Top Picks for 2005
IPII - 1.55 Imperial Industries is a building materials supplier doing business primarily in Florida and neighboring southeastern states. The Company recently received shareholder approval for a reverse split to allow an application for Nasdaq listing. Fully diluted and taxed EPS was .21 through 9 months, and .07 in Q3. Third quarter results include a one time gain, and loss of business due to the hurricanes, that roughly cancel each other out. Revenues were up 33% from a year ago for the 9 month period. Q4 should be strong due to the company’s roofing supplies segment and the rebuilding effort in Florida. Nasdaq listing is likely to occur in Q1, and the stock should then command a PE of 10.
TMFZ - 2.60 TMSF Holdings is financial holding company specializing in non-conforming and sub-prime mortgages. In the last year the Company has grown rapidly, expanding geographically beyond its California base, and shifting from refinancing to purchase mortgages. Fully diluted and taxed EPS was .19 in Q3 and .41 through 9 months. While rising interest rates are a concern, primarily the low end of the yield curve has been affected and mortgage rates have remained low. Furthermore, the Company’s market niche is less susceptible to interest rate fluctuations than the prime mortgage market. Trades at a deep discount to its peers and management would like to upgrade to the AMEX/NasdaqSC in 2005.
ERS - 4.12 Empire Resources is a distributor of a wide range of aluminum products. Earnings and revenues have grown steadily over the last 4 years, with EPS of .12 in 2001, .24 in 2002, .37 in 2003 and on track for .48 in 2004. 2005 EPS should be approximately .60. Dividend yield is over 5%, including the special year end dividend. Nothing exciting here, but this AMEX listed microcap should provide solid returns in 2005.
EGY - 3.88 Vaalco Energy continues to have success in oil field exploration offshore from Gabon, West Africa. Fully diluted EPS was .16 in Q3 and .32 through 9 months, though much higher tax rates are looming short term. However new tax credits from further exploration and development costs will arrive next year. The ETAME field alone represents several years of production at current output levels, and prospects for substantial new reserves are good for 2005 in the Abouri and Etoumi oil fields. The recent registration of 37 million shares represents a potential overhang of shares for sale into the public float, however successful institutional placements of these shares could be good news for the stock.
DGIX - 0.85 Dyna Group International, a manufacturer of a wide range of pewter based consumer products, has shown solid growth over the last 3 years with EPS of .02 in 2002, .08 in 2003 and on track for .14 in 2004, assuming the usual seasonal strength in Q4. Earnings are fully taxed and diluted. Tangible book value is .62 with no long term debt. This stock is thinly traded, but that could change as it gets discovered. Plenty of upside potential from these levels, especially if the earnings growth continues.
The above five stocks are among my favorites, but there are plenty of others I also like. Too many to name them all, but here are a few others ….
PKZ, 37.10, is a small midcap, but as cheap as some of the microcaps. A pipeline to China is due by early 2006 and will greatly reduce oil transport costs. EPS was 2.27 in Q3 and the Company continues to buyback shares aggressively. If oil prices stay at these levels, EPS could approach $10 in 2005. But the negatives are unresolved tax issues with Kazakhstan, a pesky dispute with Lukoil regarding their joint venture, and limited growth potential for their reserves.
CGNW, .39, had EPS of .027 in the latest quarter. Looks like they’ve turned the corner and 500k shares were bought by insiders over the summer.
TREK, 2.30, earned .14 in calendar Q3 and it should be more in the December quarter. Has substantial o&g reserves listed at a present value of nearly $6 per share in the recent 10K filing. Negatives are gradual declines in production and management’s lackluster growth plan. Nonetheless a very interesting asset play, that could even be a takeover candidate given their large reserves, especially if oil prices trend higher.
MANC, 9.99, may be a good short term play on expectations for a strong January fiscal Q2, due to hot selling plasma displays over the Christmas shopping season. Has had a good run already, but the stock is acting like it could go much higher ….? Priced at $9.99 to close the year, it might be a bargain with Freudian overtures.
STV, 5.19, has seen an 80% increase in construction backlog. If margins stay strong, EPS could rise sharply in 2005, up from an estimated .50 in 2004.
NWAU.pk, .45, is my favorite pink sheet ‘special’. Management might be clowning around with their guidance for .30 EPS in 2005, but their story seems to have some credibility. It could go to zero if they’re full of ‘hot air’, but 10 bagger potential also seems within the realm of possibility.
I've recently taken big profits in my favorite sector of 2004, the oil tankers, because spot market rates have come down dramatically in the last 6 or 8 weeks. But the spot market is notoriously volatile and could rebound sharply. Stocks like FRO, OMM, SFL and GMR could be interesting trading vehicles if they come down too far.
Best of luck to all with their 2005 investments !
