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Saturday, July 12, 2008

5 Thoughts on Saturday

1) What An Absolutely Insane Week

FNM FRE on the ropes with great drama - Oil surges again Friday afternoon - IMB shut down Friday night

These are amazing times we are witnessing. My guess is that because this Friday is options expiration that we could see a decent bounce at some point this next week to take out some put holders (Barring new devastating financial/oil news). There is plenty of short fuel right now.

2) Check Your Attitude At The Door

In this environment (market tanking), most stock have pulled back quite a bit. Many of my stocks have. So no one is a genius for shorting or saying "what happened to this stock Superman" during this time. Similarly, when the market is a raging bull there is no need to boast too loudly when momentum is in my or any longs favor. Everyone will eat the humble pie at some point or another. It is better not to boast too loudly or bash others when they are down because we will all be humbled at one point or another. In the past i was extremely arrogant and boastful and i see how that turned people off. As a result, I have tried to change because i am far from perfect and at best i pick some decent stocks but i don't always play them correctly.

3) Have To Continue To Be Very Selective On Longs

However, APWR proved my point this week. That point being, if you can find companies with products in demand during these times they can still do well. APWR announced the completion of the largest wind turbine facility in china and the stock moved approximately $6 higher last week. Read More Here

That is why any of these stock could take off in this market with similar news:

TAYD - earthquake protection devices
NTIC - Plastic Waste to Oil tech launch, Bioplastics
HEK - China bottled water
MBLX - Bioplastics
AETI - Texas wind power service company
ERII - water desalination products

the point being have to be selective in this market but there will still be momentum

4) Accounting Lesson - Learning To Dig Deeper

NTIC earnings and sales were great. Here is the why - NTIC makes most of their money from international joint ventures that touch 50 countries. These joint ventures are accounted for by the equity method, which is a GAAP measure to account for joint ventures with this level of control. When you look at the income statement this income shows up as income from joint ventures and holding companies (below North American operating gain/loss) you can see it was $1.2m this quarter vs $760k last quarter (approximately 58% growth). When you look further, the sales from these international ventures were up big - NTIC's international business continues to significantly expand as total net sales of all of NTIC's joint ventures increased 34.8 percent to $79,893,753 during the nine months ended May 31, 2008 compared to $59,265,028 during the nine months ended May 31, 2007. NTIC's income from its corporate joint ventures and holding companies increased 87.1 percent to $3,880,352 for the nine months ended May 31, 2008 compared to $2,073,994 for the nine months ended May 31, 2007. Read More Here

Now you ask what about the top line of the income statement? The sales and North American operating loss is from the North American (smaller) part of the company's overall biz. They announced last year that a North American customer phased out and that would make North American sales comps off for 2008 but that customer did not add much to the bottom line anyway.

In closing, you have to look at the joint venture income because that is what drives growth. Now they are going to push the Bioplastics and Plastic waste to oil technology to these international ventures soon and that is going to add to the current approximately $0.80 EPS for the core corrosion biz. In my opinion, the company should easily do $1.25-$2 EPS with these new technologies kicking in to net income. For an $11 low float company with decent amount of shorts and about to roll out a hot sexy technology it looks to be a great set up.

5) A Decent Bank?

USB - Not a buy recommendation by any means but interesting find that many say that US Bank has the least exposure and is better capitalized than it's peers.

Of the diversified banks, which include Comerica Inc., U.S. Bancorp, Wachovia Corp. and Wells Fargo & Co., U.S. Bancorp is the only bank in the subindustry with a "Buy" rating.

"We believe this bank is the best capitalized and most conservative lender in our coverage universe," Plesser said. Read More Here

1 comment:

stonebat said...

TAYD... i don't like its worsening inventory turnover. only 2% increase in raw material over a year. but double digit increase in total inventory.

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