, January 10, 2009

Highveld Steel and Vanadium - HSVLY

Highveld Steel and Vanadium (HSVLY) provides good exposure to the commodities sector, while at the same time giving the investor significant dividend income. While I don't expect the huge dividend to be maintained at this level indefinitely, it is unlikely to ever be cut completely.

The price of HSVLY stock has suffered in recent months falling to a 52 week low of $4.75. HSVLY currently trades at $7.20, well below the 52 week high of $24.94, which I believe presents real value as the stock has been heavily oversold. Highveld Steel and Vanadium (HSVLY) is among the most solvent and profitable mining companies, and will benefit strongly from any infrastructure programs put in place by the incoming Obama administration.

Highveld Steel and Vanadium (HSVLY) currently trades at a trailing P/E of 3.50, with very little debt, and I anticipate a 12-month price target of $16 as the economic outlook improves in the second half of the year.

Disclosure: At the time of writing the author did not hold shares in Highveld Steel and Vanadium (HSVLY).

Friday, January 9, 2009

Hugoton Royalty Trust - HGT

With an 80% net profit interest in XTO Energy (XTO) projects that span three states, including the prolific Anadarko basin, Hugoton Royalty Trust (HGT) provides good exposure to the natural gas sector, while at the same time giving the investor significant royalty income.

The price of HGT stock is mostly influenced by the long-term natural gas price, and as such has suffered in recent months falling to a 52 week low of $14. HGT currently trades at $16.98, a far cry from the 52 week high of $37.86, which I believe presents real value once natural gas prices resume an upward trend.

While I fully expect renewable and green technologies to play an increasing role in energy production in the future, natural gas will remain a major source of energy in the intermediate term. Hugoton Royalty Trust (HGT) currently trades at a trailing P/E of 5.98 and I anticipate a 12-month price target of $20 as the economic outlook improves in the second half of the year.

Disclosure: At the time of writing the author held shares in Hugoton Royalty Trust (HGT).

Wednesday, January 7, 2009

The Richest Man in Babylon - George S. Clason

The Richest Man in Babylon by George S. Clason is one of those classic texts that has really stood the test of time. The book dispenses financial advice through a series of simple, easy-to-understand parables set in ancient Babylon. Through a collection of everyday experiences the characters in the book learn key tenets of financial wisdom, which are still relevant and practical today.

The principles are not new and can be found in other texts, however, the simplicity of this book is its appeal. It is an inspirational text which should be required reading for everyone. I am amazed at how much is packed into such a short book. You could read The Richest Man In Babylon cover-to-cover in an afternoon, but it could take you a lifetime to fully appreciate the wisdom on the pages.

You will learn how to pay down debts and acquire wealth. You will learn to pay yourself first and to control expenditures. You will learn how to ensure future prosperity and guard your wealth from losses. If you have an income you can build wealth using these timeless principles. This book is a multi-million copy bestselling classic and you will see why when you read it. I highly recommend this book.


Thursday, January 1, 2009

2009 - Ideas For The Year

Welcome to 2009!
The past year has been a rough ride, and I imagine that many of you (like me!) are considerably worse off than you were a year ago. The events of 2008 exposed many weakness in both the national and global economies leaving bankruptcies, falling sales, job losses, lower real estate prices, foreclosures.... the list goes on.... and it ain't pretty!

There are many challenges that lie ahead in 2009, but with them come many opportunities for those looking in the right places. There is money to be made in 2009, but it may not come as easily as in years past.

The purpose of this post is to make a few picks for the year which I will review at the end of each month. In the coming few weeks I will post further thoughts about each of the picks. The purpose of this exercise is to provide ideas for your own research, some potential opportunities for 2009, as well as some companies I feel are best avoided. I will focus on specific companies in this instance, although later in the year I may look in more depth at specific sectors, or the economy as a whole.

My Long Picks for 2009, with 12/31/08 closing prices

Highveld Steel and Vanadium (HSVLY) - $7.68
Chase Corporation (CCF) - $11.29
Versar, Inc. (VSR) - $4.12
Natural Resources Partners LP (NRP) - $17.45
Hugoton Royalty Trust (HGT) - $16.05
UFP Technologies (UFPT) - $5.29
Anadys Pharmaceuticals (ANDS) - $1.57
Yanzhou Coal (YZC) - $7.52
Ecology & Environment (EEI) - $11.98
Quicksilver Gas Services LP (KGS) - $9.48
Urban Outfitters (URBN) - $14.98
Dorchester Minerals LP (DMLP) - $15.87
Himax Technologies (HIMX) - $1.61
Raven Industries (RAVN) - $24.10

My Short Picks for 2009, with 12/31/08 closing prices

Citigroup (C) - $6.71
Bank of America (BAC) - $14.08
LaCrosse Footwear (BOOT) - $12.48
Red Robin Gourmet Burgers (RRGB) - $16.83
Office Depot (ODP) - $2.98
Ann Taylor Stores (ANN) - $5.04
Mercantile Bancorp (MBR) - $10.55
Circuit City (CCTYQ) - $0.13
La-Z-Boy (LZB) - $2.17
Build-A-Bear Workshop (BBW) - $4.86
Smurfit Stone Container Corporation (SSCC) - $0.26
Converted Organics (COIN) - $3.54

Well, I will review the list at the end of January to see how my picks and pans are performing. Until then, happy investing!

Disclosure: At the time of writing the author held shares in Himax Technologies (HIMX), Hugoton Royalty Trust (HGT), UFP Technologies (UFPT), and Versar, Inc. (VSR).