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I think it's fair to say that Chinese oil consumption is only going to continue it's upward trend in the coming few years. China has already surpassed the United States in car sales as more people relocate from rural farming communities into the cities. Many industries are expanding, bringing in more workers willing to commute longer distances. All of which points to increasing oil consumption in China. The question is, what is the best way to play this ongoing trend? Many Chinese energy plays remain undervalued at this time despite recent gains, giving many options to play the trend. While not to everyone's taste, I personally like to focus on smallcap stocks that I believe are undervalued.
One company that has caught my eye in recent months is China Integrated Energy, Inc. (CBEH), formerly known as China Bio-Energy Holding Group. The company is engaged in three business segments, the development, production, and distribution of bio-diesel, the wholesale distribution and processing of heavy oil and finished oil products, and the sale of gasoline and diesel at retail gas stations. Actually, the bio-diesel segment really doesn't excite me especially. The main reason I like this company as an investment is the growing network of retail gas stations.
The company recently announced the purchase of 2 additional gas stations in Shaanxi province, bringing the total to twelve at this time. CBEH also plans to acquire a further 5-7 gas stations in the coming 12 months. The company has the ability to provide stable supply to all of the gas stations in its network. Being a vertically integrated energy company allows the company to achieve higher profit margins, and the simplicity of the company business model is something I find attractive as an investment. As of September 2009, the company reported average gross margins of 13.3% for its retail gas stations, a figure which I would anticipate growing significantly in 2010 with increased sales.
So how do the fundamentals stack up? The company has a market cap of $276M, with very little debt and a current ratio of almost 9. CBEH boasts a return on equity of almost 25% and a price to sales ratio of just 1.08. The company has demonstrated a trend of increasing sales and revenues over several years and has established a strong cash position in order to undertake further acquisitions. The shares currently trade at $8.49 and I would anticipate a 12-month target of $11-13.
Disclosure: At the time of writing the author held shares in China Integrated Energy, Inc. (CBEH).
In recent times there has been a lot of focus in looking at overseas markets for superior gains and as a hedge against the falling dollar. One country which has received a huge amount of attention and investment dollars is obviously China, however, it appears to me that finding value in China is getting increasingly more difficult. There has been somewhat of a herd mentality with many people rushing out to buy stock in Chinese companies, with little or no regard to whether or not it represents a good investment. Some people who would normally spend hours when researching a domestic company as a potential investment seem to throw caution to the wind when it comes to overseas investments. To some extent "a rising tide floats all boats", but there are excellent opportunities in China and there are, how do I put it, "less than stellar" opportunities in China. When the inevitable correction comes we will see which companies are the real deal and which are just playing with smoke and mirrors.
One company that I believe is the real deal and represents true value for the investor is Chemspec International, Ltd. (CPC).
Chemspec is a contract manufacturer of highly engineered specialty chemicals and the largest manufacturer of fluorinated specialty chemicals in China. The company is headquartered in Shanghai, with four additional facilities in surrounding provinces. The company’s chemicals are used as building blocks for more advanced chemicals or to enhance the performance of the end products of its clients. It sells primarily companies in the electronics, pharmaceutical and agrochemical sectors. Chemspec was founded in 1996 and underwent IPO in June of 2009, with a price of $9.
The area of contract manufacturing has grown immensely in recent years, both domestically and overseas, with many companies choosing to outsource what would have normally remained in-house. Chemspec's blue-chip end-users include major global TFT Liquid Crystal suppliers, one of the world's top global agrochemical companies and four of the world's top ten pharmaceutical companies by sales.
Chemspec trades at a P/E of 7.1 and a price/book of 1.51 with a current ratio of 2.99. The company has demonstrated excellent profitability in the past, however has been affected a little by the economic downturn, resulting in reduced earnings. The management appear to be making all the right moves to navigate through these difficult times, focusing on R&D and expanding facilities. The stock currently trades at $7.31, up significantly from the 52 week low, but still well below the IPO price. I would anticipate a 12-month target price of $9-10.
Disclosure: At the time of writing the author held shares in Chemspec International, Ltd. (CPC).
I have been watching with interest from the sidelines as alternative energy stocks have skyrocketed in recent months, partly wishing that I was riding the wave and partly quite content in the knowledge that there will be plenty of opportunity to make money in alternative energy in the future. My biggest concern at this point is that not all alternative energy stocks are created equally, a good number of them will fail, and ultimately which ones succeed may come down to politics. I don't yet feel confident enough to separate the wheat from the chaff, particularly as many alternative energy companies are not yet profitable, so I will continue to watch with interest and research companies that I feel stand out from the crowd.
So if I'm not yet investing in alternative energy, what am I focusing on? While I fully expect renewable and green technologies to play an increasing role in energy production in the future, I am still a firm believer that coal, oil and natural gas will remain the major sources of energy in the intermediate term. I also expect nuclear power to feature strongly, but that is a topic for another day.
You see, the problem with alternative energy, while highly desirable, is that it is expensive. In comparison, coal is cheap - very cheap. Yes, it is dirty, yes, the environmentalists don't like it, and yes, there is pressure to reduce its use in the US, but I don't feel that any of those issues are going to matter until alternative energy can begin to compete on price.
The other huge issue is that China is the world's largest coal producer and consumer, and they are not going to stop burning coal any time soon. In fact, China plans to build stockpiles of the fuel in the eastern province of Shandong to ensure supplies and help stabilize prices. At this point China is self-sufficient in coal, but there may come a time soon when it is a net importer of coal.
If you are looking for a coal play that bets directly on China, then Yanzhou Coal (YZC) fits the bill. Yanzhou is one of China’s largest coal suppliers producing high-grade, low-sulfur coal, which burns cleaner and therefore fetches a premium price. Yanzhou Coal (YZC) is principally engaged in underground coal mining, preparation and processing, sales, and railway transportation of coal. The company is organized into three operating divisions: coal mining, coal railway transportation and methanol and electricity power. The company operates six coal mines: Xinglongzhuang coal mine, Baodian coal mine, Nantun coal mine, Dongtan coal mine, Jining II coal mine (Jining II) and Jining III coal mine (Jining III), as well as a regional rail network that links these mines with the national rail network.
So Yanzhou Coal (YZC) is in a great position to benefit from China's growing demand for coal, and also from any additional infrastucture investment, but what are the fundamentals like? Despite the recent upward movement in the share price, I believe that Yanzhou Coal remains a value stock with plenty of potential upside.
The company has low debt, has shown excellent growth in recent years, and pays a 4.2% dividend. Yanzhou Coal (YZC) currently trades at a P/E of 7.4 and a price/book of 1.8 with a current ratio of 2.83. The company boasts a return on equity of 26.9% and a gross margin of 50%. The company currently trades at $14.85 and I would be looking for a 12-month price target of $25-27.
Disclosure: At the time of writing the author held shares in Yanzhou Coal (YZC).
CryoLife, Inc. (CRY) is engaged in preserving and distributing human tissues for cardiac and vascular transplant applications and develops and commercializes medical devices. The human tissue distributed by the Company includes the CryoValve SG pulmonary human heart valve (CryoValve SG), processed using CryoLife's SynerGraft technology. The Company's medical devices include BioGlue Surgical Adhesive (BioGlue) and Hemostase, which the Company distributes for Medafor, Inc., as well as other medical devices. CryoLife distributes BioGlue, which is used in place of stitches, throughout the United States and in more than 70 other countries.
CryoLife is an interesting company that has been on my radar for a while now. The company has carved itself a nice niche in an almost recession proof sector and has been aggressively marketing its products. The market for BioGlue and tissue preservation services is only going to continue to grow as the population gets larger and older, and eventually the true value of the company will be recognized. My main concern is the wild rollercoaster ride that the stock price has been on over the years. That said, I do believe that the lawsuits are now behind them and that the company will continue to grow.
The company has been profitable since early 2007 and has been steadily increasing earnings and sales since then. CryoLife trades at a P/E of 5.0 and a price/book of 1.55 with a current ratio of 4.28. The company boasts a return on equity of 38.1% and a gross margin of 64.5% which is pretty impressive in the current economic climate. There was significant insider selling last fall when the company was trading at over $12 a share, although CEO Steven Anderson still holds almost 7% of the company, which I take to be a positive sign.
CryoLife currently trades at $5.82 and I would be looking for a 12-month price target of $11-12.
Disclosure: At the time of writing the author did not hold shares in CryoLife Inc., (CRY).
SmartPros (SPRO) provides learning and training solutions for professional markets, including accounting/finance, legal, engineering, securities and insurance, as well as information technology professionals. The company also provides corporate governance, ethics and compliance training for the general corporate market. It offers off-the-shelf courses and produce custom-designed programs with delivery methods suited to the specific needs of its clients. Its customers include professional firms and companies of all sizes. The company's e-marketing and e-commerce business sells ads on its website and develops newsletters and marketing programs for clients.
Depending on which numbers you choose to believe, unemployment currently sits somewhere between 9% and 14%. In these uncertain times I believe that companies such as SmartPros should do well as unemployment figures soar. Those of us lucky enough to be employed will most likely be looking for ways in which to become more valuable to our employers in order to retain our positions, and those of us who have suffered the loss of their job will inevitably be looking for ways in which to stand out from the crowd in the competition for the limited openings available. This is where SmartPros comes into its own. The company offers courses in the very skills that many people will be looking to add to their resumes.
The company reported excellent figures for 2008 and I expect a similar trend to be observed in 2009. As of December 31, 2008, the company had approximately $6.63 million in cash and cash equivalents, $5.6 million in deferred revenue, stockholders' equity of $12.1 million, and no debt. SmartPros trades at a P/E of 8.1 and a price/book of 1.17 with a current ratio of 1.36 and a gross margin of 57.9%. Also, the acquisition of Loscalzo last year appears to have been a smart one, leading to a number of cost cutting measures and an increase in ROIC.In the company annual report Chairman and CEO, Allen Greene stated “We are proud to have finished the year strong and are looking to carry that momentum into 2009.” “We continue to show revenue growth year-over-year and our operating profits were at an all-time high. Further, we believe that operating profit and EBITDA numbers provide the best comparative narration because it removes the influence of interest rates and the tax benefit treatment.” Greene holds almost 5.6% of the company stock and is one of several insider holders. Also of note, real estate investor Zohar Ben-Dov announced a 10.5% stake in the company in March this year.The company boasts a large course library and a large customer base, however, it is a competitive industry with a relatively low barrier to entry, meaning that the company has to continually strive to protect its niche. This being said, I believe that SmartPros represents good value at its current price of $3 a share and would be looking at a 12-month target price of around $5.Disclosure: At the time of writing the author did not hold shares in SmartPros Ltd (SPRO).
If you are anything like me, you've probably spent many hours screening through list after list of stock tickers trying to unearth some as yet undiscovered companies that, just maybe, might turn out to be the next Google (GOOG), Microsoft (MSFT) or Walmart (WMT). This inevitably results in a collection of speculative smallcap and microcap stocks that you have never heard of before - after all, you're unlikely to find potential multibaggers among the highly researched megacap companies of the Dow Jones - companies that have already grown massively.
There are a number of things that must be considered when looking to invest in these smaller companies, not least of which is that there is often a lot less information available upon which to base your decisions, not to mention volatility and liquidity issues. So where is a good place to start? I personally like to begin my search by looking for value stocks with little or no debt that operate in niche markets. I also like to look for companies with good cash flow, high insider ownership, and a history of growth. It is a common misconception that most smaller companies will inevitably end up beginning run out of business by a larger one. In fact, many large companies are so slow moving that the smaller company eventually catches or even surpasses them! For instance, there was a time when the majority of people believed that Microsoft (MSFT) was invincible, until little Apple (AAPL) turned the tables and became a multi billion dollar enterprise.So here are a three companies that I believe are worth considering further, along with a basic overview of each.
Image Sensing Systems, Inc. (ISNS)Market Cap: $35.6MThe company develops and markets video image processing products for use in traffic applications, such as intersection control, highway, bridge and tunnel traffic management and traffic data collection. Its family of products, marketed as Autoscope and RTMS, provides end users with the tools needed to optimize traffic flow, enhance driver safety, regulate air quality and address security/surveillance concerns. Image Sensing Systems trades at a P/E of 8.6 and a price/book of 1.25 with a current ratio of 8.96. The company has been steadily increasing earnings and sales, and boasts a return on equity of 15.8%. The company has global exposure and wide potential with sales across North America as well as in Europe, Asia, and the Middle East. The stock currently trades at $8.92 and I would be looking for a 12-month price target of around $14-15.RF Industries, Ltd. (RFIL)Market Cap: $12.1MThe company is a provider of interconnect products and systems for radio frequency (RF) communications products and wireless digital transmission systems. Through six divisions the company supplies customers across a wide range of industries including aerospace, medicine, multi-media, and communications, as well as the military. RF Industries trades at a P/E of 9.4 and a price/book of 0.78 with a current ratio of 16.4. The company has demonstrated excellent profitability in the past, however has been affected by the economic downturn, resulting in reduced sales. As a result the company recently suspended its dividend payment in order to focus on product development and acquisitions. The company has a return on equity of 10.1% and the management appear to be making all the right moves to navigate through these difficult times. The stock currently trades at $3.95 and I would be looking for a 12-month price target of around $6-7.Continucare Corporation (CNU)
Market Cap: $142.5M
Continucare is a provider of primary care physician services in Florida. The company through its network of 18 medical centers provides primary care medical services on an outpatient basis. It also provides practice management services to independent physician affiliates (IPAs) at 25 medical offices. The company trades at a P/E of 11.3 and a price/book of 1.34 with a current ratio of 4.8. The company has demonstrated good EPS and sales growth in recent years and has a return on equity of 12.8% with very high insider ownership. The stock currently trades at $2.40 and I would be looking for a 12-month price target of around $3.50.Disclosure - At the time of writing the author did not hold shares in any of the companies mentioned in this article.
Friedman Industries, Inc. (FRD) is a microcap value stock engaged in steel and pipe processing and distribution. The company divides its products into two main groups: coil and tubular products. Friedman Industries, Inc (FRD) sells coil products primarily to steel distributors and customers fabricating steel products, such as storage tanks, steel buildings, farm machinery and equipment, construction equipment or transportation equipment, located primarily in the midwestern, southwestern and southeastern sections of the United States. The company's principal customers for tubular products are steel and pipe distributors, piling contractors and U.S. Steel Tubular Products, Inc. (USS).
The company comes with a great set of fundamentals, trading at a P/E of 2.5 and a price/book of 0.7 with a current ratio of 3.9 and very little debt. The company has been steadily growing earnings and sales over the past few years, and has paid a dividend for the past 10 years (currently 3.5% yield).
Despite the current economic slow down, I am confident that a company of the strength of Friedman Industries will be among the survivors, particularly as the manufacturing and construction industries begin to pick up in the coming quarters. Friedman Industries boasts a return on equity of close to 30% and a 5-year historical EPS growth rate of 31.7%. These are the kind of numbers that small cap value investors love to see. The stock price has already made a significant move upwards from its 52 week low of $3.82 in March, and has in fact just broken through its 200 day moving average, but I believe that plenty of upside still remains to be seen. I would be looking for a 12-month price target of around $12-13 as the economic outlook begins to improve.
Disclosure: At the time of writing the author held shares in Friedman Industries, Inc. (FRD).
Air T, Inc. (AIRT) is a microcap value stock which operates in two industry segments: providing overnight air cargo services to the air express delivery industry through its wholly owned subsidiaries, Mountain Air Cargo, Inc. (MAC) and CSA Air, Inc. (CSA), and aviation ground support and other specialized equipment products and services to passenger and cargo airlines, airports and the military, through its wholly owned subsidiary, Global Ground Support, LLC (GGS) and Global Aviation Services, LLC (GAS). The company has the kind of fundamentals that Warren Buffett would love - if only he were able to trade a company this small. Air T, Inc. (AIRT) trades at a P/E of 4.4 and a price/book of 1.03 with a current ratio of 3.1 and very little debt. The company has been steadily growing earnings and sales over the past few years and pays a dividend of 3.7% which is pretty impressive for a company of its size. While there are a number of other microcap dividend payers, I have struggled to find one that I believe is quite as attractive as Air T, Inc. (AIRT). The company recently announced an annual dividend payment of $0.33 - an increase on last year's $0.30 figure despite the tough economic climate.
I find that significant insider ownership is often one of the most important factors to consider when looking to invest in small and microcap companies. Company Chairman, Walter Clark, owns around 6% of the company's stock giving me confidence that the company holds the interests of its shareholders as a high priority. The company recently announced an order for 29 plane deicers, worth $11.5 million from the US Air Force as part of an ongoing multiyear contract with the US Air Force. The company also has strong ties with FedEx, operating a fleet of 95 planes as part of the FedEx distribution network.While Air T, Inc. (AIRT) may not yet be a household name (it may never be), the most profitable investments are often the ones where you get in on the ground floor. I find it hard to believe that companies such as Wal-Mart (WMT) or Google (GOOG) will double or triple in size any time soon - they've had impressive runs already. However, a microcap value stock of the caliber of Air T, Inc. (AIRT) could quite easily double or triple over the next year or two.Disclosure: At the time of writing the author held shares in Air T (AIRT).
At the beginning of the year I made a list of picks and pans for the year which I planned to review at the end of each month. The purpose of this exercise was to provide ideas for your own research, some potential opportunities for 2009, as well as some companies I feel are best avoided. We're five months into the year now and there has been a lot of movement across the board.
Interestingly, had I owned real life positions in a number of these stocks, I would've most likely gotten out while the going was good. For instance, shares in Anadys (ANDS) skyrocketed over 300% on positive clinical data before losing most of their gains a few months later following a poor earnings statement. A gain that large in the biotech arena would've been too much for me to resist and I would've been out of there right away! However, for the purpose of this exercise there will be no changing of picks, no matter what happens to the underlying companies.
So here are the performances for 2009 to date.My Long Picks for 2009, with 05/31/09 closing prices
Himax Technologies (HIMX) - $3.63 (+125.47%)Yanzhou Coal (YZC) - $12.63 (+67.95%)Anadys Pharmaceuticals (ANDS) - $2.22 (+41.40%)Quicksilver Gas Services LP (KGS) - $13.00 (+37.13%)Urban Outfitters (URBN) - $20.42 (+36.32%)Natural Resources Partners LP (NRP) - $23.66 (+35.59%)Dorchester Minerals LP (DMLP) - $20.49 (+29.11%)Ecology & Environment (EEI) - $14.22 (+18.70%)Raven Industries (RAVN) - $27.46 (+13.94%) Versar, Inc. (VSR) - $4.52 (+9.71%)Chase Corporation (CCF) - $11.70 (+3.63%)Highveld Steel and Vanadium (HSVLY) - $7.85 (+2.21%)Hugoton Royalty Trust (HGT) - $13.88 (-13.52%)UFP Technologies (UFPT) - $4.16 (-21.36%)Shares in Himax Technologies (HIMX) continued to rise from $2.73 to $3.63 this month despite reporting a huge slump in earnings revenue. The company is expecting a recovery in Q2 prompting the move in the share price. The top performer of the month was Versar, Inc. (VSR) moving from $2.60 to $4.52, following the announcement that the company would receive stimulus money as part of an alternative energy study. Dorchester Minerals (DMLP) and Hugoton Royalty Trust (HGT) both put in significant moves this month. I continue to be bullish on commodities which I still believe will be one of the few sectors that will finish the year on a high note. Raven Industries (RAVN) announced a dividend increase this month, something of a rare commodity in these times, leading to a moderate movement in the share price.
Not so stellar was the performance of United Foam Technologies (UFPT), falling from $5.05 to $4.16 and currently sitting bottom of the pile in my long picks for the year. The move is largely due to a drop in sales and revenue, however, I still believe the company has a strong balance sheet and will emerge from the current crisis as a strong player in the industry.
My Short Picks for 2009, with 05/31/09 closing pricesOffice Depot (ODP) - $4.66 (+56.38%)Ann Taylor Stores (ANN) - $7.32 (+45.24%)Red Robin Gourmet Burgers (RRGB) - $17.30 (+2.79%)
Build-A-Bear Workshop (BBW) - $4.48 (-7.82%)La-Z-Boy (LZB) - $1.87 (-13.82%)Bank of America (BAC) - $11.27 (-19.96%)LaCrosse Footwear (BOOT) - $9.40 (-24.68%)Citigroup (C) - $3.72 (-44.56%)Mercantile Bancorp (MBR) - $5.65 (-46.45%)Converted Organics (COIN) - $1.48 (-58.19%) Circuit City (CCTYQ) - $0.021 (-84.62%) - BankruptSmurfit Stone Container Corporation (SSCC) - $0.00 (-100%) - BankruptAs a group my short picks continued to rally this month, despite poor fundamentals. I think this is a trend that we will shortly see reversed as the bear market rally gives way to the next leg down. The biggest mover of the month was Office Depot (ODP) moving from $2.70 to $4.66 following a number of analyst upgrades, while La-Z-Boy (LZB) retraced most of last month's impressive gains. Office Depot (ODP) has made an impressive recovery from close to $1 a share back in March so I'm beginning to suspect that its days as a good short pick may be behind us.Well, I will review the list again at the end of June to see how my picks and pans are performing. Until then, happy investing!
Disclosure: At the time of writing the author held shares in Highveld Steel and Vanadium (HSVLY), Himax Technologies (HIMX), Hugoton Royalty Trust (HGT), Yanzhou Coal (YZC), UFP Technologies (UFPT), and Versar, Inc. (VSR).
At the beginning of the year I made a list of picks and pans for the year which I planned to review at the end of each month. Well, it's that time again and there's definitely been a lot of movement this past month!So here are the performances for 2009 to date.My Long Picks for 2009, with 04/30/09 closing prices
Himax Technologies (HIMX) - $2.73 (+69.57%)Anadys Pharmaceuticals (ANDS) - $2.50 (+59.24%)Quicksilver Gas Services LP (KGS) - $13.46 (+59.24%)Natural Resources Partners LP (NRP) - $24.09 (+38.05%)Yanzhou Coal (YZC) - $9.91 (+31.78%)Urban Outfitters (URBN) - $19.14 (+27.77%)Ecology & Environment (EEI) - $13.43 (+12.10%)Dorchester Minerals LP (DMLP) - $17.63 (+11.09%)Raven Industries (RAVN) - $24.64 (+2.24%)Highveld Steel and Vanadium (HSVLY) - $7.45 (-2.99%)UFP Technologies (UFPT) - $5.05 (-4.54%)Chase Corporation (CCF) - $9.70 (-14.08%)Hugoton Royalty Trust (HGT) - $11.10 (-30.84%) Versar, Inc. (VSR) - $2.60 (-36.89%)The top performer of the month was Yanzhou Coal (YZC) moving from $7.17 to $9.91. I continue to be bullish on commodities which I believe will be one of the few sectors that will finish the year on a high note. Urban Outfitters (URBN) also put in an impressive month, moving from $16.37 to $19.14, although I am still interested to see what this months Q1 figures look like.
Shares of Anadys Pharmaceuticals (ANDS) fell off a cliff after reporting larger than expected expenses in their recent earnings, demonstrating once again the volatility of the biotech sector. I still believe that Anadys has great potential, however, had I been sitting on a real life +300% gain from a biotech stock I would've sold right away! Anyway, let's not dwell on this, moving on.My Short Picks for 2009, with 04/30/09 closing pricesAnn Taylor Stores (ANN) - $7.39 (+46.63%)Red Robin Gourmet Burgers (RRGB) - $22.71 (+34.94%)
La-Z-Boy (LZB) - $2.85 (+31.34%)Build-A-Bear Workshop (BBW) - $5.13 (+5.56%)Office Depot (ODP) - $2.70 (-9.40%)LaCrosse Footwear (BOOT) - $7.79 (-37.58%)Bank of America (BAC) - $8.70 (-38.21%)Mercantile Bancorp (MBR) - $6.41 (-39.24%)Citigroup (C) - $2.97 (-55.74%)
Converted Organics (COIN) - $1.52 (-57.06%) Circuit City (CCTYQ) - $0.021 (-83.85%) - BankruptSmurfit Stone Container Corporation (SSCC) - $0.00 (-100%) - BankruptAs a group my short picks continued to rally this month, despite poor fundamentals. I think it's a classic case of "a rising tide floats all boats". La-Z-Boy (LZB) put in a particularly impressive month moving from $1.25 to $2.85, but I really have no idea why! In my opinion the company has poor valuation and fundamentals and I don't expect them to survive the year. Build-A-Bear Workshop (BBW) missed analyst earnings estimates with a pretty unimpressive set of figures which has since been reflected in the share price reversing most of last months gains.Well, I will review the list again at the end of May to see how my picks and pans are performing. Until then, happy investing!
Disclosure: At the time of writing the author held shares in Highveld Steel and Vanadium (HSVLY), Himax Technologies (HIMX), Hugoton Royalty Trust (HGT), Yanzhou Coal (YZC), UFP Technologies (UFPT), and Versar, Inc. (VSR).
Quicksilver Gas Services (KGS) is in the business of gathering and transporting natural gas and liquid natural gas through its pipeline assets and processing facilities in Texas.
These services are provided under fee-based contracts, whereby the Company receives fixed fees for performing the gathering and processing services. Quicksilver Gas Services (KGS) does not take title to the natural gas or associated natural gas liquids that it gathers and processes and thus avoids direct commodity price exposure. This is what sets Quicksilver Gas Services (KGS) apart from similar pipeline companies.Quicksilver Gas Services (KGS) currently trades at a trailing P/E of 13.81, and pays a dividend of 11%. The company has demonstrated good levels of earnings and revenue growth, depsite the economic slowdown, and I anticipate a 12-month price target of $18-20 as the economic outlook improves in the second half of the year. My major concern about the company is the increasing level of debt that the company is taking on.Disclosure: At the time of writing the author did not hold shares in Quicksilver Gas Services (KGS).
At the beginning of the year I made a list of picks and pans for the year which I planned to review at the end of each month. 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. At this point I am just going for a brief overview, I may get into some more in depth analysis later in the year. 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.So here are the performances for 2009 to date.My Long Picks for 2009, with 03/31/09 closing prices
Anadys Pharmaceuticals (ANDS) - $6.79 (+332.48%)Himax Technologies (HIMX) - $2.80 (+73.91%)Quicksilver Gas Services LP (KGS) - $13.25 (+39.77%)Natural Resources Partners LP (NRP) - $22.33 (+27.97%)Ecology & Environment (EEI) - $13.15 (+9.77%)Urban Outfitters (URBN) - $16.37 (+9.28%)Dorchester Minerals LP (DMLP) - $16.33 (+2.90%)Highveld Steel and Vanadium (HSVLY) - $7.85 (+2.21%)Yanzhou Coal (YZC) - $7.17 (-4.65%)Raven Industries (RAVN) - $20.78 (-13.78%)UFP Technologies (UFPT) - $4.4899 (-15.12%)Chase Corporation (CCF) - $9.30 (-17.63%)Hugoton Royalty Trust (HGT) - $9.56 (-40.44%) Versar, Inc. (VSR) - $2.29 (-44.42%)The top performer of the month was Himax Technologies (HIMX) moving from $1.65 to $2.80. Also of note was Yanzhou Coal (YZC), moving from $5.68 to $7.17. I imagine that oil and commodities will continue to improve in the coming months which should lift struggling pick Hugoton Royalty Trust (HGT). I am considering increasing my stake in HGT, as I feel it is one of the most undervalued royalty trusts.My Short Picks for 2009, with 03/31/09 closing pricesBuild-A-Bear Workshop (BBW) - $6.07 (+24.90%)
Red Robin Gourmet Burgers (RRGB) - $17.63 (+4.75%)Ann Taylor Stores (ANN) - $5.20 (+3.17%)Mercantile Bancorp (MBR) - $7.2999 (-30.81%)LaCrosse Footwear (BOOT) - $8.03 (-35.66%)La-Z-Boy (LZB) - $1.25 (-42.40%)Bank of America (BAC) - $6.82 (-51.56%)Office Depot (ODP) - $1.31 (-56.04%)Citigroup (C) - $2.53 (-62.30%)
Converted Organics (COIN) - $0.84 (-76.27%) Circuit City (CCTYQ) - $0.0075 (-94.23%) - BankruptSmurfit Stone Container Corporation (SSCC) - $0.00 (-100%) - BankruptAs a group my short picks rallied a little in recent weeks, particularly in the financial sector. The big surprise for me is Build-A-Bear Workshop (BBW) which is up almost 25% for the year. Converted Organics (COIN) continued its fall into penny stock territory.Well, I will review the list again at the end of April to see how my picks and pans are performing. Until then, happy investing!
Disclosure: At the time of writing the author held shares in Highveld Steel and Vanadium (HSVLY), Himax Technologies (HIMX), Hugoton Royalty Trust (HGT), Yanzhou Coal (YZC), UFP Technologies (UFPT), and Versar, Inc. (VSR).
China Fire & Security Group (CFSG) supplies industrial fire safety products and systems to companies in the iron and steel, power and petrochemical industries in China. The company today announced fourth quarter results which beat analyst estimations, showing increased revenue and earnings. The company is in a strong financial position with no debt and a healthy cash flow.
In the past, China has not been known for its strong track record in the arena of health and safety, but as the country continues to show tremendous growth, it makes sense that they will endeavor to protect their investments. Companies like China Fire & Security Group (CFSG) should flourish as a result. Interestingly, the company has a high insider ownership and yet has almost a 10% short interest.
China Fire & Security Group (CFSG) has been on my watchlist for several months as it is in a strong position to benefit from any government infrastructure spending and stimulus efforts in China.
Disclosure: At the time of writing the author did not hold shares in China Fire & Security Group (CFSG).
At the beginning of the year I made a list of picks and pans for the year which I planned to review at the end of each month. I started out posting further thoughts about some of the picks, but failed quite miserably to add much new stuff over the past month. I'll try to fix this over this next month! 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. At this point I am just going for a brief overview, I may get into some more in depth analysis later in the year. 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.So here are the performances for 2009 to date.My Long Picks for 2009, with 02/28/09 closing pricesAnadys Pharmaceuticals (ANDS) - $6.12 (+289.81%)Quicksilver Gas Services LP (KGS) - $12.20 (+28.69%)Natural Resources Partners LP (NRP) - $20.73 (+18.80%)Urban Outfitters (URBN) - $16.64 (+11.08%)Ecology & Environment (EEI) - $12.49 (+4.26%)Dorchester Minerals LP (DMLP) - $16.31 (+2.77%)Himax Technologies (HIMX) - $1.65 (+2.48%)Highveld Steel and Vanadium (HSVLY) - $6.742 (-12.21%)Chase Corporation (CCF) - $9.12 (-19.22%)UFP Technologies (UFPT) - $4.10 (-22.50%)Yanzhou Coal (YZC) - $5.68 (-24.47%)Raven Industries (RAVN) - $18.18 (-24.56%)Hugoton Royalty Trust (HGT) - $9.93 (-38.13%) Versar, Inc. (VSR) - $2.44 (-40.78%) A pretty dismal performance from my picks this month. Shares in Anadys Pharmaceuticals (ANDS) skyrocketed last month following the release of promising HCV data and have maintained a steady run. Highveld Steel and Vanadium (HSVLY) was the best performer of the month, although still sitting at a loss for 2009.My Short Picks for 2009, with 02/28/09 closing pricesAnn Taylor Stores (ANN) - $6.58 (+30.56%)Red Robin Gourmet Burgers (RRGB) - $14.21 (-15.57%)Build-A-Bear Workshop (BBW) - $3.62 (-25.51%)LaCrosse Footwear (BOOT) - $8.5185 (-31.74%)Mercantile Bancorp (MBR) - $5.94 (-43.70%)La-Z-Boy (LZB) - $0.90 (-58.53%)Converted Organics (COIN) - $1.27 (-64.12%)Office Depot (ODP) - $1.05 (-64.77%)Bank of America (BAC) - $3.95 (-71.95%)Citigroup (C) - $1.50 (-77.65%) Circuit City (CCTYQ) - $0.007 (-94.62%) - BankruptSmurfit Stone Container Corporation (SSCC) - $0.00 (-100%) - BankruptWell, as a group my short picks worked out a whole lot better than the long picks. The banks in particular had a rough month, with Bank of America (BAC), Citigroup (C) and Mercantile Bancorp (MBR) all suffering big drops. The one jewel among the short picks is Ann Taylor Stores (ANN) which is up over 30% since the beginning of the year. In fact despite the economy, certain retailers seem to be holding up a lot better than most people expected.Well, I will review the list again at the end of March to see how my picks and pans are performing. Until then, happy investing! Disclosure: At the time of writing the author held shares in Highveld Steel and Vanadium (HSVLY), Himax Technologies (HIMX), Hugoton Royalty Trust (HGT), UFP Technologies (UFPT), and Versar, Inc. (VSR).
At the beginning of the year I made a list of picks and pans for the year which I planned to review at the end of each month. Over the past month I have also tried to post further thoughts about some of the picks, I'll try to continue this through the next month also until I've covered each one. 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. At this point I am just going for a brief overview, I may get into some more in depth analysis later in the year. 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.So, without further ado, here are the performances for 2009 to date.My Long Picks for 2009, with 01/31/09 closing pricesAnadys Pharmaceuticals (ANDS) - $5.21 (+231.85%)Quicksilver Gas Services LP (KGS) - $14.00 (+47.68%)Natural Resources Partners LP (NRP) - $23.39 (+34.04%)Dorchester Minerals LP (DMLP) - $19.00 (+19.72%)Himax Technologies (HIMX) - $1.68 (+4.35%)Urban Outfitters (URBN) - $15.58 (+4.01%)Ecology & Environment (EEI) - $12.41 (+3.59%)UFP Technologies (UFPT) - $5.30 (+0.19%)Chase Corporation (CCF) - $10.91 (-3.37%)Raven Industries (RAVN) - $21.81 (-9.50%) Versar, Inc. (VSR) - $3.68 (-10.68%) Yanzhou Coal (YZC) - $6.50 (-13.56%)Hugoton Royalty Trust (HGT) - $13.06 (-18.63%)Highveld Steel and Vanadium (HSVLY) - $5.112 (-33.44%)A wide range of performance from my picks this month. Shares in Anadys Pharmaceuticals (ANDS) skyrocketed following the release of promising HCV data. Also strong movement in the natural gas sector helped lift picks Quicksilver Gas Services LP (KGS), Natural Resources Partners LP (NRP), and Dorchester Minerals LP (DMLP). The performance of Highveld Steel and Vanadium (HSVLY) prompted me to pick up a few shares at $5.48. I still believe that this company will be a major player in years to come, but right now it is holding up the bottom of the table.My Short Picks for 2009, with 01/31/09 closing pricesAnn Taylor Stores (ANN) - $4.92 (-2.38%)Mercantile Bancorp (MBR) - $9.85 (-6.64%)Build-A-Bear Workshop (BBW) - $4.20 (-13.58%)LaCrosse Footwear (BOOT) - $10.76 (-13.78%)Converted Organics (COIN) - $2.80 (-20.90%)Office Depot (ODP) - $2.16 (-27.52%)Red Robin Gourmet Burgers (RRGB) - $12.18 (-27.63%)Citigroup (C) - $3.55 (-47.09%) Bank of America (BAC) - $6.58 (-53.27%)La-Z-Boy (LZB) - $0.97 (-55.30%)Smurfit Stone Container Corporation (SSCC) - $0.0331 (-87.27%) - BankruptCircuit City (CCTYQ) - $0.006 (-95.38%) - BankruptWell, my short picks fell across the board, although some more than others. Circuit City (CCTYQ) and Smurfit Stone Container Corporation (SSCC) both ended the month in the bankruptcy court, and both Bank of America (BAC) and La-Z-Boy (LZB) fell more than 50%. I fear that the economy may not recover in time for La-Z-Boy (LZB) who may also find themselves in the bankruptcy court before year end. After all, who is going to opt for a new recliner over a mortgage payment?Well, I will review the list again at the end of February to see how my picks and pans are performing. Until then, happy investing! Disclosure: At the time of writing the author held shares in Highveld Steel and Vanadium (HSVLY), Himax Technologies (HIMX), Hugoton Royalty Trust (HGT), UFP Technologies (UFPT), and Versar, Inc. (VSR).
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).
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).
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.
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).
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).
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