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  • Company With Simple Business Model Equals Big Opportunity

    (click to enlarge)One of the widely known investment quotes is "buy what you know", by the great Peter Lynch. In other words, do not buy a stock if you cannot quickly and accurately describe what the company does. This age old saying continues to be sound advice, and certainly seems like common sense. The stock I will be talking about today is extremely easy to understand what it does to produce earnings: nutrition. Specifically nutrition for animals and humans. Omega Protein Corporation (NYSE: OME) makes Omega-3 fish oil for supplemental use for humans, and fish meat additives for livestock. Feeder cattle futures are up almost 30 percent on the year, which may be a buoy for this company. Turning to the fundamentals, Omega Protein has a market cap of $291.46 million and is currently rated a "Strong Buy" by analysts. Price to earnings is at 7.72 and forward price to earnings comes out to 9.56. Price/earnings growth is undervalued at .77, price to sales is at 1.01, price to book is 1.07, price to cash is 7.25, and price to free cash flow comes in at 15.42. Total debt to equity is minor .08 and cash per share is 1.91, giving the company a very solid current ratio of 4.90. Earnings are expected to rise 625 percent this year, 3.21 percent next year and 10 percent over the next five years. Institutional investors own 81.7 percent of the stock, while insiders own a measly 1.9 percent. Margins are very good: gross margin of 34 percent, operating margin of 24.4 percent, and profit margin of 12.9 percent. Management efficiency ratios are equally impressive: return on assets of 11.2 percent, return on equity of 15 percent, and return on investment of 12 percent. Performance has been outstanding: 50.54 percent in the past year and 12.45 percent year-to-date. Omega Protein is the largest producer of Omega-3 fish oil in North America. The fundamentals accurately show this as it is quite simple to see the comparative advantage with the margins and efficiency ratios that the stock displays. Omega Protein's animal nutrition business has struggled in the past year, but has not seen a decrease year-over-year. With the rise of more health consciousness in our society, supplement purchases have seen a huge bump. Sales of supplements came in at $20 billion back in 2003, and rose to $32 billion in 2013. Analysts are seeing a continuing upward trend with a forecast of supplement sales rising to $36 billion by 2017. Omega-3 is helpful for several aspects of health, most notably heart health. This is certainly an area that does not go unnoticed by consumers, and the growth forecasts are supportive of that point. Be sure to do your own research before investing.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: OME
    Sep 09 3:26 PM | Link | Comment!
  • A Smart Way To Play Oil And Gas

    (click to enlarge)The oil and gas industry has seen a revolution of sorts in the past few years here in U.S. New found reserves, combined with new technologies, have allowed oil companies to invest in the U.S. and create jobs here, while tapping into oil shale. Some companies certainly have had more success than others, but this still has not stopped U.S. (and even international) oil and gas companies from coming over to the U.S. and purchasing land to explore and drill for oil.

    According to the Institute for Energy Research, the U.S. has more than 1.4 trillion barrels of recoverable oil within its territories, including offshore. This shows a massive opportunity for not only oil companies, but also for the U.S. to lift the ban on oil exports to help bring our trade balance to a positive number and help finance debt reduction. However, my stock today profits greatly from this oil and gas revolution without actually conducting any of the expensive drilling, extraction and refining. The company is Enservco Corporation (NYSE: ENSV). Enservco provides oil field services such as: "fluid management services, including water/fluid hauling, frac tank rental, and disposal well services; well enhancement services, such as hot oiling, acidizing, frac heating, and pressure testing services for assisting in the fracturing of formations for newly drilled oil and natural gas wells; and maintaining and enhancing the production of existing wells; and well site construction and roustabout services" (finviz).

    Turning to the fundamentals, Enservco has a market cap of $116.41 million and is currently rated a "Strong Buy" by analysts. Price to earnings is at 28.73 and forward price to earnings is 13.74. Price/earnings to growth comes in at 1.44, price to sales is 2.19, price to book calculates to 6.58, and price to cash is 105.83. The company has a total debt to equity of .83 (.61 of that is long-term debt) and cash per share of .03, giving the company a current ratio of 2.10.

    Earnings are expected to increase 500 percent this year, 53.33 percent next year and 20 percent over the next five years. Insiders are big believers of their company, as they own 72.20 percent of the stock, and institutional investors own 21.20 percent of the stock. Margins are very good: return on assets of 14.40 percent, return on equity of 35.5 percent, and return on investment of 20 percent. Margins are good: gross margin of 29 percent, operating margin is at 16.6 percent, and profit margin is at 8.7 percent. Performance has been outstanding: 145 percent in past year and almost 75 percent year-to-date.

    Overall, Enservco is an excellent niche market with few competitors. The problem with investing directly into an oil and gas company is that there are so many competitors that it is hard to find the comparative advantage. Enservco has the comparative advantage, while still profiting from the oil and gas revolution.

    Be sure to do your own research before investing.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: ENSV
    Sep 09 3:22 PM | Link | Comment!
  • Kingstone Companies Stalls, Despite An Impressive Quarter

    (click to enlarge)Kingstone Companies (NASDAQ: KINS), a Kingston, New York-based property and casualty insurance provider, posted impressive results for the most recent quarter (Q2, 2014) as net income increased to $1.4 million or 18 cents per share from $68,000 or $0.02 per share posted the same period last year. The company hit the bull's eye on all cylinders, reporting significant improvements across all segments in its business model. For instance, direct premiums increased by 27.5 percent to $20.3 million as growth in personal lines soared.

    The company's net premiums earned edged up a massive 37.5 percent to $6.4 million, compared to $4.6 million reported in Q2, 2013. Based on this run-rate, Kingstone companies could be on its way to reporting on average 15 percent increase in net premiums earned (to $25.6 million) for the full year 2014, compared to last year's $22.2 million. Another impressive result came from the number of policies in force, which increased by 23.7 percent to 41,000.

    Following this fantastic performance, the company went on to increase its quarterly dividend by 25 percent to 5 cents per share, compared to last quarter's dividend of 4 cents per share. The dividend is payable on September 15, 2014 to shareholders of record August 29, 2014. This makes it the thirteenth consecutive quarter that the company is paying a dividend to shareholders.

    However, the most interesting part is that despite the company's impressive results and an uptick in dividend, the stock uptrend appears to have stalled at a price of about $7.20 per share, having rallied from $6.80 following the earnings release. The company did miss analyst estimate by a cent, but this is highly unlikely to have affected the uptrend, which would have been immediate without the two-day rally. This appears to go against the norm, as the company rallied only for two days before hitting what seems to be a resistance level. Technically, this could be signaling a pullback due to the excessive buying that took place on August 12 and 13, but the stock looks fundamentally solid to support more uptrend.

    Leading analysts expect the company's EPS to continue growing sequentially and annually for the next few quarters. EPS estimate for Q3, is set at 21 cents compared to Q2 EPS of 18 cents, which implies a 16.67 percent growth sequentially. On the other hand, Q4 EPS has an average estimate of 26 cents implying 23.8 percent growth from Q3, which indicates an incremental growth rate. The company's revenue has a similar growth trend, with Q3 expected to post revenue of $13.87 million, while Q4 has an estimated figure of $14.36 million.

    Kingstone Companies has a solid balance sheet with massive cash and holdings balance of $62.4 million, which is an improvement from $57.6 million reported for FY13. The company's investments are comprised of 83.1 percent worth of fixed income securities, which implies low risk exposure. This compares to 81.9 percent reported for FY13.

    With a book value of $4.98 per share as of June 30, 2014, Kingstone Companies is currently trading at roughly 1.44 times in price to book value, which makes it reasonably affordable. Therefore, despite missing analyst estimates by 1 cent, and advancing 6 percent after the earnings announcement, Kingstone Companies appears to have stalled, and for nor clear reason. The company appears to be attractively valued based on P/B valuation multiple and looks set for a bright future; at least for the next one to two years.

    The bottom line is that Kingstone Companies is not getting the credit it deserves for its recent performance and appears significantly undervalued, which makes it a possible buy candidate.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: KINS
    Sep 09 3:18 PM | Link | Comment!
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