Quick, name a pair of military contractors. If you're like most investors, you'll say The Boeing Company (NYSE:BA) and Lockheed Martin Corporation (NYSE:LMT). That's because those two corporations are the biggest military contractors, working on the highest-profile projects. Namely, The Boeing Company supplies F-18 fighter jets and maintenance support to a couple of the U.S. military's branches, while Lockheed Martin is the developer of the multi-purpose F-35. It's a misnomer, however, to say weapons manufacturing is the United States' military's biggest expense - it's just the most prolific.
Reality: The biggest chunk of the United States' annual military budget is spent on operations and maintenance (aka 'logistics'). Enter Innolog Holdings Corporation (PINK:INHC).
Just for perspective, in 2010, the Department of Defense's budget totaled $683.7 billion. Of that, only $140 billion was spent on weapons and hardware... the kind that companies like Lockheed Martin and Boeing build. Even costlier to the nation's armed services is personnel (payroll). That required $154 billion, in 2010 anyway. The largest category of spending, though - and it leaves both personnel and procurements expenses in the dust - is operations and maintenance, or logistics. In 2010, the Department of Defense spent $283 billion on support services.
And, most of that $283 billion was directed not towards companies like LMT or BA, but to smaller, off-the-radar names like (you got it) Innolog Holdings. Indeed, the U.S. military specifically has a bias for hiring small companies.
Innolog Holdings Corporation - mostly through its primary subsidiary, Innovative Logistics Techniques, Inc. (INNOLOG) - is a "solutions oriented organization providing preeminent supply chain logistics and information technology solutions to clients in the public and private sectors." That's not necessarily the compelling part for investors, however. No, what's compelling to potential INHC shareholders is the way this little $1.0 million company is quietly adding military support contracts to its revenue stream, particularly over the past year.
Revenue has grown from $1.14 million in the fourth quarter of 2011 to $1.56 million in the third quarter of 2012. The raw numbers aren't huge, but the percentages are - the company has averaged (sequentially) a 16% increase in the top line since the last quarter of 2011. Shareholders can likely look forward to more of the same going forward as well, given the new contract Innolog was awarded in December to support the recap/rest operations for armored vehicles based at the Letterkenny Army Depot in Chambersburg, PA. Add it to a growing list of revenue bearing deals the company has made of late.
And, while the total revenue numbers may be small, bear in mind the company is too, with a mere $1.0 million market cap; all opportunities are relative.
What's even more compelling than that is the way the operating loss has been shrinking as sales have been climbing. For too many small companies, the loss widens as the top line grows, somewhat defeating the purpose of being in business at all. For Innolog Holdings Corporation shareholders though, there's a proverbial light at the end of the tunnel. While the company isn't likely to get in the black for Q4-2012 or early 2013, it's on the horizon, and that promise can often be enough to prod the stock upward in anticipation.
All my posts are my OPINION>>IMO>>>Do your own Due Diligence!!.......rareF...deal with it
