Power Solutions International Inc. (PSIX)

[MikeDDKing]

PSIX is a new favorite and is my largest holding. They make natural gas engines and are growing very rapidly. I think they have great odds of being a multi-bagger over the next several years. Here are some details on why I like them:

1. The really low prices for natural gas are causing a transition to natural gas engines. PSIX has been focused on the industrial market (e.g. forklifts) where the transition is easiest as a larger network of filling stations isn't required. They are also moving into the on-road market with a an 8.8L offering that is targeted at garbage trucks, light delivery trucks, school buses, and RVs. http://investorshub.advfn.com/boards/read_msg.aspx?message_id=74777512

2. Due to new emissions regulations, natural gas engines are now cheaper than diesel engines. Also, new regulations are increasing the size of diesel engines and some will not even fit in the compartments of the equipment/vehicles that they were designed to fit within.

3. Most pure play natural gas engine companies are not profitable. PSIX is one of only two companies in this industry that I know are profitable. Also, a well known name in this space, WPRT, has a market cap that is 10 times greater than PSIX but only 2 times the revenue and it is not even profitable. PSIX is very undervalued relative to it's peers.

4. The analyst that is covering PSIX is expecting their rapid growth to continue. Revenue is expected to jump to $203M in 2012 and $269M in 2013. They had revenue of $155M, $101M, and $83M in 2011, 2010, and 2009 respectively. Earnings are expected to grow from $0.56/share in 2011 to $0.76/share in 2012 and $1.14/share in 2013. Given their rapid growth, I think they can achieve a PE multiple of 50.

5. PSIX has a number of competitive advantages including:
a. They have agreements in place with many OEMs (e.g. 8 of the 12 top fork lift companies) which would be difficult for someone else to replicate.
b. They have emissions certifications on their engines and have expertise in obtaining certification.
c. They have been in this industry for a long time and thus have a first mover advantage.

6. I expect PSIX to uplist as soon as regulations allow which is in spring of 2013.

7. They have large insider ownership and a small float.

8. Their presentation at ROTH provides a great overview on the company:

http://wsw.com/webcast/roth26/register.aspx?conf=roth26&page=psix&url=http%3A//wsw.com/webcast/roth26/psix/