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Concrete is truly an amazing product. Its use in construction was first popularized during the Roman Empire. Concrete’s impact was so profound it spawned its own renaissance.
The Roman Architectural Revolution was built on the versatility of concrete. No longer were architects and builders constrained by brick and stone. The miracle product, concrete, allowed for larger more structurally complex buildings.
There aren’t a lot of products that have persisted for millennia… and hunger for this commodity has only become more ravenous.
You’re probably surrounded by concrete right now. It’s in your home’s foundation, or your office walls. The world is practically wrapped in it. The US alone has more than 55,000 miles of highway paved with the stuff.
One country’s massive hunger for concrete puts everyone else to shame. You probably guessed it already – China.
In 2009 China consumed approximately 1.4 billion metric tons of concrete. That accounts for half of the world’s total consumption.
You see the opportunity as clearly as we do… so we’ve uncovered a Chinese concrete company that’s a major supplier in China.
Many world famous structures began life in their plants. Iconic architectural achievements such as the Olympic Stadium Bird’s Nest, Beijing International Airport, and the country’s massive 30,000 km high speed rail expansion.
The company we uncovered is Chinese Advanced Construction Materials (CADC).
ABOUT CHINESE ADVANCED CONSTRUCTION MATERIALS
There are four state owned conglomerates that dominate China’s ready-mix concrete (RMC) market. They are all CADC clients. The company is also one of only three Chinese RMC producers that are publicly traded.
China Advanced Materials has four plants in Beijing. One they own and three they lease. All of these facilities have formulation, production, and transportation capabilities.
There is of course a drawback with large fixed facilities for concrete production. The transportation and setting of concrete has to be accomplished within 90 minutes or the mixture will begin to harden. That means the plants are restricted to projects within a 25 km radius.
That’s why CADC put an emphasis on portable RMC facilities. The company currently has 24 rapid assembly and deployment batching plants in the field.
Talk about a strategic advantage…
No longer are projects constrained by geographical distance. Plus the specifications and mixtures can be easily tweaked for every project’s unique needs.
Concrete is highly engineered, and proprietary formulas are closely guarded secrets.
It helps set CADC apart from the competition.
They can compete on price, but when it comes to construction materials cheaper isn’t always better.
CADC’s track record, experience, and production capabilities are what landed them so many high profile contracts.
WHY CADC? WHY NOW?
China Advanced Construction Materials has a couple of big advantages in the concrete market.
First, the market sees their proprietary concrete formulas as a better product. Their eco-friendly RMC product has a projected life span of 100 years. That’s double the Chinese national average of 50 for conventional concrete.
Second, they are one of only a handful of Chinese concrete companies that have reached significant economies of scale. And in the concrete biz size and infrastructure makes all the difference.
CADC has put a lot of R&D into their green concrete formulas as well as production. Of the 2,400 concrete producers in China only China Advanced Construction Material and 9 others are certified as green.
What’s the key to their green concrete? It’s their aggressive use of recycled waste material, their low energy use at production, plus initiatives designed to cut down on dust and air pollutants.
The big emphasis on green concrete production in China began in 2004.
That year the Chinese government issued Decree 341. The law banned on-site concrete production in over 200 cities. Seems like it would be bad news for concrete producers, right? Not for CADC. They had the capacity and knowhow to adapt and profit big.
Their eco-friendly RMC cemented their leadership position in the market. The company’s portable RMC plants reduce worksite noise, dust, and transportation impacts.
This became especially important when CADC was awarded part of the lucrative High Speed Rail contract. They currently have 24 portable RMC plants in 10 provinces working on the project.
The China growth story is clearly reflected in this company’s financials.
Revenue at the end of CADC’s fiscal year in June 2008 was $27.5 million. Revenue this year is up to a staggering $137.9 million… up 400% from 2008. And this growth was achieved in a rough economy… imagine what happens when times improve.
Net income was up 42% to $17.1 million.
This company doesn’t keep a lot of cash or debt on its books. At the end of the year the company had $1.6 million cash on hand. But total assets were approximately $144.8 million.
The return on equity is high at over 26%. Clearly management’s using shareholder profits effectively.
According to a 2007 ADOT report there are approximately 254.4 million vehicles in the United States. The cost of upkeep and fuel is astronomical, and a lot of people make a lot of money off of that massive fleet…Oil companies, automakers, part manufacturers and mechanics just to name a few.
But eventually that car is going to reach the end of its life. As you probably know, cars aren’t just carted off to some auto-cemetery to rust.
These days a car is a wealth of material resources. There’s loads of iron and steel in the car’s frame and components.
Radiators are also sought after for their high metal content. Newer vehicles have primarily aluminum radiators, and older cars could have copper or even brass radiators.
Batteries are broken down for their lead and plastic. Precious metals in catalytic converters are worth a small fortune. And even scrapped aluminum engine blocks are valuable.
In death automobiles are still creating industries.
The Automotive recycling industry is still fragmented. The top 20 companies control only 35% of the market.
It’s estimated there are over 500 independent metal recyclers in the U.S.
In 2010 the US recycled about 74 million tons of iron and steel alone, and we exported another 20 million tons of it as scrap. That’s a lot of metal. In fact the industry sells about $40 billion worth of materials annually.
One small cap company in particular has consolidated the whole chain. They have facilities to recycle almost every part of a car form metal frames, to batteries, radiators and catalytic converters.
And they’re conveniently located in the industrial heart of America.
Metalico (MEA) has three distinct business segments.
The largest segment is their ferrous and non-ferrous scrap metal recycling.
Ferrous metals are simply metals that contain iron, like steel. Non-ferrous means no iron, such as aluminum, copper and lead.
The company sells the ferrous metal as shredded, sheared and bundled scrap. The Non-ferrous is sold as aluminum, copper, stainless steel, brass and high temperature alloys.
Metalico’s second segment is platinum group and minor metal (PGM) recycling.
And their last segment is lead product fabrication. They manufacture sheet lead/plate, shot, strip lead, cast lead and some machined products.
The company is based in the north east part of the country. Their scrap processing facilities are in New York, Pennsylvania, Ohio and West Virginia. The company operates twenty other scrap metal facilities.
One of those has the added bonus of being an aluminum de-oxidizing plant as well.
Their Annaco facility in Ohio is one of the largest auto engine processors in the country. And Metalico’s Buffalo, New York processor is one of the largest in the Great Lakes region.
Metalico has six PGM processing facilities smattered elsewhere. There are facilities in New Jersey, Pennsylvania, Mississippi and Texas.
The company’s lead product manufacturing facilities are in Alabama, California, and Illinois.
There’s a lot of diversity in this company. So it’s important to look at how each of those segments is performing.
The ferrous and non-ferrous scrap metal is the largest segment.
In Q3 2011 ferrous sales were 135,800 tons and non-ferrous sales were 32.7 million pounds. But the selling price of non-ferrous was stronger in 2011. Overall, ferrous and non-ferrous segment sales increased year-over-year by 23%.
Metalico’s PGM segment is also up.
Platinum processing by weight was down slightly from 31,400 in Q3 2010 to 29,200 in 2011. But revenue increased by five million, or approximately 15.4%, on account of more favorable platinum prices. The minor metals part of that segment also increased, from $8.1 million to $12.6 million.
The Lead fabricating segment’s weight of sales increased only marginally. But because of improving lead prices, revenue from this segment increased, by 24.3%.
Metalico announced a third straight year of revenue increases with their most recent annual filings on March 14, 2012. The company reported revenue of $660.9 million, up 19.5% from 2010’s revenue of $553.3.
A 126.6% increase over 2009’s revenue of $291.7 million.
In 2009 the company reported a net loss of $3.4 million. Working hard, company management turned the business around, reporting net income of $13.4 million in 2010, and $17.4 million in 2011.
Earnings per share in 2011 were $0.37, up 27.6% year-over-year.
The company’s main hurdle is keeping operating expenses down. In 2010 they had an operating margin of 6.6%. In 2011 that dropped down to 5%.
At the end of 2010 the company reported $3.5 million cash. As of Metalico’s their March 10k filing the company had $5.9 million in cash. That’s an increase despite recent capital outlays.
Total assets for 2011 are up 11% from 2010. Liabilities only increased 7.3% during the same period. The company has long-term liabilities of $134.1million.
RECENT NEWS AND FUTURE ENDEAVORS
During the third quarter Metalico leased and received permits for a 75,000 square-foot property in New Jersey. The property will be used as a new non-ferrous buying center. It’s also going to be the headquarters for their New Jersey-based PGM recycler.
The company also added some key members to their team of non-ferrous buyers. According to management their success has already expanded that segment. The company has already added additional equipment to handle the growth. They are now planning an expansion of a warehouse to handle the increased volume.
Management also bought back $5 million of the company’s 7% convertible notes. They plan on retiring another $5 million of the notes before year’s end.
The company has also increased capital expenditures. They invested $7.6 million in the third quarter, primarily in the scrap metal segment.
They spent $3.3 million on a new shredder in Buffalo. Another million for a fleet of high capacity rail cars. And the rest was mostly spent on improving facilities for new trucks and scrap cranes.
The company’s future plans are to continue to invest in metal processing capabilities. Management is also on the lookout for attractive acquisitions.
Let me ask you a simple question… “Which country has the world’s largest auto-industry?”
If you guessed the U.S. or Japan you’d be wrong. The correct answer, since 2009, is China.
Last year auto sales in China were up 32%!
In July alone General Motors sold 173,398 vehicles in China. Buick sold over 50,000, and Chevrolet sold over 46,000 vehicles.
The auto industry in China is exploding.
In 2000 China production capacity was about two million automobiles. By 2009 the industry had grown to over 14 million vehicles a year.
By 2010 the industry reached 18 million vehicles a year… and it’s growing!
China has a ravenous hunger for automobiles. The staggering growth of production and sales is proof of that.
Now I want you to think about the last car you bought.
As you know there are thousands of parts and assemblies that go into making a working automobile. Transmissions, electrical systems, cooling systems, steering… the list goes on and on.
All those parts have to be manufactured by someone!
This has created a boom in a variety of auto-related industries. Mining, engineering, electronics, and plastics have all experienced massive growth in China to support the Auto industry.
One of the companies benefiting from the growth in the Chinese auto industry is none other than China XD Plastics (CXDC).
ABOUT CHINA XD PLASTICS
China XD is one of China’s leading plastics manufacturers. Their products are used in automobiles, plasma TVs, appliances, and mobile phones.
CXDC counts all ten of the top ten Chinese automakers as an end-user.
In 2005 their first two production lines went up with an annual capacity of 7,000 tons.
Now they have 430,000 square feet of production facilities, and an annual production capacity of 165,000 metric tons.
It’s not often you see a company’s manufacturing capacity shoot up by 2,257%, in just six years.
What’s incredible… the company is still expanding!
They recently purchased the land use rights to a 50-acre piece of land, and management expects with some minimal construction, they can use it for expansion.
Now here’s the most exciting part of the plastics business.
While Autos contain a good deal of plastic components, alternative energy vehicles use even more. As the wave of green energy sweeps through the auto industry, demand for plastics is only going one direction… up!
China XD is well positioned to participate in the biggest manufacturing boom in history.
WHY CXDC? WHY NOW?
In their Q1 conference call CXDC’s CEO said he believed the automobile industry growth rate in 2011 and 2012 to be between 10% and 15%.
That’s huge growth!
Remember, cars in China, like in the rest of the world, are becoming more advanced. This means a much higher percentage of plastics are replacing metal alloys.
According to the company’s management, the average U.S. and European vehicle has 330 pounds of plastic per vehicle. In China the average is only 242 pounds. So the future looks bright for plastic demand.
China XD is aggressively pursuing higher end clients as well.
There’s a trend towards buying more advanced alloy plastics and environmentally friendly plastics. The company has a number of products to address those demands… and it explains why the company is investing so much in R&D.
China XD is announced their 2011 numbers on March 26, 2012.
CXDC has had three record breaking years in a row. In 2010 revenue was $249.8 million; up over 2009’s $135.8 million. In 2011 the company reported $381.6 million in revenue. That’s a 52.7% increase from a year before. Gross profits hit $95.8 million, jumping 55.7% from 2010. And net income was up to $60.5 million, up 110% from last year.
Here’s the best part. Total product shipped increased by nearly 50%.
The key is not only are they shipping more product, it looks like they’re charging more money for the product they ship!
What’s even better was management’s guidance!
“The Company expects its fiscal year 2011 revenue to be in the range of $280 million and $310 million and it expects its fiscal year 2011 non-GAAP adjusted net income to be in the range of $48 million and $51 million.”
Looks like CXDC not only outperformed market expectations for China, but outperformed their own expectations as well!
Xinyuan Real Estate (XIN) is a big residential property developer in China. As of the end of 2010 they had completed 21 projects. Those 21 projects had a combined size of over 2 million square meters and totaled 23,324 units.
XIN is a vertically integrated company… because they really do it all.
Xinyuan focuses on building apartment buildings. These high-rise and sub-high-rise structures include all the necessary amenities… like retail outlets, health facilities, and even schools.
The company’s strategy is simple.
They focus on developing China’s Tier II cities with solid population growth and good economic activity. XIN’s really focusing on seven strategically selected cities. This gives their growth strategy good focus.
An important part of XIN’s strategy is location. By picking the more affluent and rapidly growing Tier II cities they’ve secured a healthy level of demand.
One of their new projects, Chengdu Splendid, was just launched in May 2011. In May and June alone they sold 11% of the total square footage. That accounted for $74 million of XIN’s sales in Q2.
They also know when to start cutting prices on their properties that aren’t moving. They nearly tripled sales in their Xuzhou International City Garden project by lowering prices a bit.
As a way to expand their business, they also offer other industry related services from property management to landscaping.
Xinyuan has been busy, and it shows in their financials.
XIN’S MOST RECENT FINANCIALS
Xinyuan released their 2011 numbers on April 16 2012. Year-over-year revenue increased 52.7%, with XIN reporting revenue of $687.5 million for the quarter.
You would think that year after year of huge revenue increases would cause a company to grow lax on expenses. Not with Xinyuan. Gross margin was up big during 2011. For the whole year gross margin was at 29%, considerably better than the already great 25% of 2010. Their selling general and administrative expenses dropped from 7.3% of revenue in 2010 to 6.3% of revenue in 2011!
They’ve not only been able to hold expenses low while aggressively growing revenue, but they have actually managed to lower them… just look at their amazing net income numbers.
XIN’s net income increased over 100% from 2010 to 2011! In 2010 the company reported net income of $51.1 million, in 2011 it was up to $102.3 million.
As a result, their earnings-per-share have increased over 100% from last year.
In 2010 the company had a diluted earnings per share of $0.33, compared to $0.26 the previous year. In 2011 that was up to $0.68 a share!
The company’s balance sheet looks strong with $319.2 million in cash at the end of 2011, and only $113.1 million of long term debt.
Earnings season continues in a big way. This week there are more than 110 S&P 500 companies announcing earnings.
On Tuesday Apple (AAPL) released earnings for the quarter ended on December 30 2011. The company had a 73% increase in sales year over year. Also reporting this week are tech companies Netflix (NFLX) and Yahoo (YHOO).
Keep an eye out for earnings from car manufacturer Ford (F) and fast food giant McDonalds (MCD).
Industry Oil & Gas Refining & Marketing
Recent Price $1.48
Market Cap $150.1 m
Shares Outstanding 100.8 m
Average Volume 383,333
Dividend Yield N/A
Longwei Petroleum is a wholesale petroleum distributor in China. The company’s operations include buying, storing, transporting and selling oil and gas.
The company has two storage facilities in Shanxi province. The storage depots have a combined capacity of 120,000 metric tons. Longwei is the only licensed large scale intermediary in the city of Gujiao, where one of their storage facilities is located.
There are a variety of demands in Shanxi ranging from retail to industrial. Longwei’s clients include coal mining operations, power suppliers, and large, small, and independent gas stations.
The company also owns two retail gas stations and acts as a purchasing intermediary for other Shanxi industrial interests.
LPH’s most recent quarterly numbers were released on November 9, 2011.
The company reported revenue of $118.6 million in the quarter. Up from last year’s third quarter revenue of $113.3 million. This is an increase of 4.7%. Longwei Petroleum also reported a net income of $17.8 million… an increase year-over-year from a net income of $4.9 million.
As of September 30, 2011, the company reported $2.9 million in cash and no long-term debt.
KEY METRICS ANALYSIS
Trailing P/E 2 x
Price / Sales 0.3 x
Return on Assets 23.3 %
Insider ownership 66.6 %
Short Ratio 1.3 x
Current Ratio 22.7 x
Total Debt To Equity N/A
Longwei put out a year end update in early January 2012. The company announced that it put $86.3 million towards the acquisition of an additional Shanxi province facility. The northern Shanxi fuel storage depot has a capacity of 100,000 metric tons and a total purchase price of $110 million.
The company last added storage capacity in 2009 with their 70,000 ton Gujiao facility.
Yongjun Cai – CEO
Michael P. Toups – CFO
Yongping Xue – Secretary, Treasurer, Director
Dora Dong – Director
Chart courtesy of stockcharts.com
LPH’s 52-week low was $0.82 and the 52-week high was $2.79. Right now the stock is trading at $1.48. The 50-day moving average is near $1.32 a share and the 200-day moving average is at $1.26. The company has a market cap of $150.1 million and 100.8 million shares outstanding.
It’s finally a new year and a new quarter. While many people are excited for the New Year, some aren’t so happy. You see, it also happens to be 2012, the year the world ends according to the Mayan calendar.
Regardless of your stance on this end of the world nonsense, if we do wake up to a post-apocalyptic wasteland one morning, There’s one thing everyone’s going to miss… electricity.
That is, unless you’ve equipped your house with solar panels. Which leads us to this week’s company to put on your radar…
Industry Semiconductor Equipment & Materials
Recent Price $1.83
Market Cap $70 m
Shares Outstanding 35.1 m
Average Volume 248,740
Dividend Yield N/A
Daqo New Energy (DQ) primarily manufactures and sells polysilicon, a key component in solar panels. In 2008 the company established Chongqing Daqo, their Chinese operating subsidiary.
In addition the company manufactures solar modules with subsidiary Nanjing Daqo. The company established a U.S. based subsidiary, Daqo Solar Energy North America, in 2009. The North American subsidiary has served as a marketing office for the continent.
Most recent is their Xinjiang Daqo New Energy subsidiary. It was established in February 2011 to expand the company’s polysilicon manufacturing capacity.
DQ’s most recent quarterly numbers were released on November 15, 2011.
The company reported revenue of $59.6 million in the quarter. Down from last year’s third quarter revenue of $63.2 million. This is a decrease of 5.8%. Daqo also reported a net income of $12.4 million… a decrease year-over-year from a net income of $17.9 million.
As of September 30, 2011, the company reported $59.2 million in cash and long-term debt of $63.1 million.
KEY METRICS ANALYSIS
Trailing P/E 0.6 x
Price / Sales 0.2 x
Return on Assets 13 %
Insider ownership 7 %
Short Ratio 2.6 x
Current Ratio 0.8 x
Total Debt To Equity 32.4 x
The company received a number of rewards in 2011. In November the company’s CEO, Dr. Gongda Yao, won the “2011 Ernst & Young China Entrepreneur of the Year” award. Then in December the company was included in the “2011 China Cleantech Top 20” list. The award is meant to support the sustainable growth and cleantech sector in China.
Daqo is also in the process of expanding its new Xinjiang production facilities. In August the company announced approval of a $150 million loan from the Bank of China. The 6-year long-term project finance loan will enable the company to continue its “phase-2” expansion of the facility.
Gongda Yao – CEO
Shihua Su – CFO
Liqiang Jin – Senior Vice President
Jian Zhu – Senior Vice President
Chart Courtesy of StockCharts.com
DQ’ 52-week low was $1.41 and the 52-week high was $14.97. Right now the stock is trading at $1.83. The 50-day moving average is near $1.88 a share and the 200-day moving average is at $4.41. The company has a market cap of $64.3 million and 35.1 million shares outstanding.
Out With The Old, In With The New…
Well, we’re at the end of 2011, and about to embark on a new adventure called 2012. While many market commentators are talking about the past year, and what could have been, I want to do something different…
I want to talk about the future.
I truly believe 2012 is shaping up to be a great year… and one that could seriously propel your portfolio higher.
Well there are a number of reasons. First off is economic data. It’s not really getting better… but more importantly it’s certainly not getting worse. Consider unemployment numbers.
While almost 9% of the US population is out of work right now, and another 6% or 8% is under employed, the numbers aren’t getting worse. Back during the Great Depression it was estimated unemployment hit 20% – 25%. Thankfully we’ve avoided that catastrophe.
Now, another important driver for higher stock prices in 2012 is housing.
I don’t know if you’ve seen the numbers, but housing starts, housing permits, and even housing sales are up. Granted they’re up from pathetically low numbers… but again we have stability or improvement… things are NOT getting worse.
We also pass an important milestone in housing this year… the 4 year mark.
Remember the housing implosion started in 2008. Now here we are 4 years later and all those families who sold their homes in a short sale are once again able to buy a house!
Now this won’t create a flood of new buyers, but some people will start to work their way back into the market. And again that’s great news for housing.
Once we see the housing industry pick up… and 2012 could be the year… we should see a lot of other industries start to employ more people. More employment means more purchasing power… that means more economic growth… and that’s great news for stocks of all shapes and sizes.
Of course, I’m a bit biased when I say small cap stocks will outperform the markets over the next few years. But I believe properly chosen stocks… smaller in size… will be able to quickly react to economic improvement, and grow quickly.
So be on the lookout for great small stocks in 2012.
As always, we’ll be bringing you great investment ideas in our free Radar Reports every week. If you’re also interested in getting more in depth research, I encourage you to try a subscription to “Zenect Wealth”. It’s our premium research product where we do a bit more in depth analysis and look much more closely at the companies. To learn more about everything that comes with a subscription to Zenect Wealth, click here.
We’re going to release our next recommendation on New Year’s day! So sign up quickly to get in on this first pick of 2012!
I hope everyone has a wonderful new year, and we’ll see you in 2012!
Editors Note: Because of the Thanksgiving holiday, we’re bringing you this issue of Zen Money News a day early. We want to wish you and your family a happy and safe holiday!
It’s official… there will be no super committee budget decision. At least no deal delivered on time. Add that on to Europe’s continuing sovereign debt crisis, and it’s no wonder why the markets continue to fall.
On Monday the DOW was down 248 points to 11,547. The S&P was down 1.86% to 1,192.
Although a lot of equities are suffering oil is remaining stable. Brent Crude is at $106.90 and WTI is trading at $97.40.
Today’s company is diversifying to take advantage of oil’s relative strength.
Industry Independent Oil & Gas
Recent Price $1.34
Market Cap $77.8 m
Shares Outstanding 58.1 m
Average Volume 735,418
Dividend Yield N/A
GMX Resources is a natural gas and oil exploration and production company. They have two newly acquired oil plays in development.
One on the Bakken, targeting the Bakken & Sanish-Three Forks formation, was just purchased in January 2011. Another, in Wyoming’s DJ Basin, will target the Niobrara Formation. It was also acquired at the same time.
These acquisitions are part of a concerted effort by the company to diversify into oil. Both of those new plays are estimated to be 90% oil.
The majority of the company’s natural gas interests are in the East Texas Basin, specifically the Haynesville/Bossier shale and the Cotton Valley Sand Formation.
GMX Resources’ third quarter numbers were released on November 3, 2011.
The company reported revenue of $28.4 million in the third quarter, down from last quarter’s $32.9 million. This is a decrease of 13.7%. GMXR also reported a net loss of $65.9 million… a sharp decrease from last quarter’s loss of $11.8 million.
As of September 30, 2011, the company reported $4.9 million in cash and debt of $341 million.
KEY METRICS ANALYSIS
Trailing P/E N/A
Price / Sales 0.8 x
Return on Assets 1.6%
Insider ownership 8%
Short Ratio 6.7 x
Current Ratio 1 x
Total Debt To Equity N/A
GMX Resources is a company in flux. This has been a watershed year because of their expansion into oil and the Bakken. GMX estimates there are approximately 600 potential wells just at the Sanish-Three Forks location.
The first wells were finished and began producing in the third quarter. That helped boost the company’s production by 32% year-over-year in Q3. The second well is scheduled to begin production in November 2011.
The company expects to eventually operate 52 North Dakota units. GMX anticipates an average working interest of 50% to 75% per well.
Ken Kenworthy, Jr. – CEO
Michael Rohleder – President
Jim Merrill – CFO
Gary Jackson – VP of Land
Chart courtesy of stockcharts.com
GMXR’ 52-week low was $1.32 and the 52-week high was $6.48. Right now the stock is trading at $1.34. The 50-day moving average is near $2.11 a share and the 200-day moving average is at $3.51. The company has a market cap of $77.8 million and 58.1 million shares outstanding.
News just came out about a new bet made by one of the most prolific investors of our time. Warren Buffet has apparently had his eye on tech. He just bought approximately 5.5% of IBM, or 64 million shares, for about $10.7 billion.
IBM obviously doesn’t fit the criteria of a small cap value stock. But if you’re looking for a tech for your radar with a more buyer friendly price tag check out this week’s pick.
Industry Application Software
Recent Price $1.61
Market Cap $137.6 m
Shares Outstanding 85.5 m
Average Volume 619,943
Dividend Yield N/A
Openwave Systems (OPWV) is synonymous with mobile internet usage. The company has approximately 200 patents related to smart devices, cloud technology and unified messaging.
The company has helped its operating customers accomplish a number of industry firsts including mobile browsing, photo-messaging, and the first Wireless Access Protocol (WAP) deployment.
Mobile data and bandwidth are in high demand. Openwave is developing ways for operators to get more out of their data capabilities and limited bandwidth. These operators, or communication service providers, include internet service providers (ISPs), wireless and wired carriers, and broadband providers.
Openwave’s third quarter numbers were just released a week and a half ago.
The company reported revenue of $52.4 million in the third quarter, up year-over-year from $41.5 million. This is a year-over-year increase of 22.3%. OPWV also reported a net income of $2.6 million… a sharp increase from last year’s Q3 profits of $71,000.
As of September 30, 2011, the company reported $23.9 million in cash and no long term debt.
KEY METRICS ANALYSIS
Trailing P/E N/A
Price / Sales 0.8 x
Return on Assets -4.5%
Insider ownership 10.5%
Short Ratio 6.6 x
Current Ratio 1.7 x
Total Debt To Equity N/A
On August 31 2011 Openwave filed a complaint against Apple Inc. (AAPL) and Research In Motion (RIM) with the International Trade Commission.
In Openwave’s complaint they accused both companies of profiting off of Openwave’s inventions. The company argued that some of the breakthroughs it developed became foundational to mobile internet technology. Openwave claims it has not seen any royalties from these companies they say utilized those advancements.
Openwave has compiled a pretty comprehensive list of offending Apple and Blackberry products. Including iPhones 3G, 3GS, 4, the iPod Touch, iPads, and Blackberry’s Curve 9330 and Playbook.
Mike Mulica – CEO
Anne Brennan – CFO
John Giere – Senior VP, Products and Marketing
Sean MacNeill – Senior VP, Engineering and Global Services
Chart courtesy of stockcharts.com
OPWV’s 52-week low was $1.17 and the 52-week high was $2.67. Right now the stock is trading at $1.61. The 50-day moving average is near $1.58 a share and the 200-day moving average is at $1.91. The company has a market cap of $137.7 million and 85.5 million shares outstanding.