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Tuesday, May 19, 2009

Monster Quarter for MRM - Next DDRX?

Merrimac Industries, Inc. (MRM) engages in the design, manufacture, and sale of electronic components and subsystems for commercial, military, and high-reliability markets. Per Bloomberg it has a tiny float of 1.5m shares and 2.9m shares outstanding See Bloomberg.

Today MRM reported a monster turnaround first quarter of 2009. Sales were up 32% yoy and gross profit margin was 45%. Amazingly, MRM earned $0.29 EPS vs. a loss of $0.29 EPS last year. The CEO had a very nice comment regarding the upcoming second quarter. "Chairman and CEO Mason N. Carter commented, "We are clearly executing our new strategy well as reflected in the Financial Highlights. Fiscal year 2009 has begun with a strong first quarter. New orders met our internal targets; operating performance, as measured by our gross profit margin of nearly 45%, exceeded our plan. We anticipate the second quarter to have both strong incoming orders and operating performance."" Read MRM press release.

Like recent runner DDRX, which posted $0.25 EPS in a turnaround quarter and hit $15 so far from an open of $3.70 the day they reported the last quarter results, MRM appears to me to be an equal complete turnaround story with an even lower float. This stock reminds me of the stock BOOM in 2005 when it was around the same price range as MRM today ($8.35 close - May 19) and had a major turnaround in its business and went on to become one of the best performing stocks of that year. If this quarter is an indication of a new EPS run rate, then MRM could be on the way to $1-$1.20+ EPS for 2009. If I were to apply a 20 P/E for that EPS range due to growth I would get a share price of $20-$24. (I am not saying that is where the stock is going)

I bought MRM at $6.40 today May 19th. See Blog Alert. It closed at $8.35 for a 30% gain.

DISCLAIMER : MRM is thin and will be volatile due to its float. In my opinion, it is NOT a stock to chase or have a large position in. That being said, I am long this stock from $6.40 and will add on any significant pullbacks to that range as I believe this has the potential to move much higher like DDRX recently has on its similar turnaround. No stock picker is 100% accurate ( I certainly am NOT) and there is risk in every trade.

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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.