The Long Case for Bolt Technology

Bolt Technology Corporation (BTJ) broke out the day before the market went haywire and has held up reasonably well since.

Bolt Technology operates in two segments: geophysical equipment and industrial products. The geophysical equipment segment develops, manufactures and sells marine seismic energy sources and underwater electrical connectors and cables, air gun signature hydrophones and pressure transducers used by the marine seismic industry. The industrial products segment develops, manufactures and sells miniature industrial clutches, brakes and sub-fractional horsepower electric motors.

The Company consists of three operating units:

• Bolt Technology Corporation (Bolt)
• A-G Geophysical Products, Inc. (A-G)
• Custom Products Corporation (Custom Products)

Bolt manufactures and sells air guns and replacement parts, and A-G manufactures and sells underwater cables, connectors and hydrophones. Custom Products, which is in the industrial products segment, manufactures and sells miniature industrial clutches and brakes and sells sub-fractional horsepower electrical motors.

FUNDAMENTALS: Bolt Technology is a very small company, but one that has grown tremendously after losing money in 2003. Profits have more than doubled in each of the past three years with sales growth equally as impressive. Net margins (18%) and ROE (25%) are impressive, but more impressive is the fact that both margins and ROE have been rising over the past three years (one key quality to look for in the best companies). On top of that, the company has no debt. This is a company off the radar of Wall St. - no analysts are covering it!

TECHNICAL: A volatile stock, but continues to look very bullish. It broke out to a new all time high on Feb 26th but not surprisingly has stalled during the market correction. The technical action still looks good though. The stock bounced off support of the 50 day moving average yesterday and surged nearly 10% today with good volume. I'd like to get into the stock as close to that 50 day moving average as possible with a continued decrease in selling volume. With the market correction unlikely over, it just may offer that opportunity in the coming days.

Full Disclosure: Author has no position in above-mentioned company.

BTJ 1-yr chart