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Author: ClientNine Three stars, 500 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 21514  
Subject: Ideas 2011 Date: 12/22/2010 8:04 PM
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Recommendations: 33
Some of my favorites:

KVHI: Actually went down this year despite massive progress on each of their major business lines. 4Q10 will be a bit of an air pocket because of order patterns in their fiber optic gyro business, but their main customer here will finish drawing down inventory and resume buying in Q1 per management on the most recent conference call. Meanwhile, the company has been massively diversifying the FOG customer base and growing their TAM over time, so there may be more runway on this product line that we thought. Over at the marine broadband business, the company beat everyone in the industry to win the coast guard contract. First shipments and revenues will be in Q1. Revenues, margins, free cash flow and ROE should all go up in a big way in 2011, off a tough comp base, since 2010 was the best year in company history by far. On the most recent conference call, management actually said growth in marine broadband is accelerating, and they grew about 50% year over year. Harris CapRock, a major competitor, just bought out the marine VSAT business unit of Schlumberger for 2.3X revenues and almost 11X EBITDA.

ATPG: Assuming that the government ever allows well completions again, ATPG should be back on track. Nothing I can say here can compete with the awesome Fool board for this company, so head over there.

TNSGF: Wildly speculative. With their partner Intel, they have built a video game app store into every Intel chip shipping to cable set top boxes. If the cable companies use it, and then if customers actually buy games on their cable boxes, the upside could be very large. First shipments to a confirmed customer look like they'll start in January, after much delay. The bull case requires some change in customer behavior, and so many assumptions multiplied by each other that it reminds me (uncomfortably) of the Drake Equation. As close to venture capital in the public markets as anything you're likely to see -- and they just put a Canadian VC on the board! Downside protection (some) is provided by their successful & growing business porting video games from PC to Mac at low cost and quick turnaround time.

RFLMF: Everybody's favorite Mozambique coking coal company. Nothing new here.

PWER: A power electronics and inverter company that's been public since the 90s and had, until this year, racked up $500MM + in accumulated losses. Debt ridden, money losing, low margin and fierce competition -- what's not to love? But a few years ago, they started rolling up inverter companies supplying the wind and solar markets. The roll-up was interrupted by the Great Recession, and the company came close to going under. They were saved by an investment by Silver Lake Sumeru, which converted to equity at about $1.50 per share. One of the best cleantech deals in 2009, easily -- stock is at $11 or so now.

Roll up is done, and they now are the #2 player in the market. Debt is gone, gross margins have doubled, EBITDA is $200M+, and while there is some question as to next year's growth thanks to the end of feed-in tariffs in some European countries, the long term market picture looks bright. Oh, and it's trading at ~ 7-8 times next year's earnings net of cash, even if the solar market hits an air pocket. A sexy cleantech multiple is possible here, but even if the company never gets it, growth in line with the solar & wind markets, plus a mid teens multiple, would make this a multi-bagger over a few years.

SD: The Anti-Chesapeake. Run by Tom Ward, who was the adult supervision to Aubrey McClendon in the years when Chesapeake was actually run by rational adults. Like every other E&P, SandRidge is a natural gas company trying really hard to be an oil company when they grow up, but unlike most, this time it's real. A series of acquisitions, most notably Arena Resources in 2009, gives SD a huge acreage position in the midcontinent in which to drill for oil. This year, their production is on the order of 75%/25% gas/oil, and next year the ratio will flip. A fair amount of deal-related debt + rising production will give this name a lot of leverage to rising oil prices. Biggest investor in the company? Fairfax Financial.

YNGFF: The story here has been posted all over value blogs, VIC, SumZero and elsewhere. Gold mine in Nevada, shut down by the EPA for emissions. New management + investment from Eric Sprott saved the company. Production restarted now, steady state of 150K ounces/year nearly achieved. The gold mine itself is nice, but the real asset here is the roasting facility, which has capacity much greater than the output potential from YNG's own mines. This allows them to do deals with numerous nearby Nevada mines that have above-ground low-grade ore that can be processed only by this type of facility. Two other facilities in Nevada operate at capacity from their own mines, and these things are nasty enough that none are likely to be built in the USA for a long time, if ever -- making YNG the only game in town. A test deal with Newmont has already begun. The company updated long-run projections in a recent investor presentation to indicate that they can do 900K of production by 2015, but the market yawned at this forecast. If they hit it, YNG has multi-bagger potential.

Your turn guys: what are your favorite ideas for 2011?

Best,
C9
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