Replies to post #42522 on Savvy Trades and Investments

[hweb2]

Hey Swick, tough to find bargains in a market at record highs. And even when a stock does look cheap, traders would much rather chase a Bitcoin stock that will never post quarterly profit. Many stocks on my screen are sitting with little to no volume. My pink sheeters have really been dead, so mostly focusing on listed stocks for now. Been trying to find stocks that fit 1 or more of the following themes: a stock that could rebound after tax loss selling ends in 2 weeks, a company that will pay less taxes in 2018 vs. 2017 thanks to the tax bill, or a low floater that could catch fire if the market melt up continues. Mentioned these on the board already, but here's a few I've been buying lately...

PCMI one of my faves. Been languishing around $10 & under for weeks. Stock was over $30 earlier this year, so getting hammered with tax loss selling. Last couple of quarters haven't been good. But they still managed Q3 adjusted earnings of .34/share despite some weakness from the hurricanes. PCMI guided for Q4 adjusted earnings of .55-.61/share. If they come close to that when they report in early February, I'm guessing stock rebounds to at least $12-$15. Then they should be set up with some easier comps in 2018. Revenue growth probably flattish, but lots of room to increase earnings. In the Q3 earnings PR, they talked about $12M in cost reductions they made near the end of the quarter. That alone is almost $1/share per year pretax. They also bought back a whopping 7% of the shares outstanding during Q3 (and paid $13/share too). That should enhance EPS going forward. Finally the Q3 adjusted earnings of .34/share were taxed at nearly 40%. So a tax rate of 20-25% should provide a further boost to the bottom line.

EVOL another one I like a lot. Hoping to add more in the low-mid $4's ahead of the Q4 report. Won't be out til late March, so we've got awhile. Q3 was kinda hohum, but the CEO provided terrific guidance on the call. Q4 revenues expected to increase to $8.5M-$9M. That's 40%+ revenue growth vs. last year. Sure to get some attention. And will be the first in a series of very favorable revenue comps thanks to a couple of acquisitions. Bottom line should look great too. There were $600K in 1-time expenses in Q3. And they see $400K in synergies in Q4, with more to follow in 2018. So just from those 2 things, income from operations could improve by $1M sequentially from Q3 to Q4. Plus add in any bottom line benefit that will result from growing revenues 13-20% sequentially. Could be looking at GAAP earnings of .12+/share in Q4. And then even better numbers in early 2018 (small benefit from lower taxes). Of course a lot of this is just on the CEO's word at this point. Possible he's setting us up for an overpromise & underdeliver scenario.

SCKT I've been buying around $3.40. Been suffering from some tax loss selling imo as the stock spent much of the year around $4 and higher. Q3 was a decent quarter, somewhat impressive considering business was really hurt by the hurricanes in early September. What I like is that business has rebounded strongly. They said on the CC that they'd shipped $2M in orders already for Q4 (in late October). Could be their first $6M revenue quarter. SCKT has cranked out many solid quarters in a row, but 2017 hasn't looked that hot as earnings have been fully taxed vs. untaxed last year. Now SCKT should see a significant benefit from the tax bill as earnings were taxed at 45% in Q3. If they'd been taxed at 25%, Q3 earnings would have jumped from .06/share to .08/share. With their continued solid growth plus the tax break, SCKT could easily post a .10+ quarter early next year. Stock will rebound to the $4's if that happens. Maybe $5's or higher if SCKT gets pumped as Square (Nasdaq:SQ) sympathy play.

SVT one I've been buying in the $10's. Popped up to the $12's last month after an excellent Q3 report. SVT posted Q3 earnings of .29/share vs. .16/share last year. Q3 revenues up 20%. If not for a 1-time $449K charge, Q3 earnings would have been .43/share! Tangible book value is $12. Numbers on SVT can be lumpy, but Q3 may have been a breakout quarter for them. Q1 & Q2 were weak quarters as the company said they were experiencing higher costs as they hired/trained new workers as they increased production capacity. Looks like they're starting to see some success in Q3. SVT paid taxes at a 32% rate in Q3, so the tax bill helps them. Another thing is the company founder passed away in August (why the charge in Q3). This guy was drawing a huge salary for doing little to nothing. Like $700K-$800K per year! Without the weight of that large expense, SVT earnings should improve by a few pennies per quarter going forward. Easy comps too. Don't think it'll happen every quarter, but SVT has the potential to put up a .50 quarter by next summer. That could send this low floater rocketing up to $15-$20.

AMS one I've been nibbling at. Down from $5 earlier this year, getting hit with tax loss selling here at $2.50. No surprise as the last couple of quarters have stunk. CEO said Q4 would be much improved. But he said the same thing about Q3, so not holding my breath. They've got a tough Q4 comp too. But the stock has really been beaten up and I think there's lots of bounce potential in 2018. CEO thinks the numbers will improve, they've got some easier comps next year, and will be paying less taxes. Tangible book value is $4.67. Plus AMS has that kicker of whenever they announce their next proton center, stock could soar 30-50% in a day.

MHH I've started buying in the $9's. Stock has been weak, maybe some tax loss selling after it popped up to $13-$14 a couple months ago. Q3 report was disappointing, but I think this is a good one to accumulate ahead of their Q4 report in early February. Due to an acquisition, should be the first in a series of very favorable looking comps for MHH. The company reported Q3 non-GAAP earnings of .27/share vs .25/share last year. Excluding a $1.7M charge for the acquisition, Q3 GAAP earnings probably flattish vs. the .21/share last year. MHH's Q3 was hurt by the hurricanes. So that alone should give Q4 a sequential bump. But I think the real improvement will come from their InfoTrellis acquisition. InfoTrellis only contributed $4.1M in revenues during Q3. The acquisition happened in mid-July...so a full quarter of InfoTrellis would have contributed more like $4.7M-$4.8M according to the CC. Still a somewhat soft quarter. A more normal quarter will see InfoTrellis revenue in the $5M-$6M range. Why this is important is that InfoTrellis has much higher gross margins. Over 44% in Q3 vs. 20% for the rest of the business. So even increasing InfoTrellis quarterly revenues by $1M-$2M could have a very positive impact on EPS. I'm guessing Q4 revenues come in around $40M vs. $32.4M last year. Hoping to see Q4 GAAP earnings of .25-.30/share vs. .14/share last year. And Q4 non-GAAP earnings of .30-.35/share vs. .19/share last year. If MHH posts Q4 numbers like these, I think the stock pops back up to the $12's or higher.

TAIT still my favorite low floater. I've been buying in the $1.60's.
They posted Q3 earnings of .04/share vs. .01/share last year. Nine month earnings of .11/share vs. .01/share last year. Excellent balance sheet with .63/share in cash. And I think their real estate is undervalued by several million. TAIT might be worth buying just for the healthy dividend yield of 6%. No tax loss selling or 2018 tax benefit. Actually they'll start paying taxes next year. But it should at least be good for a hold into the Q4/10K report as TAIT should have another favorable comp. Hopefully another .04-.05/share in earnings vs. a large loss in Q4 last year due to an inventory writedown. Should make for an excellent annual comparison, and send this low floater spiking higher. Think only a matter of time before this one sees another run to $2+.

Well I've rambled on for long enough. I'm always hunting for new ideas too. So any stocks you or anyone else think look good, please post them!

[littlefish]

SWICK, take a long look at OPXS. I'd probably see where Q4 comes in first since it should be out by year's end (possibly this week). I'm guessing $.05-.07 op income per share.

Their share structure and debt got massively cleaned up first in Aug 2016 (convertibles cleaned up) and most importantly in June 2017 when over $13 mill in debt owed by Sileas (and pledged in shares of OPXS making the debt owed potentially toxic to me as a potential investor) got cleaned up.

Now pretty much all those parties are only common shareholders like me except SILEAS/Hirschman whom no longer own any.

There are two positive organic growth drivers along with the whole business about to start perking up. One is more immediate with their building relationship on the commercial/retail side and the other involves a replacement build for the M113 military vehicle that will get going down the road a bit more probably (like a year or two). I estimate the latter could add upwards of $3 mill per year in periscope sales when AMPV goes into full production after 2020 and could add roughly $1+ mill once low rate production starts probably in late 2018 or 2019. That compares to total periscope sales of around $7.8 mill last year I think. So double digit organic growth potential eventually (the AMPV has only had a few testing variants built so far so it hasn't had meaningful impact on sales yet).

My guess is there's a bit of selling pressure lately into year end. Longview registered to sell up to 1.3 mill shares not long ago when the debt was settled. Keep in mind, the 2016 share restructure was for $1.2 per share when the company was worse off IMO. Subtract 4 cents in divs paid so their cost basis would be $1.16. We can buy shares a bit over $1. Not to mention the debt settlement averaged out to something like $3.7 a share for Longview since they forgave a big chunk of the debt. So the company's value was immediately enhanced in my mind.

The company has fairly stable SGA overhead and fairly stable fixed costs so they can leverage growth and turn it more easily into meaningful cashflow IMO. They made a couple small smart acquisitions over the last 5 years- buying remaining pieces of Miller-Holzwarth in BK for $750k- they used to be a direct competitor in plastic periscope market, and picking up AOC in Dallas from L-3 in the middle of sequestration hell for some of these small companies for about $1 mill (AOC should do over $5 mill revs this year and are hitting critical mass to pay overhead and expand profitability).

The puttable warrants for cash also mask a bit of book value IMO and at first had me cautious about what implications they might mean, That puttable for cash clause is tied to their being a fundamental transaction (like change in ownership/merger/buyout,etc). This probably makes the company a bit less attractive as a buyout candidate but also if warrants get exercised brings in about $1.5/warrant in cash- so effectively it would benefit us buying shares near $1 if they get exercised at $1.5 so the dilutive factor is accretive to peeps buying at this level. Took me awhile to get comfortable with the puttable part til combing over the S-1/A form where detailed info was. Thinking it was filed Aug 26 2016 or something like that if U dig.

I've spent some time combing over it due to not feeling comfortable with them for a long time but I feel pretty good about their future right now. Especially if you look out a few years (the near term looks OK too but I think the AMPV could really juice periscope sales down the road).

I've accumulated from the low $0.9s to just under $1.1 area and continue adding.

Good luck and don't be afraid to keep digging to assuage any fears/answer questions you might have. I think that's one reason they haven't been discovered yet.

All IMO only.