Gigamedia has an excellent quarter and sparkling future.
20 Stock Portfolio member Gigamedia (GIGM: 10.71 +0.15 +1.42%) released 3rd quarter earnings before market open and the results were excellent. Revenue was up 76% YoY and net profits up 49%. The historically weak 3rd quarter improved on Q2 numbers. Revenue and profits were above analysts estimates (not that I care much).
The exciting news is the future possibilities, but first the core European online poker business Everest Poker had record results increased revenue 163% from a year earlier. What gets me excited is the Asian gaming side of the business is just getting started with slower than expected revenue streams for the quarter and the Japanese games including Pachinko will not get fully rolling until early next year. Adding to the future possibilities GIGM is teaming up with Electronic Arts (ERTS: 43.98 +0.36 +0.83%) to offer online versions of EA’s games to Gigamedia’s Asian customers.
GIGM is still a small, fast growing company. Revenues are under $200 million annually and market cap around $1 billion. I do not see any reason why this company cannot be a $1 billion revenue company soon. At a 50% growth rate that number comes in less than 5 years. Gigamedia’s stock is highly volatile as short term traders push the price around. At this point I see any price pull back into the teens as a buying opportunity (until it cracks $30!).
Note: Take a look at my 20 Stock Articles page to see earlier posts.
Note squared: I own shares in GIGM.
Aegean Seems Poised for Growth - WSJ.com
Aegean Seems Poised for Growth - WSJ.com
Subscription is required to the Wall Street Journal.com, but this is an excellent article on the prospects for Aegean Marine Petroleum Network (ANW: 36.06 +0.01 +0.03%). With the recent pullback in the price I finally purchased some of the stock for my own portfolio. This stock should be a big winner over the next 3 to 5 year or longer. I will be looking to add shares on any future price pull backs.
All my stocks are down! Panic time?
Not really. Like anyone who owns stocks and checks them regularly, the last week has been trying to say the least. I hold primarily smaller cap stocks and the value has fallen about 10%. So I take a look at the issues and try to see if I missed something that affects what I thought made them attractive in the first place. The answer is generally, no. I sold my position in (WSTG: 7.40 -0.18 -2.37%) after the quarterlies came out, but otherwise still like what I own and the stocks in my 20 Stock Portfolio (not completely the same).
As I have refined what I am doing on this blog and with my personal investing, I have developed a focus on finding stocks that are 2-5 year heros. I try to find stocks that I believe will double or better in that time frame. So if a stock is down 10% or 15% or more ((TMA: 0.1825 -0.0175 -8.75%)) from where I bought it, the longer term prospects remain intact.
(ELP: 19.86 +0.23 +1.17%) released earnings today. (GIGM: 10.71 +0.15 +1.42%) and (SFL: 27.88 -0.38 -1.34%) are coming in the next few days. I have raised some cash and looking for the best opportunity to add to my positions.
I wanted to write this post as a contrast to what I often see from stock analysts and the financial media, where they recommend “stock XYZ currently $25 with a target of $28 in the next 6 months”. That type of recommendation means almost nothing if the market goes down in mass. I am investing in stocks for longer term out sized gains, and that process definitely helps me weather market conditions like we have recently experienced.
Silver Wheaton releases earnings
Silver Wheaton (SLW: 14.30 -0.57 -3.83%) released their 3rd quarter earnings last week with positive, but I am still waiting for the great report, results. Earnings were $.09 per share, basically flat for the last few quarters. 3.1 million oz. of silver were sold, slightly higher than Q2. Selling rates were about 3.5 million oz. per quarter for the 2nd half of 2006. The company is on pace to sell 13 million oz. for 2007 vs. 13.5 million oz. in 2006.
The stock is up from below $10 in the Spring and $14 a month ago. The PE is an eye-popping 44. These results made me take a closer look at why I have the stock in the 20 Stock Portfolio, and should I continue to own it personally.
Here are the items that I think make this stock a future winner (the returns so far this year haven’t been bad!):
- The company’s goal is 28 million oz. of silver sold per year. This last quarter they purchase 25% of the silver production from Gold Corp’s new mine at Penasquito, Mexico. This share equals up to 400+ million oz. of proven and probable reserves, measured and indicated resources and inferred silver resources.
- The company is a pure play on silver prices without digging any holes or spending capital. If silver prices go up so will the stock, if sales grow so will the stock. I think this is a good way to get exposure to precious metals in my portfolio.
- Management indicated in the conference call that paying dividends are probable in the next 2-5 years. This company is a cash machine with almost no overhead. Starting to pay dividends will return profits to shareholders and probably boost the share price.
I look at this stock as a precious metals proxy and an excellent chance as a big longer term winner. I will strive to add to my position on the share price pull backs that inevitably happen.
SLW is a component of my hypothetical 20 Stock Portfolio.
Stock Review: City Bank
Not Citi, but City Bank (CTBK: 9.21 +0.13 +1.43%). City Bank is based in Linnwood, WA with a total of 8 branches and assets of just over $1 billion. In my search for profitable small cap stocks this one really fits the bill, and the recent market turmoils that have especially affected financial stocks has knocked the price down to a level not seen for two years and 30% off the recent high.
Here are some of the facts that I find attractive about the stock:
- Growing dividend: Currently at a 2.5% rate and growing. Also the company has paid special dividend on almost an annual basis. Dividends have been paid for at least 10 years.
- Return on assets in the 3.5 to 4% range historically vs. competitor average of 1.3%.
- 97% of loans are commercial or real estate construction. Only 3% are real estate mortgages.
- Loan losses have been 10% of the peer average and loss reserves exceed the peer average.
This company has show strong growth of both assets and profits throughout its 30 year history. The current credit “crisis” will probably slow the growth for a couple of quarters, thus affecting the stock price negatively. The return to more typical growth should cause the stock price to do very well.
I have long been a fan of small well run banks. If they are well run they can be extremely profitable and it appears City Bank is such a bank. Also, when these small banks break the $billion asset mark, as City Bank did in 2006, they often become buyout candidates at very nice premiums. I am adding City Bank (CTBK: 9.21 +0.13 +1.43%) to my 20 Stock Portfolio.
I currently do not own any stock in CTBK.
Wayside Technology reports disappointing quarter
Wayside Technology (WSTG: 7.40 -0.18 -2.37%) released their 3rd quarter earnings yesterday, and sales and profits were down from 2006. Revenue decreased 14% and net income per share fell a penny to $.18. Year to date revenues are up 5.6% and per share earnings up 20%. Of course, the stock is down 12%.
The decrease in revenues is due to the company not chasing low margin VMware sales. These sales are a third of the companies revenue, but with the growth of VMware, others are selling the product at much lower margins than Wayside will accept. WSTG actually improved profit margin during the quarter.
Wayside’s problem, as I see it, they are selling a value added approach in a commodity market, with competitors who will sell at very slim margins. The conference call sounds positive that they can build value in their sales, but the results have been disappointing for the last couple of quarters. This is a very small company with large competitors. Can they remain profitable and build revenues at the same time? That is the $2 question.
I own a small position in WSTG and plan on keeping it for at least another quarter. I would like to see an upward trend in revenues by next quarter. In the mean time they declared another 15 cent dividend, giving a 4%+ yield on the stock.
Wayside Technology is a component of my hypothetical 20 Stock Portfolio.
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