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Strategies & Market Trends : Value Investing

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From: James Perry4/5/2005 2:18:38 PM
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I can name 3 stocks that I think are well worth DD study by a value oriented group.
First is PowerCold (PWCL). To get a real feel for the company you need to read a lot of 10Ks filed in past years. They do air conditioning and for several years, bankruptcy seemed a certainty. Officers worked without pay, except options. Debts paid with stock. And several times, when things got too tight, the CEO and major shareholder would add enough money to keep it running just a little longer. And during that time they bought and merged with other little companies, to gain technology. They have put together a commercial cooling plant that just outclasses the competition, and in recent years have grown. My memory may err, but revenue has run on the order of 300k, 1.3MM, 3MM, 4.5MM (annual) and just announced for the current year, 9MM. This year they showed up with a large bad debt increase - a general contractor building a large hotel in which they provided a/c went belly up...most of that will be collected, ultimately, for the hotel is being operated. At this point they have a very efficient chiller (outstandly so) and use DuPont Caltrel plastic to make their coils and cooling fins. They control air quality by use of humidifiers, dehumidifiers, swamp coolers, etc and build a self contained unit with a tank to hold the liquid which keeps recirculating for cooling. Also uses generators as part of the unit to supply energy during the portion of the day when electric prices peak. Their customers include quite a few chains, such as Hilton Hotels, Applebees, Burger King, Eckerts drugs, etc. Stock is $1.70, and I believe 3 years will produce large growth.
Second - and some may disagree that this is a value stock - is FX Energy (FXEN). Has 1.8 million acres under lease in the Permiam Basin of Poland, with interest from 24.75 to 100%, but mostly 49%. Drilling for gas. Has just put down a second well which is flowing commercial quantities of gas, but holding development of the well to determine the extent of the gas field they have hit. A third well will soon be completed and step off to establish a boundary, and a 250KM 2d seismic study is being made of the underground ridge that acts as another boundary. Careful DD on this one will reveal lots of hints that this is a big find that has been made by this little company. I am told that CalEnergy is in the tier of companies owned by Warren Buffett. FXEN sold 1/2 their interest in 15,000 acres to CalEnergy for $10MM, and when a well there hit a commercial flow of gas, they seem to have bought the remainder of that well and 1/2 interest in about 25,000 more acres for enough MM to cover the cost of all the drilling FXEN is required to do to "pay for" the rights granted to them in a huge segment of land where all this is taking place.
Third: I like a company called Sometics (SMTS). They measure the oxygenation of the blood going to the brain during surgery in order that a doctor may be warned if for some reason the oxygen is reduced and the patient put at risk. That seems to me to likely become a "standard of care". They sell both the machines ($25000) and one time use pads ($100). Has 8 years of double digit revenue growth, most recently 40% growth, next year predicted 45% growth, after increasing product price 22% and decreasing manufacturing cost 40%. Has a p/e of 17. The market today finds biotech unexciting, and I think this stock will have to await excitement to reflect a value which is more reasonable.
I own each of these stocks.
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