Turley Muller

Force Protection Volatility Presents Unique Buying Opportunity

I can tell you why? You seen the short-interest last report increased to 15m from 9m the previous month. I started to take a look at FRPT after I saw it take a beating today and was thinking about writing about but I discovered you already had. I think this stock is probably overdone on the downside. I think two issues
1) Contracts going elsewhere
2) The 13m (i think) shares being registered that were done in a PIPE deal end of last year.

I address the last, first. People always short before they know that shares may temporarily flood the market. Occasionally some dirty bastards in the PIPE deal will go short and then cover with newly registered shares "Shorting against the box" not supposed to happen but it does. Not saying that's the case but I am always suspect. Also, disappointing news affecting the near-term adds shorting pressure.

FRPT originally was perceived as being the only game in town. They have such a superior solution, yet we come to find out their capacity is miniscule. Since somebody / people overlooked ordering proper equipment before our current vehicles got blown to shreds its been a major catch up game. So I think it's fair that contracts are getting spread around since what we need is no where close to what we can make quickly. FRPT is expanding their production, but that takes time.
According to Thomas Weisel analyst David Gremmels the contract loss will end up causing FRPT to have excess capacity. I think it will get filled one way or another.
Figures I have heard is that 80-85% of troop deaths are a result of IEDs. All we hear is roadside bomb, roadside bomb, roadside.....
After not having armor in Somilia and again showing up in Iraq with canvas doors looks real bad. I think the government will spend and over spend on these vehicles. For a long-time. The sand and heat in Iraq causes 5 years of wear in one year, that's just driving around NOT being shot at. Like with hurrican katrina, the govt bought tons more trailers/mobile homes & Ice etc that was needed to make up for the lack of what they needed when they needed it.
So, I think it's not a question of "WILL" yet "WHEN" FRPT will be given plenty of work.
It seems logical that the military will want to make keep FRPT in business so that they will have capacity to call upon in states of urgency. Like 4 years ago when there was minimal capacity. FRPT needs to get it together in terms of managing their expansion and production runs. That's tough given that the company was more of an R&D outfit not a scale manufacturer. The fact that FRPT has R&D savvy gives them another strong point .
So, I think this stock is cheap given its future revenue potential.