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Kemet Corp. (NYSE:KEM) is the largest manufacturer of capacitors in the United States. Capacitors are ubiquitous in virtually all electronic systems. Kemet focuses on the two fastest growing segments - Tanalum and Ceramic capacitors.

They supply through distributors [47% of sales], OEMs [32% of rev.] and EMS [21% of sales]. North America, Asia and Europe are approximately 30%5, 40% and 30% of sales respectively.

FY 2007 [ends March 31, 2008] will likely see EPS of $0.38 versus $0.42 in FY 2006. Consensus estimates for FY 2008 are now at $0.47 or up about 24% year-over-year.

That means KEM shares now sell at just 10.6x trailing and < 8.6x forward projections.

The slightly down earnings year coupled with the weak stock market environment has pushed KEM shares to below their low prices since 1998. The shares have hit annual peak prices of $9.00 and higher in each year since 1995- most of the time when fundamentals were not as favorable as they are today.

Value Line expects a 20 P/E multiple for their 3- 5 year share price projections of $19 - $30. Even 15 times projections for FY 2008 leads to a very conservative 12-month target price of $7.05 or + 75% from yesterday's quote.

Long-term debt is a moderate 29% of capital and Kemet held $165 MM in treasury cash as of September 2007.

As of Dec. 31, 2007 these were some large holders:
[Dec. 31, 2007 price: $6.63/share]

  • Dimensional Fund Advisors - 8.83%
  • Sprucegrove Inv. Mgt. - 6.27%
  • Barclays Global - 5.42%
  • LSV Asset Mgt. - 5.42%
  • Brandes Inv. Partners - 3.82%
  • Deutsche Bank - 5.04%
  • AXA - 3.27%
  • Royce & Assoc. - 3.36%
  • Vanguard Group - 2.93%

There has been a flurry of insider buying in Kemet shares this month. Director Robert Paul bought 6000 shares for $25,000 on March 12. Olof Loof Per purchased 62,500 shares for $267,000 on March 12. Daniel Lamorte bought 10,000 shares for $42,000 on March 13 – 14. Larry McAdams purchased 10,000 shares for $40,000 on March 17th.

Kemet is a healthy, profitable, small-cap value trading near 12-year lows. Even just a bounce back to its year-end 2007 closing price would be a gain of over 65%. Kemet looks to have the 'capacity' to shock you with a 50% - 100% capital gain over the next 12 - 24 months.

Disclosure: Author has a long position in Kemet shares.