Wednesday, May 31, 2006

Stocks that go BOOM

I have been following DYNAMIC MATERIALS (NasdaqSC:BOOM) for over a year and the whole time the stock has been scary to buy because of its Mt. Everest looking chart. Thanks to a secondary offering by some old bagholders, the stock has sold off the past month. I think the stock has been beaten down too far and makes for a good buying opportunity.

Dynamic Materials is one of the lowest cost claded metal producers in the world. Its main competitor is Asahi Kasei in Japan, which can't really compete because of shipping costs. The industries that BOOM serves are petrochemical, refining, hydrometallurgy, aluminum, shipbuilding and energy. All of which are booming right now.

This puts Dynamic Materials in a sweet spot with 112% EPS growth in 2005 & 81% over the last 5 years. LT debt/cap has been reduced to 5% and ROE has grown from 17% to about 40% currently.

With this kind of growth, a larger float and a marketcap over $300mm its not surprising to see a Wall St firm initiate coverage last week. I always find it funny how institutional investors refuse to buy a small amount of shares in a company when its a smallcap, but they will pay a lot more for the same amount of shares when its a mid or largecap. Hey! That sounds like an inefficiency.

DISCLOSURE: I maybe long BOOM for myself and clients. Not a recommendation to buy or sell any security. For informational and educational purposes only.

Monday, May 22, 2006

Alpha Watch List

This is a list of high alpha stocks with earnings momentum and interesting future prospects. Or as I like to tell the usual skeptics: "I think their not done going up."



SYMBOL | COMPANY NAME | WEIGHTED ALPHA
TIE TITANIUM METALS +504.20
HANS HANSEN NATURAL +433.90
NTRI NUTRISYSTEM INC +308.60
KNOL KNOLOGY INC. +307.30
NXG NORTHGATE MINER +255.20
MGPI MGP INGREDIENTS +249.10
FMCN FOCUS MEDIA HOL +248.30
DXPE DXP ENTERPRISE +238.80
NEU NEWMARKET CORP +234.80
CELL BRIGHTPOINT INC +212.30
WIRE ENCORE WIRE CP +206.10
ANDE ANDERSONS INC
+202.30
PLXS PLEXUS CP +192.90
TTI TETRA TECHNOLOG +191.50
FAL FALCONBRIDGE LT +181.00
BTUI BTU INTL INC +175.20
MWRK MOTHERS WORK IN +170.40
LDSH LADISH COMPANY +167.30
MDR MCDERMOTT INT P +166.50
PSTA MONTEREY GOURME +159.80
SHOO STEVEN MADDENS +159.60
ATI ALLEGHENY TECH +155.60
RAIL FREIGHTCAR AMER +154.60
EZPW EZCORP INC CL +151.00
GPI GROUP 1 AUTOMOT +149.10
SMSI SMITH MICRO SOF +148.00
TWGP TOWER GROUP INC +145.90
NTG NATCO GROUP INC +145.30
CFK CE FRANKLIN LTD +143.20
SLW SILVER WHEATON +139.40

Data from barchart.com

Friday, May 19, 2006

NutriSystem Inc. (NTRI)

This is a great play on the #1 disease worldwide; obesity. More people suffer from obesity then any other other disease, and NutriSystem has a solution.

The Glycemic Index : measures the quality of carbohydrates and their impact on your blood sugar. According to Nutrisystem, "carbohydrates that break down slowly in your body encourage stable blood sugar levels, which is good, so they rate well or "low" on the Glycemic Index. On the other hand, carbs that break down too quickly cause your insulin levels to spike, and high insulin levels cause your body to store fat, so these carbs are given higher glycemic values. These "bad" carbs also leave you hungry soon after a meal, so if you're looking to lose weight, you should seek to incorporate more "good" carbs with low glycemic values to keep your blood sugar levels stable and you metabolism burning strong." The NutriSystem Nourish meal plan features low Glycemic Index foods and optimal amounts of protein to help keep your blood sugar levels stable and your metabolism burning strong.

NTRI is a major momo with 1867% earnings growth in 2005, and 212% expected earnings growth for 2006, although that estimate looks conservative because it recently beat the quarterly estimate by 50%.

NTRI operating margin is 12.5% vs 4% for the industry, ROE is 55.6% vs 12.68% for the industry. Turnover is 40.83 vs 7.58 for the industry.

This company is at the top of my momo list because of its quadruple digit earnings growth!
I'm looking to ride this bull until its earnings and guidance start to match analyst estimates.


DISCLOSURE: I am long NTRI . Not a recommendation to buy or sell any security. For informational and educational purposes only.

Why We're Here

Because value investing is really boring. If your going to do something, do something you love. Value investing these days is boring, we are tired of buying marginal business below book value that sells candy, tires, underwear or some other mundane product/service as old as time. We're not trying to buy 50 cents for $1 (if such a thing exists), we're trying to buy an apple seed that will blossom into a tree. We don't look to avoid risk, we seek it, that how we get paid, by taking on the risk others don't want.