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Monday, September 1, 2008

Why I think VIFL should Double or More Over Time

When I first bought TAYD and expressed my belief in the Company, I heard from many all the reasons (some valid and some ridiculous) why TAYD will never move.

1) The Company is small
2) The Company is a piece of garbage
3) The stock never moves
4) The volume is low
5) The Company is too quiet

and many more. Well afterhours on Friday TAYD hit $8.95 from my original entry in the low $5's. It did take some time as it initially moved to the $7's when I bought it and then back to the low $5's before this move to the $8's. The point is that my research was correct in my opinion and all it took was some vision to see the Company and circumstances for what they were. (Increased earthquakes will bring demand and attention, low float with a niche business, strong case for momentum etc.)

I believe I have found another stock like TAYD at the ground floor (but like TAYD, this is a BUY AND HOLD for me and NOT A DAYTRADE):

VIFL 2.8m Shares outstanding and 2m Float per Bloomberg

Company Website

VIFL is a small (13 Employees and record first half 2008 revenues of $1.2m) yet profitable ($0.05 EPS for Q2 and $0.08 EPS for first half 2008). Read More Here

1) The Company well positioned to profit on food and medical device irradiation.

Food Technology Service, Inc. CEO Dr. Richard Hunter said, “I am pleased with our growth in revenue and income during this year. Customer demand for medical sterilization continues to grow and there is increasing interest in food irradiation. The Company remains well-positioned to take advantage of that interest as food producers recognize the food-safety benefits of irradiation.” Read More here

2) The FDA recently approved lettuce and spinach for irradiation and some large producers are considering it Read More Here

The industry group wouldn’t name salad suppliers ready to start irradiating. But it expects niche marketing to trickle out first - bags of spinach and lettuce targeted to high-risk populations such as people with weak immune systems “who right now may be afraid to eat uncooked produce,” said GMA’s chief science officer Robert Brackett.

“It’s one big step forward in improving the safety of fresh produce,” he added.

California-based produce giant Dole Food Company confirmed it is considering irradiated lettuce. “We are currently doing extensive testing with irradiation and it looks to be very promising,” said spokesman William Goldfield.

3) VIFL is one of a handful of facilities that are approved for food irradiation and is considered a leader in the field

"But most U.S. irradiation facilities treat medical products, and only a handful are set up for food."

"You'll see gradual adoption and early adopters … who convince others to try," says Richard Hunter, CEO of Food Technology Service, a 13-employee food-irradiation company in Florida that's considered a food-irradiation leader but which relies on medical devices for 70% of its revenue.

Read More Here

4) VIFL has been expanding capacity and expected growth before the new FDA approval for lettuce and spinach

As previously mentioned, the Company installed additional Cobalt during the second quarter at a cost of approximately $530,000. The Company paid cash for this Cobalt. Management anticipates increased revenue during the remaining quarters of 2008 based on growing demand for irradiation services. Read More Here

Summary : The possibility exists that in the future the FDA will expand this initiative to other vegetables and ready to eat foods. However, keep in mind that food irradiation is an intensely debated subject and widespread rapid adoption is unlikely. Also, some customers may not want to advertise their use of irradiation. The challenge with all small caps is whether or not the management is ready to get a facts based story to the street to enhance shareholder value or play the small meek Company that only releases earnings and doesn't keep the street updated on contract wins and other good news.

That being said, with the small share structure of VIFL and the already profitable existing business, it would not take much for this Company to throw off some growth and strong EPS. Food borne illness outbreaks as well as contract announcements could bring strong momentum to low float VIFL. With the Company doing $0.05 EPS last quarter and growth forecasted, they could easily be on a $0.25+ EPS run rate if that growth comes to fruition along with some new spinach and lettuce contracts. I believe the stock should be valued at $5 based on current EPS ($0.05 EPS last quarter X 4 = $0.20 EPS plus growth = $0.25+ EPS with a 20 P/E as the Company is a low float with a unique niche. At any rate it is undervalued here in the $2's. Depending on circumstances playing out (contracts, outbreaks), it is my opinion that VIFL could become a strong momentum play in the future that could take it even higher.

That is why I am in VIFL. This is all in my opinion and not investment advice, please see the disclaimer at the bottom of the blog.

No comments:

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Welcome to, blog home of Superman. Purpose of this blog is for me to discuss my trades and stock ideas (As well as opinions and rants on stock market related issues). I will mention the date and price I enter. As far as exits, I always try to take half off when I have some profit and if I believe in the stock, let the rest run further. I always also use mental stop limits, at which time I would exit and minimize any losses. I do not like to give price targets unless I can support them by P/E in some way or by comparison to another stock. I just post stock trades and ideas that I believe will go higher (or lower for shorts) and the reason I believe that. Individuals should have their own strategies for managing profits and losses. My stock picks tend to NOT be daytrades at all and many take time to move. I am not an investment advisor and this blog should not be considered or followed as investment advice.