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Stanley Barton  

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  • Materialise: Cheap Value In Fast-Growing Industry [View article]
    What I like most about MTLS is that it spends almost all the cash flow on R & D. Of course it could "capitalize" the expenses to make the bottom line look better, but management chooses the conservative method of making these one-time expenses. They are growing software revs at a 50% clip because they are opening the technology gap between them and competitors. To assure a permanent lead in an industry in its early stages, MTLS would rather spend the cash on R&D than make EPS look better and using a chunck of that money to pay taxes. Last quarter, they paid $49,000 taxes on $ 28MM in revs....I love it.)

    I think the market sees the bottom line and thinks the stock is expensive. MTLS spends 20% of revs on R&D...if they spent half that, they would sport a single-digit PE. Also I give management high credit for managing this growth without much fact, MTLS has more than 3 times as much cash as long-term debt.

    I think the company has suffered in the market because it has some exposure to the negative effect of the steep rise in the strength of the dollar versus Euro.

    The long-term view reveals a company with exceptional visible growth based on technological leadership in an infant industry, with a clean balance sheet and tailwinds from a likely exchange rate reversal.
    Apr 22, 2015. 11:44 PM | 4 Likes Like |Link to Comment
  • Initiating 3Pea International: FCF Positive, High Growth And Operating Leverage [View article]
    Thanks for the article.

    I have been long 3 Pea for some time, and I like the fact that the company is trying to diversify its customer base and expand into new market niches. The revenue and income growth is fantastic and should get better. A similar company in the same business is Payment Data Systems (PYDS), which has a more diversified revenue base and higher growth rate than TPNL, but a slightly higher PE. PYDS is expected to announced up-listing any time now, which will enable institutions to invest. I own both and sleep very well with these two.
    Apr 21, 2015. 11:08 AM | 1 Like Like |Link to Comment
  • Vertex Energy's 2014 Earnings And Nuggets Of Hope In 2015 [View article]

    You understand the situation. The company has aggressively expanded its territory and is one of the largest players in its niche. It has little competition in its areas...that is how it can dictate that suppliers now have to pay them additional hauling fees. Of course, that will be adjusted out when the price of oil rises some, but by then the spread between sales price and inventory cost will be stabilized and the large revenue increases will translate to larger increases in cash flow and EPS, as overhead is a smaller part of cost of goods sold. I realize that there is a glut of fossil fuels today, but far-sighted folks realized that we have about tapped out new areas to frack, and lifting costs continue to rise while well production depletes rapidly on fracked wells. As a Texan, I can tell you that every portfolio ought to have a few of these "green" energy stocks for the future. I have seen what happens when wells play out and boom turns to bust. VRTX has an unending supply and has cornered the market in much of the US.
    Apr 12, 2015. 10:20 AM | 1 Like Like |Link to Comment
  • Aemetis: A Little Known Gem [View article]
    Thanks for the article on this interesting company. Actually, I look at AMTX as a developing technology company insofar as they have found ways to produce their products from a variety of uncommon feed stocks, and can adapt equipment to accept others. Of course, this is not considered such a breakthrough when fossil fuel is so cheap, but long-term this is the future. It is worth mentioning that the plants are valued on the book at a fraction of their replacement cost. I also like that they invest in R & D for the future. On the cautionary side, the debt load is a concern to them and me, but I can live with the leverage as I think AMTX can generate a flood of cash flow when factors you mention normalize. A bit of a gamble for sure, but I have been rewarded as a long-term holder and actually believe the company is executing on its plan better now than ever.
    Apr 12, 2015. 10:02 AM | 2 Likes Like |Link to Comment
  • Vertex Energy's 2014 Earnings And Nuggets Of Hope In 2015 [View article]
    The steep and swift decline in oil naturally left VRTX holding the bag on used motor oil acquired at relatively expensive costs according to first-in-first-out inventory accounting. If oil were to rise, just the opposite occurs, as VRTX can sell its refined products at higher prices. The lower cost inventory will allow the spread to widen to the positive side...expanding profit margins to counter the recent losses. If the price of oil is relatively stable, VRTX has always done a good job of managing spread so the swift drop is more of a one-time problem IMHO. That is why Goldman is on board.
    Apr 9, 2015. 08:48 PM | 3 Likes Like |Link to Comment
  • Hibbett Sports Fails To Close Higher On Earnings Beat, Providing Opportunities [View article]
    One analyst took the opportunity of the earnings beat to downgrade HIBB for lack of online store and not "appreciating" the potential impact of west coast port delays. Seemed like a stretch from a short seller to find something to criticize considering that the online store in development will be a future growth engine and nobody is including any revs from that effort in 2015. The downgrade suspiciously does not mention that HIBB has been a solid performer and compares favorably in value and growth metrics with Foot Locker (F)L, which is hitting new highs.

    HIBB is one of Hilary Kramer's top "value picks." In a market where consumer discretionary stocks with minimal growth are at stratospheric prices, HIBB with steady growth and rapid expansion opportunities seems like a reasonable place to get exposure to that sector. Since the HIBB market is in the small and mid-size Southern cities, look for sales to get an extra boost from NCAA tournament if southern teams prosper (Kentucky, Virginia, Duke, LSU, etc. for instance). My team got eliminated for "goal tending " an airball...oh well.
    Mar 19, 2015. 11:01 PM | Likes Like |Link to Comment
  • Amira Nature Foods: Hungry For Another Big Helping Of Cash [View article]

    If you bother to read closely you will see that I refer to the entire PP&E disclosure, not just the land cost...and I stand by all my statements. I am not able to evaluate if the land was worth the price or not, but the filing indicates that before making the decision to purchase the land ANFI received "independent, third-party evaluations" to assure an arm's length transaction. Perhaps you have better information to enable you to deduce that these evaluations were not independent or accurate. If so please share with us. If not...well...
    Jan 30, 2015. 03:10 PM | Likes Like |Link to Comment
  • Amira Nature Foods: Hungry For Another Big Helping Of Cash [View article]
    In addition to the debt reduction, $99MM will go into the cash coffers. That will be available for rice purchases to fuel growth, add to their chain of fully-owned distribution centers in new markets...or pay debt. Now that the commodity price of rice has dropped 35% in the past 6 months, I vote for buying as much as they can at fire sale price and reduce the cost of goods for windfall profits for years to come...this opportunity can disappear with a drought, so they should strike while the iron is hot and now they should have cash to do it. They can store/age it on the new land, next to the new plant, and cut transport and storage costs drastically.

    Actually the last quarterly filing indicates $22MM in PP&E, and this is probably only a fraction of the real value, as it is the net value after deduction of depreciation from origination costs from decades ago.

    Fair to wait for the interest rate before getting too excited...although I think the major short thesis was that the only option was "selling a bunch of stock -- possibly at a steep discount to the market price -- in a dilutive secondary offering." The company has another chance to stick it to the shorts when they announce the final details...could be any day.
    Jan 30, 2015. 02:04 AM | Likes Like |Link to Comment
  • Amira Nature Foods: Hungry For Another Big Helping Of Cash [View article]

    Thank you for the link to the KRBL site. I was particularly pleased to read their analysis of the industry, which indicated escalating basmati prices and a trend to the premium branded products. KRBL looks like a pretty good investment option, if you have access to the Bombay market and are interested in a conglomerate that sells bulk rice, solar and wind power, biofuels, and packaged basmati. I believe ANFI is a better pure play on the premium, gourmet and specialty prepared basmati market. However, since you offer it as the “peer” to prove that ANFI has impossibly high margins and financial metrics out of line, I checked the YAHOO statistics summary to see how KRBL compares to ANFI:

    ---KRBL has a higher operating margin (14.09%) to ANFI (13.15%)…curious since you stated that ANFI’s “margin performance is entirely inconsistent with its peers.”

    ---both companies have essentially the same price to book and return on equity (KRBL 26.54% and ANFI 27.46%)

    ---ANFI is superior on all value metrics: price to sales, PE, PEG

    ---per balance sheet, ANFI has a superior current ratio and KRBL has debt to cash of 12.6 while ANFI only has debt of 5.3 X cash

    ---finally, YAHOO indicates that KBRL has quarterly revenue growth of 6.30%, which hardly compares to ANFI’s 30.9%

    I am not familiar with all the KRBL products, but they make no mention anywhere of marketing to the organic or gourmet markets and indicate a specific threat to their business is “private label products, especially in export markets…” ANFI is taking that niche, unless someone like KRBL decides to buy them out. After all, KRBL states it already has established a substantial fund for acquisitions, and taking ANFI would be a perfect fit. You do not want to be short ANFI when that happens.
    Jan 19, 2015. 10:59 PM | 1 Like Like |Link to Comment
  • Amira Nature Foods: Hungry For Another Big Helping Of Cash [View article]

    I am pleased that you are giving me the opportunity for some pre-publicity for a piece I am preparing:


    Since you do not provide any names of “peers” nor their growth rates, PE ratios, etc., it is hard for me to buy into your proposition that since Amira has exceptional financial metrics it must be a scam.

    Amira is most comparable to Starbucks. There are lots of companies in the rice business in one form or another. However, as you know, and prefer not to mention, AMIRA deals primarily in premium-grade basmati rice, and retails the product after it has been carefully selected, aged and prepared for sale in top retail establishments.

    Follow me on the STARBUCKS comparison:

    ---both source their raw product from small farmers operating in ecologically-special areas that produce the highest grade of rice (ANFI) and coffee (SBUX).

    ---both are “first movers” in their market. ANFI has been working with these specialty farmers for a century, and, as the country western song says, “ANFI was organic before organic was cool.”

    ---as first movers, ANFI and SBUX have built mutually-profitable relationships with suppliers, making it difficult for newcomers to break relationships that have been working for decades, or to buy the “commodity” at prices or quality to compete with ANFI or SBUX.

    ---ANFI and SBUX both have product brand recognition based upon the simple idea that consumers are willing to pay a premium price for the small luxury of enjoying the most tantalizing organic selection on the shelf.

    ---ANFI and SBUX both have large untapped markets, for SBUX it is emerging markets, for ANFI it is those and the US of A.

    ---In its early phase of growth, SBUX had a heavier debt load than ANFI, as percent of revenue.

    ---although I do not want to give away all the comparisons, I will note that both have recognizable brands that depict royal women (I suspect that women are the primary buyers).

    Where the comparison falters is that SBUX has a growth rate of 10% and a forward PE of 22 and ANFI has a growth rate of 25% and a PE of 6.5. That is why ANFI is an easy double, or as Oppenheimer stated in their OUTPERFORM rating: “We expect the market to award ANFI shares a higher multiple over time as investors become more familiar with the story…”

    Think about it...
    Jan 17, 2015. 06:08 PM | Likes Like |Link to Comment
  • Amira Nature Foods: Hungry For Another Big Helping Of Cash [View article]

    The company sells premium basmati rice...not just plain rice. The cost savings from shipping, lower cost of goods, etc. will mostly go to the company. When was the last time you saw Starbucks lower their cost due to improvements in the coffee market or their shipping costs?

    Company pays about $.50/share in shipping each year, so I would guess a 50% cut in fuel costs would translate to maybe $.10 - $.20 per share to the bottom line. If you assign a PE of 15..that might be a $3 per share bump. The bigger impact will be from a 30% drop in cost of goods.
    Jan 17, 2015. 04:04 PM | Likes Like |Link to Comment
  • Amira Nature Foods: Hungry For Another Big Helping Of Cash [View article]

    The author provides links to SEC filings, and you should read the filing carefully rather than accept his "summary" which is not the whole story.

    The author quotes from the filing "company pays 21% interest to certain suppliers for payments made beyond the normal credit period." That is a required filing to disclose credit terms in the event that they do not pay according to terms. Also in the filing, the company states they have no past due debt payments. What is 21% of zero?

    Later, in the filing it states that the 21% is only on "trade payables". In the last quarter the company used cash flow to reduce those from $42MM to $12MM. If the entire amount was "past due" the interest would be about $200,000 per month while the company generates about $6,500,000 of EBIDA each month. This is a non-issue that Shorty is hanging his hat on...don't be a sucker. This company is growing revenue at more than a 25% clip, and sells at a single digit PE. You should thank Shorty for the buying opportunity.

    Earnings will be out in about a month, and the shorts are desperate to knock ANFI down so they can cover before earnings.
    Jan 17, 2015. 11:21 AM | Likes Like |Link to Comment
  • Amira Nature Foods: Hungry For Another Big Helping Of Cash [View article]

    Clear thoughts:

    "There are no economies of scale via volume"

    ALL companies have fixed costs that do not increase proportionately with sales growth...this is simply Economics 101

    "...non self-processed volumes are now far outstripping its own, which should offset such benefit (of 30% drop in rough rice costs)..."

    If your implication were correct, the savings on self-processed rough rice would not be affected by the non-self-processed. However, I understand from SEC filings that the company typically buys the rice and ships to the all the savings on rice purchases should accrue to the company. In the interest of balance, it is true that the use of outside processors places an additional risk that would be eliminated by the new plant. Also the first in, first out inventory accounting means that the bulk of these savings are yet to be recognized. These are positives that will add further margin growth in the future.

    Hope this helps.
    Jan 16, 2015. 12:09 AM | Likes Like |Link to Comment
  • Amira Nature Foods: Hungry For Another Big Helping Of Cash [View article]
    Silly Shorty…you don’t scare me…

    Looks like an attempt to demonize management for doing smart things for the company and stockholders:

    ---Double revenue since IPO in 2012, by increasing debt for inventory growth by only 28%
    ---Borrow to fund revenue growth with profit margins more than double the interest rate
    ---Reducing the tax rate by growth in expansion markets that have lower tax jurisdictions
    ---Take advantage of 100-year history and long-term relationships in the market to profit from special “institutional” opportunities

    On the other hand, curiously missing from this article are the following recent tailwinds:

    ---Reduction in shipping costs due to 50% reduction in cost of oil
    ---Reduction in cost of goods due to 30% reduction in cost of rough rice
    ---Reduction in interest expense due to India policy target to reduce base rate by 1% by year end

    The company will be better with the plant expansion, and will realize huge savings from that development. However, level heads realize that a combination of internal cash flow and traditional financing are available. The company has the luxury of using existing facilities and outsourcing to continue planned growth at current margins, although the margins would improve with the new plant. The company has time to explore and arrange financing options.

    The management IS guilty of under-estimating the growth potential. Expanding shelf space in existing markets and entering new ones are indeed a sign of hunger…hunger in the Basmati market. Management is at a crossroad of deciding if it is better to cap growth and pay down debt (Shorty’s proposition) or take advantage of the growth in the organic foods market, growth in the middle class in emerging markets and the moat they established by being a reliable supplier of high-quality product for a century. Although plans may require some adjustment due to the unanticipated growth explosion, I think management is making the right choice by borrowing and investing to strike while the iron is hot...JMHO
    Jan 15, 2015. 04:14 PM | 2 Likes Like |Link to Comment
  • Amira Nature Foods: Hungry For Another Big Helping Of Cash [View article]
    Absolutely true that margins will improve greatly with a new plant; however, ANFI has other margin tailwinds:

    ---Larger volumes due to explosive market growth

    ---Lower cost of goods due to 30% drop in rough rice commodity cost in last six months

    ---reduced shipping cost due to 50% drop in oil

    just for starters...
    Jan 15, 2015. 04:08 PM | Likes Like |Link to Comment