Q3 2009 Earnings Call

October 23, 2009; 10:00 am ET

Gulf Islands Fabrication Inc. (GIFI), at Friday's closing price of 18.06, is a value play in the oil and gas equipment and services industry. The initial attraction is a combination of low P/B (1.0) and low Price/5 Year Average Earnings (11.5). The company has numerous strengths, which over time should allow it to overcome current weakness in revenue and backlog and participate strongly in the growth area of deep water equipment.

I picked up the idea from a screen by Alan Brochstein here on Seeking Alpha. Checking further, the same name appears on a screen he did on 3/28 which also included Carbo Ceramics (CRR) and Lufkin Industries (LUFK), both successful picks I wrote up favorably and bought for my discretionary account. To some extent I work by affinity – I follow Alan and since this idea is a case where our thinking leads in the same direction, I did my own research, developing the following information and opinion.

Those who follow my work know that I spend way too much time running screens on the weekends. My goal is to find new ideas. I run various types of screens, looking across broad market capitalization ranges or within sectors or even narrow industries. Many of the screens are value-focused, others pursue growth. I tweak my screens, and I try to come up with new ones. The screen I ran today extends upon some screening I was doing at the end of last year within the Consumer Discretionary sector, which was laden with companies trading below tangible book value.

Today, I applied several of those parameters to the broad market and tried to hone in on companies that not only have strong balance sheets but that appear to have weathered the storm. While the 8 names I am about to share are up a lot this year, they were down a lot last year and appear to be cheap yet. Lots of people like to buy value stocks when they are beaten down, but prices 50% higher aren't necessarily bad prices. In the case of this group, they fell pretty much with the market last year, about 47% on average. While they have rallied 57% on average in 2009, they are still down over the past 21 months. While I know only one of these companies very closely, the group certainly appears to be worth investigating.

The following table contains the two cheapest companies in the Russell 2000 from each sector based on The Applied Finance Group’s Recommendation and Value Score (explained below). All of the companies listed below are the most attractive in their sector based on AFG Recommendation, which factors in each companies Economic Margin, Intrinsic Value, and Management Quality Score. All companies listed also had the highest Value Score (upside) relative to their sector peers. Also provided is a VE analysis of each company to identify implied sales growth expectations versus what the company has delivered historically in sales growth over the past 5 years. Measuring the spread between a company’s VE sales growth expectations and what it has historically delivered should give you a good idea of which companies have the best chance of meeting or exceeding those expectations, and thus are more likely to outperform.

Given that the stock market has lost a tremendous amount of value over the past year, it is important to point out the market cap for the companies in the table. The twenty-two companies shown below have returned -53% on average over the past year vs. -33% for the Russell 2000 Index as a whole. Specifically, a few companies now maintain a market cap that some investors may define as micro caps. If micro caps are within your universe of focus, then the following table can help identify some gems to invest in, especially since micro caps (as well as small caps) have outperformed large cap stocks by about 10% since the market bottomed on March 9, 2009. However, if the “bigger” small caps are more to your liking, the table provides a good snap shot for several companies with respectable size that may outperform the Russell 2000, based on Value Score and imbedded expectations.

Q4 2008 Earnings Call Transcript

March 6, 2009 10:00 am ET

I always find it interesting to look at the guru portfolios I run on Validea and ask the question “what is working now?" Over the last month, in a period where the S&P is up 0.4%, 11 out of Validea’s 13 portfolios have outperformed. The best performer is my Ben Graham strategy, up 9.4%. Incidentally, the Graham portfolio is also the best long term performer (up 89.3 percent vs. -12.9% for the S&P since July 15, 2003). The table below shows the performance of the 10-stock portfolios I run over the last 30 days.

Q3 2008 Earnings Call

October 24, 2008 10:00 am ET

Gulf Island Fabrication, Inc. (GIFI), a manufacturer of drilling and production platforms and other specialized structures for the oil and gas industry, is a double play as it offers investors both value and growth. Last week, it reported quarterly results above consensus expectations with EPS at $0.83 vs. $0.77 estimates and $0.55 last year; and revenue at $117.9mm vs. $116.25mm estimates and $137.6mm last year. Going forward, GIFI expects 2008 revenues at $144.9mm and 2009 revenues at 292.8mm.  Gulf Island Fabrication trades at a forward P/E of 14.39 and a PEG ratio at 0.81 while averaging earnings growth of 29.38% over the last four quarters.

Dissecting the company’s 10-Q, comments on its backlog provides investors visibility on its future growth prospects. The company estimated a revenue backlog at $437.7mm and a labor backlog at 4.6mm man-hours remaining to work. 58.3% of these figures represents projects destined for deepwater locations and is based upon work remaining at June 30, 2008 and commitments received through 2Q earnings released on July 24, 2008. For comparison, on December 31, 2007, it stated a revenue backlog at $330.4 mm and labor backlog at 3.7mm man-hours.

Q2 2008 Earnings Call Transcript

July 25, 2008 10:00 am ET

Get Healthy: Becton Dickinson (BDX), CR Bard (BCR), Baxter (BAX)

Leery about Lehman: Lehman Brothers (LEH), Financial Select Sector SPDR (XLF), Goldman Sachs (GS), Citigroup (C)

Financials led stocks down with Lehman leading the way as it attempted to deny rumors that it is raising $3 to $4 billion. Macke says LEH is trading “like a stuck pig” and while he doesn’t think it is another Bear Stearns, he wouldn’t buy the stock. Najarian observed put activity in LEH and XLF and high volatility. Finerman says LEH will have to approach the markets to get liquidity even though this will hurt the stock. Adami doesn’t think Lehman will attract an offer from Goldman Sachs or another bank. Macke said although financials were down, Goldman Sachs and Citigroup were not low enough to buy.

Gulf Island Fabrication, Inc. (GIFI)

Q1 2008 Earnings Call Transcript

Q4 2007 Earnings Call

February 28, 2008 10:00 am ET

With the price of oil bouncing around between $90 and $100 per barrel, maybe its time to look at the oil drillers, which can provide substantially more upside than the large integrated oil companies or the oil income trusts. Here are a list of 14 oil drillers, all but two of which have market caps above $1 billion, and all but two of which pay dividends:.

Atlas Energy Resources (ATN) is a developer of of natural gas and oil principally in Michigan, New York, Pennsylvania, Ohio, and Tennessee. The stock has a P/E of 23, a PEG of 0.42, and a yield of 7.5.

Entergy (ETR) - Electric utility company based in New Orleans. Up about 40% over the last year and is now trading at a somewhat aggressive 21x LTM EPS. If you believe forward estimates though, which have EPS growing 20% year over year, forward P/E is a more palatable 17x. Pays a 2.3% dividend.

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