Trends, Observations, and Exclusive Opinion
Three SmallCaps Worth a Serious Look
AONE: Recently Opened the Largest Lithium-ion Battery Plant in North America
MPWR: $0 debt and $189+ Million in Cash on Hand; ttm Diluted EPS of +$0.79
VLCM: Youth Retailer Adds to Distributorships in France, the U.K., and Switzerland
First up this morning we have A123 Systems Inc., (AONE) http://www.a123systems.com/ currently trading in the $9.71 range. AONE is a ‘steady as she goes’ stock to me. On June 25 when the stock was trading in the $9.19 range I wrote the stock would be a long-term (1 Yr) ‘Buy’ consideration for me. In the last 4-Months the stock has gained 5.65% and I’m sticking with that consideration for the remaining 8 months as of today. In this climate, a 10% annual return is still very attractive. AONE has a 52-week high of $23.46 set on 21-31-09 and could also be seen as a ‘buy on the dips’ opportunity by new investors. AONE has trailing twelve month revenues of $95+ million. I like the debt/cash ratio of AONE at the end of its most recent quarter: $19+ million in debt and $353+ million in cash. AONE makes and sells rechargeable lithium-ion batteries and battery systems primarily in the United States. AONE batteries and battery systems are based on its Nanophosphate technology for application development in the transportation, electric grid services, and consumer markets. AONE has a joint venture with SAIC Motor Co. Ltd. to develop, manufacture, and sell complete vehicle traction battery systems for use in hybrid electric vehicles, and electric vehicles in China. AONE recently opened the largest lithium-ion battery plant in North America. As electric vehicles inch their way towards a greater marketshare, battery producers who can just hang in there long enough will greatly benefit. A fellow writer recently pointed out that last month, Frito-Lay, a division of PepsiCo announced it would buy 176 battery-powered delivery trucks. Car battery companies have always had short-sellers and AONE is no exception but it has been going on for so long that their downside pressure is built into the current price. It shouldn’t deter an energy investor.
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Next up this morning we have Monolithic Power Systems Inc., (MPWR) http://www.monolithicpower.com/ currently trading in the $15.91 range. MPWR has a 52-week high of $25.34 set on 04-30-10 with current trailing twelve month revenues of $200+ million and a positive ttm diluted EPS of +$0.79. I like those earnings. I also like the fact that MPWR has $0 debt and $189+ million in cash on hand. MPWR makes and sells advanced analog and mixed-signal semiconductors. MPWR was founded in 1997 and is headquartered in San Jose, CA with a global presence in sales offices in Taiwan, China, Korea, Japan, and Europe. In mid-Sept MPWR gave an updated revenue guidance for the third fiscal quarter ending September 30, 2010. Based on the current production and demand outlook, MPWR expects its third quarter revenues to be at the lower end of its previously announced guidance of $66.0 to $70.0 million. The Co provided this update to investors due to the uncertainty in the current semiconductor markets. I love it when companies don’t ‘oversell’ themselves. At nearly $10 off its high, MPWR would be a ‘Buy on the Dips’ consideration for me. MPWR will report its Q3 numbers on Wednesday, November 3, 2010 at 2:00 p.m. PT / 5:00 p.m. ET.
Finally this morning we have S&P SmallCap 600 company Volcom Inc., (VLCM) http://www.volcom.com/ currently trading in the $21.17 range. On Oct 8 when VLCM was trading in the $20.52 range I wrote that the Co would be a strong ‘Buy on the Dips’ consideration for me. Well in less than 3-weeks the stock has gained 3.16% and at a little more than $4 off its high, I’m sticking with that consideration. VLCM has trailing twelve month revenues of $298+ million and a positive ttm diluted EPS of +$0.99. I like those earnings. VLCM is an innovative designer, marketer and distributor of premium quality young men’s and women’s clothing, accessories and related products. The VLCM brand, symbolized by The Stone, is athlete-driven, creative and forward thinking. VLCM has consistently followed its motto of “youth against establishment,” and the brand is inspired by the energy of youth culture. VLCM branded products are sold throughout the United States and internationally. And speaking of internationally; VLCM announced on Oct 19 it now intends to directly distribute its products in Spain having acquired strategic assets from its current distributor in the region. Terms of the transaction were not disclosed. “This move enables us to service our accounts directly and further build the Volcom brand in this important and influential territory,” said Richard Woolcott, Volcom’s chairman and CEO. “Historically we have been successful in growing market share in territories where we have assumed direct control and this initiative directly supports our expansion plans in Europe.” In Europe, VLCM distributes products directly or in partnership with distributors. In addition to Spain, where the company has had a growing presence since 1997, VLCM has direct operations in France, the United Kingdom, and Switzerland. The company intends to incur some additional expenses as it transitions its operations in Spain to begin shipping directly to retailers starting July 2011. In the current 2010 fourth quarter, the company anticipates additional expenses in Europe of approximately $150,000 related to the transition. VLCM will report its financial results for the third quarter ended September 30, 2010 on Thursday, October 28, 2010.
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