Five Companies PEG'ed for Growth

I'm looking for another dash downwards to 11,000 at which point I'll start picking away at some of these names.

Ricks Cabaret International (RICK)

PEG - .32

Rick's Cabaret International, Inc., through its subsidiaries, operates upscale adult nightclubs serving primarily businessmen and professionals. The company's nightclubs offer live adult entertainment, restaurant, and bar operations in the United States. It owns and operates, or licenses adult nightclubs in Houston, Austin, San Antonio, Minneapolis, New York, Fort Worth, Charlotte, and other cities under the names Rick's Cabaret, XTC, and Club Onyx.

Rick's Cabaret International also owns and operates adult entertainment Internet Web sites, including xxxPassword that features adult content; CouplesTouch, a personals site for those in the swinging lifestyle; and NaughtyBids, an online adult auction site that contains consumer-initiated auctions for items, such as adult videos, apparel, photo sets, adult paraphernalia, and other erotica. As of September 30, 2007, it operated 15 adult nightclubs. Rick's Cabaret International was founded in 1982 and is based in Houston, Texas.

Naked girls are not as recessionary as many people think. Now the $10 drinks sales may be affected until people get their jobs back and can afford gas again. RICK's also uses its equity to finance deals as it tries to consolidate the fragmented stripper joint industry. It has also been providing a clause that it will buy back its stock from these deals at around $20 a share - and with the shares much lower than that, this could be a drag on earnings for awhile. The company is still small and there are a lot more opportunities for growth ahead of it. If it can weather the ills of the domestic economy, it will pull out of this with a much higher stock price.

AAR Corp. (AIR)

PEG - .53

AAR CORP. provides products and services for aircraft fleet operators, original equipment manufacturers, independent service providers, and military customers. It operates in four segments: Aviation Supply Chain; Maintenance, Repair, and Overhaul; Structures and Systems; and Aircraft Sales and Leasing.

The Aviation Supply Chain segment sells various new, overhauled, and repaired engine and airframe parts and components for airline and defense customers. It also repairs and overhauls avionics, electrical, electronic, fuel, hydraulic, and pneumatic components and instruments, as well as internal airframe components. In addition, this segment inventory supply and management programs, and logistics programs for engine and airframe parts and components, as well as sells and leases commercial jet engines.

The Maintenance, Repair, and Overhaul segment provides airframe maintenance services; and the repair and overhaul of various landing gears. It also provides airframe maintenance, modification, special equipment installation, painting services, and aircraft terminal services for various models of commercial, defense, regional, business, and general aviation aircrafts.

The Structures and Systems segment engages in the design, manufacture, and repair of pallets, containers, and shelters in support of military and humanitarian tactical deployment activities. It also designs, manufactures, and installs in-plane cargo loading and handling systems for commercial and military aircraft and helicopters. In addition, this segment designs and manufactures composite materials for commercial, business, and military aircrafts, as well as composite structures for the transportation industry.

The Aircraft Sales and Leasing segment sells and leases used commercial aircraft. It also provides advisory services, which include assistance in remarketing aircraft, records management, and storage maintenance. The company was founded in 1951 and is based in Wood Dale, Illinois.

These guys, tied to the airline industry, have been smashed and probably rightly so, but that hasn't affected their earnings yet. The company claims that airlines are relying on it more than ever now as they outsource a greater amount of systems and operations work to cut costs. Now I along with the rest of the market think that the airline industry cutbacks will have to have some damaging effects here soon, but if oil continues to fall and gets back to say sub-$90, AIR could be a big beneficiary. That makes this one to watch if oil does keep falling.

On the other side of the business, the start of another Cold War with Russia would also benefit its military aircraft segments, as would a Republican victory in the elections as Republicans spend a lot more on defense than Democrats.

Hercules Technology Growth Capital (HTGC)

PEG - .56

Hercules Technology Growth Capital, Inc. is a public investment firm specializing in financing venture capital for growth and later stage private equity for recapitalizations, leveraged buyouts, and spin-off transactions. The firm also provides public to private financings, including PIPEs. It invests in the form of equity, senior and subordinated working capital loans, senior revolving loans, bridge loans, and equipment loans.

The firm prefers to invest in technology and life sciences related companies. In the technology sub-sectors, it seeks companies characterized by products or services that require advanced technologies, including computer software and hardware, networking systems, semiconductors, semiconductor capital equipment, information technology infrastructure or services, Internet consumer and business services, telecommunications, telecommunications equipment, media, and life sciences. Within the life sciences sub-sector, the firm focuses on medical devices, bio-pharmaceutical, biotechnology, health care services, and information systems companies.

It provides loans ranging from $1 million to $20 million and can underwrite transactions up to $30 million. The firm prefers to be the first debt provider but can also work with existing debt providers. Hercules Technology Growth Capital, Inc. was founded in 2003 and is headquartered in Palo Alto, California with additional offices across North America.

This company has a dividend just under 14% currently and management recently stated they are planning on raising it in the near term. That makes this a safer play in a tough environment like we are in today. That is also a reason that if this one gets taken down with the market it should make for an excellent buying opportunity. Now everyone knows the Allied mess with the SBA, so there is rightfully some hesitation in this space, but those guys committed every fraud in the book, got caught red handed and they still sport a market cap of 2.57B.

Don't forget these guys have the USSA on their side - United Socialist States of America.

Transocean (RIG)

PEG - .25

Transocean, Inc., together with its subsidiaries, provides offshore contract drilling services for oil and gas wells. It offers deepwater and harsh environment drilling services; oil and gas drilling management services; and drilling engineering and project management services. It is also involved in oil and gas exploration and production activities in the United States, offshore Louisiana and Texas, and in the U.K. sector of the North Sea. As of February 20, 2008, Transocean owned and operated 139 mobile offshore drilling units comprising 39 high-specification floaters, 29 midwater floaters, 10 high-specification jackups, 57 standard jackups, and 4 other rigs, as well as had 8 ultra-deepwater floaters contracted for or under construction. The company was founded in 1953 and is based in Houston, Texas.

I've talked about RIG a few times before and even here I still like the company. Now if oil is going to take a beeline to $80 which I think is probable then I don't want to touch RIG until it gets oversold on the ride down. That being said RIG is a great value, has many 5-10 yr contracts at great rates, and even with oil sub $100 (but over $75) RIG is going to make a ton of money and a year from now will be sporting a hefty dividend.

A recent story out last week was that a Petrobras (PBR) competitor just found another huge underwater oil find off the coast of Brazil (so much for peak oil, looks like the ocean is full of it) and guess what they will need to get to it - big deepwater rigs. The shortage of available deepwater rigs is a long term problem for oil companies and a long term advantage for RIG.

Foster Wheeler (FWLT)

PEG - .73

Foster Wheeler, Ltd. and its subsidiaries provide construction and engineering services to the oil and gas, oil refining, chemical/petrochemical, pharmaceutical, environmental, power generation, and power plant operation and maintenance sectors worldwide. It operates through two groups, Global Engineering and Construction Group (Global E&C Group), and Global Power Group.

The Global E&C Group designs, engineers, and constructs onshore and offshore upstream oil and gas processing facilities; natural gas liquefaction facilities and receiving terminals; gas-to-liquids facilities; oil refining; and chemical, petrochemical, pharmaceutical, biotechnology, healthcare, and related infrastructure facilities. It also owns refinery residue upgrading technologies and a hydrogen production process used in oil refineries and petrochemical plants. In addition, this group also performs environmental remediation services, and engages in the development, engineering, construction, and ownership of power generation and waste-to-energy facilities in Europe.

The Global Power Group designs, manufactures, and erects steam generating and auxiliary equipment for electric power generating stations and industrial facilities. It also provides a range of site services, including construction and erection services, maintenance engineering, and plant upgrading and life extension. In addition, this group provides research analysis and experimental work in fluid dynamics, heat transfer, combustion and fuel technology, materials engineering, and solids mechanics. Further, it owns and operates cogeneration, independent power production, and waste-to-energy facilities, as well as power generation facilities for the process and petrochemical industries. The company was founded in 1894 and is based in Clinton, New Jersey.

This company has been taken down along with the rest of the "Global Growth Is Dead" construction meltdown. The company seems to think the end of global growth isn't entirely true and announced a massive 750 mil buyback - about 12% of the float. The CEO was also on Mad Money on Friday and stated that none of the company's projects have been canceled and that he has seen no slowdown in its pipeline of future projects. This is another company where I think oil needs to keep from crashing below $80 for the company's growth to continue to outperform.

Full Disclosure: I have a small position in HTGC.

Comments

[Socialism c...:]

"Naked girls are not as recessionary as many people think."

Um, yeah...the addiction play. Thanks, but no thanks. I have zero desire to make money by promoting bad morals or worse yet, capitalizing on others' addictions. I think we can all do better than that.

2008 Sep 17 01:11 PM

[Zee4Money:]

I agree - I'm going to go buy stock in Altria


On Sep 17 01:11 PM Socialism cannot compete! wrote:

> "Naked girls are not as recessionary as many people think."
>
> Um, yeah...the addiction play. Thanks, but no thanks. I have zero
> desire to make money by promoting bad morals or worse yet, capitalizing
> on others' addictions. I think we can all do better than that.

2008 Sep 19 02:32 PM