Things change quickly in the market.
What looked attractive last month, now looks overvalued, or further due diligence has proven it to contain some warts.
Such is the case with stocks that enter and exit my Top 5 as constant fluctuations in both price, market conditions, and business fundamentals constantly alter the investment thesis.
I wanted to give you a heads up on some of the stocks that I was watching for possible inclusion into the PeakStocks.com portfolio, specifically ones that are high on my list, and most likely to be added as formal recommendations in the weeks to come as they reach desirable price points, and present wonderful opportunities for long term investors.
Please note that my Top 5 Stocks for September aren’t yet formal recommendations.
I have more due diligence that I have to perform on them, but they are compelling enough with the research that I have done to be at the absolute top of my list.
Let’s Start With What We Know
My top picks from my own portfolio
Before we get into the new names that are on my list, let’s first take a look at the names in my portfolio, and how I feel about them:
GeoEye Inc. (NASDAQ: GEOY): GeoEye is a leading provider of global space-based and aerial imagery and geospatial information.
GeoEye’s imagery is used in a broad array of applications that include: government monitoring and surveillance, intelligence gathering, construction planning, scientific research such as environmental monitoring, and the online mapping industry via Google (NASDAQ: GOOG), Yahoo! (NASDAQ: YHOO), Microsoft (NASDAQ: MSFT) and other partners.
I think that GeoEye represents one of our best opportunities for capital appreciation due to the recent downturn in the stock, as well as market overreaction to their latest earnings announcement, and delays in launch of GeoEye-1, now scheduled to launch September 4th, 2008.
Several upcoming catalysts including a successful launch and check-out of GeoEye-1, and higher analyst coverage of the company (there are now 4 analysts that cover GeoEye vs. 1 previously), will bring more attention to the company, and stock.
If you’ve got new money to invest, GeoEye is my #1 recommendation for new money.
New to the GeoEye story?
- Read my initial buy recommendation here.
- or listen to my EXCLUSIVE interview with GeoEye’s management team here.
AuthenTec (NASDAQ: AUTH): AuthenTec is the world’s leading provider of fingerprint sensors and solutions to the wireless, PC and Access Control Markets.
AuthenTec’s sensors are the only sensors in the world that are patented to read below the surface skin layer, to where your true fingerprint resides.
AuthenTec went public last year at $11 per share, and now sits significantly below those levels, while in the meantime, they have continued to execute flawlessly, and have improved their business in every single meaningful way.
In fact, AuthenTec’s last quarterly earnings and analyst conference call was strong as usual, with some great insights into the company, and management’s expectations for the coming year.
While I’ve commented before that shares of AuthenTec will never look “cheap”, they have now become “cheaper” and are at a fantastic risk/reward valuation.
This company is growing fast, has met or beaten analysts earnings estimates every single quarter as a public company, and continues to execute at a high level.
I highly recommend new money be put into shares of AuthenTec right away.
New to the AuthenTec story?
- Read my last company update here.
AAR Corp. (NYSE: AIR): AAR Corp. is a diversified company that provides products and services to the aviation, aerospace, and defense industries worldwide. It operates in four segments: Aviation Supply Chain; Maintenance, Repair, and Overhaul (MRO); Structures and Systems; and Aircraft Sales and Leasing.
AAR has gotten slammed to the mat along with most other stocks in the Aerospace and Defense sector over the last year or so.
But as I wrote recently, AAR is being unfairly punished for what is going on around it, and is still executing extremely well even within this difficult environment with higher oil prices, and cut-backs in the airline industry.
Needles to say, even in today’s environment in the Defense and Aerospace industry, AAR’s valuation is extremely attractive.
In fact, AAR is approaching its book value of about $15.09 per share!
Couple that with recent insider buying of the company stock, and you can see that we might be approaching a bottom here.
Those with a long term investment horizon would do well to visit the AAR story, and start a position here as AAR is a best-in-breed company that will be one of the first to rise in price when strength returns to this battered industry.
New to the AAR story?
- Read my last company update here.
uWink Inc. (Nasdaq: UWKI.OB): uWink, Inc. is an entertainment and hospitality software development company that develops casual, interactive, social games, in addition to licensing the rights to those games and their proprietary touch-screen ordering and gaming interface to restaurants, entertainment venues and the hospitality industry.
uWink also owns and operates three restaurants under the uWink brand name that utilize this technology.
The company’s CEO is Nolan Bushnell, the founder of Atari Inc. (OTC: ATAR.PK) and Chuck E. Cheese (NYSE: CEC), and what uWink is doing with their proprietary software should lead them to a huge market in a few year’s time.
uWink’s last quarterly earnings and sales dropped significantly from the previous year, but need to be taken into context, and mask the true potential of this tiny company.
I explain this in full detail in my lastest post on uWink.
I think uWink, while a risky stock, is a great investment for new money, or for additional money if you already own shares, especially at today’s prices.
New to the uWink story?
- Read my last company update here.
Top 5 Stocks for September
The following stocks are not formal recommendations, but are the highest on my watch list right now.
They are listed in no particular order.
- E-House (China) Holdings Limited (NYSE: EJ): E-House (China) Holdings Limited provides real estate agency services, real estate brokerage services, and real estate consulting and information services in the People’s Republic of China.
E-House primarily offers real estate agency services to real estate developers of residential properties.
The company also provides real property brokerage services, and intends to provide listing and brokerage services, which include sales and rentals.
E-House focuses its secondary real estate brokerage services in three metropolitan areas within China, including Shanghai, Wuhan, and Hangzhou, as well as in Hong Kong and Macau.
Its real estate consulting services include land acquisition consulting and real estate development consulting; and other consulting services to investors interested in purchasing businesses with land or other real estate assets, as well as to banks, real estate trade associations, and governmental property and planning agencies.
The company’s real estate information services comprise the CRIC system, which supports its primary and secondary real estate services, and consulting and information services. The CRIC system consists of real estate sales data in China covering information on land, residential, office, and commercial spaces, as well as real estate related advertisements.
I have been watching this stock for quite awhile, and have watched is fall precipitously in that time.
Most recently, E-House has reported earnings that were in-line with expectations, and decreased their earnings outlook for the rest of this year.
In turn, analysts have also cut their sales and earnings estimates, and at the same time E-House has approved a share buyback plan for $20 million as the company’s shares continue to get hammered along with anything having to do with China now.
While the market has beaten up this stock as a result of the rise in interest rates in China and the perception that the housing market there will slow as a result, I believe that E-House looks attractive at these price levels, and pending further investigation on my part, is sufficiently buffered from these potential problems in the Chinese real estate market.
Why I Like the Company: Founder/CEO with a huge stake in the company; recent insider buying, company authorized share repurchase program, low stock price/valuation; continued growth prospects in an expanding market despite possible “slowing” of Chinese economy; great margins, cash flow, etc.; great market presence and amazing growth potential both on the top and bottom line.
- PROS Holdings, Inc. (NYSE: PRO): PROS Holdings, Inc. provides pricing and revenue optimization software to several different industries worldwide.
Did you ever wonder how airlines and other industries like hotels and cruise lines, can change prices on the fly so quickly to maximize profits and adjust to customer demand?
Well, PROS is one of companies that provides this service to many different companies in several industries all over the world.
PROS offers a set of integrated software products that enables enterprises to apply pricing science to determine, analyze, and execute optimal pricing strategies.
The company’s software products support pricing decisions through the aggregation and analysis of enterprise application data, transactional data, and market information.
PROS sells and markets its software products primarily through its direct sales force to customers in manufacturing, distribution, services, hotel and cruise, and airline industries.
I love everything about this company, and have been watching them since their IPO last year.
The stock currently sits below it’s IPO price of $11 per share, and the company just instituted a share repurchase program for $15 million.
Why I Like the Company: Wonderful high margin/cash flow business with recurring revenue stream; cutting edge and proven technology; great balance sheet and high insider ownership; while not “cheap” valuation has gotten more attractive.
- Zhongpin, Inc. (HOGS): Zhongpin, Inc., through its subsidiaries, engages in the meat and food processing and distribution business primarily in the People’s Republic of China.
If you are noticing a theme here, it is not by accident.
China is still growing fast, regardless of the inflation and recent stock market turmoil there which has seen the major indices fall by over 50% this year.
It seems that anything China is toxic nowadays, but as with all things, once investors return looking for growth it will be companies like Zhongpin that will garner the most attention.
The rise of the middle class in China is increasing demand for more meat products, with pork being one of the major staples of this trend.
Zhongpin offers chilled and frozen pork products; pig by-products and various meats; and prepared meats, such as sausages, hams, and Chinese cured hams, as well as fruit and vegetable products, including asparagus, sweet corn, broccoli, mushrooms, lima beans, strawberries, and capsicum under Zhongpin brand name.
Its customers include international or domestic fast food companies, export-registered processing factories, school cafeterias, factory canteens, army posts, and national departments, as well as retail outlets, including supermarkets.
The company sells its products directly, as well as through a network of agents, showcase stores, and network stores.
I would not hesitate to add multiple Chinese companies to my portfolio and between HOGS (I love that ticker!) and E-House (EJ), I believe we are looking at two good ones.
Why I Like the Company: One of the largest pork producers in China; expanding rapidly; macro trend towards higher meat consumption in Chinese diets as more and more Chinese reach middle class; profitable with high insider ownership; great valuation/stock price; consistent execution and results by management.
- BJ’s Restaurants, Inc. (BJRI): BJ’s Restaurants, Inc. owns and operates casual dining restaurants in the United States.
It operates restaurants under the BJ’s Restaurant & Brewery brand name, which includes a brewery within the restaurant; BJ’s Restaurant & Brewhouse, which receives the beer it sells from its breweries or an approved third party craft brewer of proprietary recipe beers; and BJ’s Pizza & Grill, which is a smaller format, full service restaurant.
As of August 05, 2008, BJ’s Restaurants owned and operated 78 casual dining restaurants.
While it is certainly not the best of times to be investing in restaurant chains, I think that it is prudent to start looking at some of the best-in-breed players and more importantly for us, the fastest growing restaurant concepts.
BJ’s offers an innovative and broad menu featuring award-winning, signature deep-dish pizza complemented with generously portioned salads, appetizers, sandwiches, soups, pastas, entrees and desserts including their famous Pizookie dessert.
In addition, at most locations, BJ’s features award-winning handcrafted beer to go along with highly detailed, contemporary decor and usually includes a bank of TV’s, including several high definition flat panel televisions for patrons to enjoy while they eat.
I won’t go out on a limb and say that BJ’s restaurant concept is unique and can’t be duplicated, but as it stands now, this company is growing extremely fast, and is profitable, even in the down economy, with same-store sales declining slightly or remaining flat, while most other restaurant chains are suffering steep losses and same-store sales declines.
This is doubly remarkable considering that BJ’s has more than half of their locations in the depressed California market and says a lot about the restaurant concept and value proposition to its customers.
While the stock price has come down from about $20 per share to about $10 now, I still feel that there may be some more downside to come, but this is one of my favorite names in the restaurant space that bears keeping a close watch on.
Why I Like the Company: Rapidly expanding restaurant concept that offers a great value proposition and great food to customers; insiders including the CEO have been buying stock all the way down; the company is profitable; the company is in the early stages of its growth cycle with over 20% growth in both profits and sales expected over the next several years.
- CPI Aerostructures Inc. (AMEX: CVU): CPI Aerostructures, Inc. engages in the contract production of structural aircraft parts for the United States Air Force and other branches of the U.S. armed forces as a prime contractor or subcontractor for other defense prime contractors.
The company, as a prime contractor, offers skin panels, leading edges, flight control surfaces, engine components, wing tips, cowl doors, nacelle assemblies, and inlet assemblies for military aircraft.
As a subcontractor, it offers various pods, modular and structural assemblies for military aircraft; and various kits and assemblies for the S-92 civilian helicopter, as well as operates as a subcontractor to prime contractors in the production of commercial aircraft parts.
This is a really small company that trades about 7,000 shares daily, and of course as a result, no analysts cover the stock, but I like the fact that insiders have been buying more shares in the company on the open market, signaling good things ahead.
I can’t take credit for finding this little company, as it was brought to my attention by a gentleman by the name of Robert Blumenthal on Seeking Alpha.
He does an excellent job in describing the company in more detail, and also how management expects growth to really accelerate in the coming years with increased contracts garnered for their products and services.
Normally I would be a little gun-shy in recommending another play in the Aerospace and Defense sector, but I feel this company deserves a hard look, and gives us much different exposure than other companies in this sector.
Why I Like the Company: Tiny hidden gem with accelerating growth, profit and fundamentals; reasonable stock price/valuation; recent insider buying; management projects large growth as a result of increased contracts in the coming 2-3 years.
While this is not a definitive and comprehensive list of every company that I watch and am interested in, these present the most compelling argument for inclusion sooner rather than later.
Once again, my Top 5 Picks for September are NOT formal recommendations, and after digging around, they may never become formal recommendations, but this will give you a heads up if you are looking for some interesting companies to get started researching on your own, or that you might be hearing about soon.