ZAGG Inc (ZAGG): ZAGG went from 65c to $7 in seven months during 2009 and is now around $4. The company will likely earn 0.20 in 2009 (give or take a penny or two), and gave guidance of 0.40 EPS for FY 2010. With increased distribution for invisibleShield and new product introductions throughout Q4 2009 – Q1 2010 (ZAGGsparq, ZAGGskins, ZAGGfoam, ZAGGbox) continued growth looks to be all but guaranteed. Even if the company would earn 0.30 in 2010, this growth would warrant at least a 20 PE by EPS growth standards, so I believe the stock should do well from these levels. The company will be making a big splash at the Consumer Electronics Show in January, and it is probably when the stock will revive itself as well.
This dip that it is on now is a great buying oppurtunity, I hope they panic sell it tomorrow and if it starts to run up I will add to my position. I rarely do this, but this stock will make a quick and great comeback. I will be offline for the rest of the time and will be touring CA.
This market continues to move higher. One of our subscribers banked today on BIDU entry at close now up 7% on his play.
Ben
This is in relationship to our CHOP and CHNC holds currently in our longterm account.
China’s surging demand for steel this year is expected to dominate the landscape of the steel industry as never before.
Already the world’s largest producer by far, the country is expected to rev up production by nearly 10%. But the higher output likely won’t exceed demand, pushing prices higher world-wide for steel, its raw materials and even coal.
Steelmakers, which idled dozens of mills and cut production as the global economy slowed, are now ramping up. Rio Tinto, which sells the most iron ore to China, is restarting production. Iron ore is a key ingredient in making steel. Arcelor Mittal, the world’s largest steel producer, is raising prices, as is China’s largest steelmaker Baosteel Group Corp.
China also is trying to unify a fragmented and sprawling domestic industry to present a strong, unified voice in price negotiations for sales and purchases of raw materials. The idea: Capitalize better on the country’s huge appetite for the materials that make everything from refrigerators to bridges.
China is expected to produce a record 600 million metric tons this year—about half the world’s total output. The next biggest producer, Japan, will make just one-sixth of what China is expected to produce. The U.S. was fourth in production, behind Russia, last year.
China’s continued resilience was the dim light in an otherwise dreary year for miners and steelmakers, marked by layoffs, mine closings and production and investment pullbacks as prices for commodities tumbled. And it looks to be the beacon going forward, along with India, to a lesser extent.
While other economies are strengthening, they don’t offer the same potential for growth as China, which makes penetrating that market critical. “Chinese steel production and demand is likely to continue its inexorable rise,” says Peter M. Fish, economist for MEPS International, a steel consulting firm.
That, in turn, is good news for all metals and minerals sellers.
Iron-ore spot prices, at about $110 a metric ton, have been climbing toward their highest level in more than a year. Coal prices for steel mills and electricity production have surged by more than 30% as the Chinese last year curbed production due to environmental concerns. Copper, aluminum and zinc prices also have risen.
“The recovery of all commodities has exceeded expectations,” says David Butler, analyst at J.P. Morgan Cazenove.
Australian ports are becoming congested again, with coal ships in line on the ocean, waiting to load and unload.
Robin Walker, a spokesman for Rio Tinto, the largest seller of iron ore to China and which sells a substantial amount of coal, says its economists are revising projections from August regarding Chinese demand. “The new update could show that growth is stronger,” he says.
BHP Billiton, the world’s largest miner, Rio Tinto, Australia’s Fortescue Metals Group Ltd. and Brazil’s Vale all are increasing production of iron ore, and in some cases coal, to meet the expected increased demand in China.
China’s Baosteel, an industry bellwether, told buyers last week that it would increase steel-sheet prices by 5% beginning in February, marking the third steel price increase in as many months.
“With January hikes now sticking well, we expect to see further price increases announced in China as well as Europe and the US,” says Michelle Applebaum, an analyst at steel research firm MARI in Chicago. “Chinese steel demand is profound, and rising raw-material costs are driving an inflationary spiral in the region as steelmakers and their customers clamor for material.”
Massive government stimulus and infrastructure plans—including for rails, roads and bridges in eastern China and for general construction and factory building in the western part of the country)—are fueling demand. Most of the steel production will be consumed internally, says the China Iron and Steel Association, the main steel trade group in the country.
China’s exports have dropped between 10% and 50%, depending on the product and country in the last year, which is welcome news for ArcelorMittal Chief Executive Lakshmi Mittal. Mr. Mittal says that last fall, China’s steelmakers remained fairly disciplined about keeping their steel from flooding foreign markets, which has helped steelmakers around the world raise prices.
The downside for ArcelorMittal and other steelmakers is that raw-material prices will likely rise as the companies compete with Chinese steel mills to secure the coal and iron ore needed to fuel and feed steel plants.
This week, Australia and China signed a $3 billion coal deal, the largest buyout by a Chinese firm in Australian mining history. The purchase of Australia’s Felix Resources Ltd. by Yanzhou Coal Mining Co. could open the door to more acquisitions this year.
Write to Robert Guy Matthews at robertguy.matthews@wsj.com
A recent online friend of mine wrote this update on his blog. This is talking about GAXC and as you know I bought 20,000 shares of it at $.93 and now its at $1.06. Thanks Ian for your research. Not to mention he went down to Florida to meet the CEO and have dinner and ask questions about this investment.
GAXC DVD Kiosks
Transaction processors and ATM companies have received a lot of positive press this past week. Barrons and AP both put out bullish articles on the industry and Global Axcess’s (GAXC) closest comparable, Cardtronics (CATM).
From Barrons Article: Transaction Processors See Some Action
For the month of December, group average 2009 and 2010 price/earnings multiples increased to 17.9 times and 15.0 times from 16.7 times and 14.1 times, respectively. 2009 and 2010 group average Ebitda multiples also increased to 10.4 times and 8.9 times from 9.9 times and 8.6 times, respectively.
From AP Article: Payments Processors outlook
Among smaller payments processing companies, Mammone recommends Cardtronics Inc. for 2010. He rates the stock as a “Buy” and set an $18 price target for the company, which operates thousands of ATMs across the U.S., United Kingdom and Mexico.
Conclusion:
Global Axcess (GAXC) at $1.00 per share is trading at about half of its peer group average. Deutsche Bank analyst Christopher Mammone has an $18 price target on Cardtronics (CATM) which when you break it down is valuing it at 21x the average 2010 EPS estimate. Global Axcess will likely grow net income yr/yr at a higher growth rate then Cardtronics. After reading both articles and doing a peer analysis and analyst expectation analysis, GAXC is considerably undervalued. GAXC’s ATM division alone should be currently valued over $2.00 share. My GAXC baseline EPS estimate for 2010 is 13-14c (40%+ EPS growth) which doesn’t include additional ATM wins or any DVD kiosk contribution. A baseline price target on GAXC would be close to $3.00 by using comp PE analysis. With additional ATM or DVD kiosk wins/contribution, GAXC’s price target would increase considerably.
Disclosure: LONG GAXC and continuing to add to my position
www.iancassel.com
Zagg is one stock that is super undervalued, and I am extremely bullish on this stock. Watch the below video and see how they are expanding their business. I expect this stock to be at 7 by June.
Back in October zagg announced a new project called zaggbox, which would store recorded video, pictures, and music on its 1 terabyte hard drive, and allow you to access the media on your home entertainment system as well as on your mobile device. As impressive as that is for a company that started off selling stickers high-grade protective polysomethingerother skins for cell phones, it’s only the beginning – full home automation through zaggbox is in the works, which will let you lock doors, control and view security cameras, and adjust the thermostat from your smartphone. Recording media for later consumption is huge, and with the Xbox 360 connectivity, you’ve got an easy way to create and share gameplay videos. The price point will sit somewhere between $600 – $900, and the mobile app will be in the neighborhood of $20, which might sound like a pricey proposition overall, but at least they’re only charging a subscription fee if you want all of your media backed up in a cloud storage service. I can only imagine what Sling and Unify4Life think about zagg now…
Source ZAGG Inc.
Our call today was awesome on ICXT as it dribbled all day down a total of 18% for a great short. 2 people shorted that for some nice gains!
I mentioned TRIT at the lower (secret strategy) and the stock just rocketed up over 2 dollars or almost 10% after that entry. After selling and taking about $400-$500 in profits I moved on to sell SYNM in my short term account while still holding in my long term account.
Purchased SIAF the other day at 1.19
Purchased CHOP at 5.24 a month ago or so
Purchased NEP at 4.90 average price still holding currently at 10 and some change in one of my clients accounts
Purchased SYNM longterm account.
A lesson on portfolio balancing, when you trade you want to alot your portfolio and risk about 10% towards speculative plays and the rest should be used towards for sure things when you trade.
Guys I am working on a trading plan that is going to be awesome for this year so that we can consistently be on the same page money management wise. This is going to be on the house if you have already purchased the courses.
Today was a great day, and yes the market is going up but I don’t care all my plays are circumstantial and when that happens, doesn’t really much matter what the market does. I am up 70% for the last 6 months.
Tomorrow, I will be adding to CHOP as it looks like it is ready to explode, I will also back the truck up and buy some zagg on any pullback. I might even mortgage the house 
On any major pullback on NEP I will load up.
Here is some research done by a friend on CHOP, AMMMMMAAAZZZZZZIIIINNNNNNGGGGG COMPANY!
Way to show what a great investment chop is. I will split chop into two divisions.
Presently, division one which is the present division that is making money, is turning down business and if it does nothing else this division will generate year in and year out at least a dollar plus five cents a share. That is 42 million Net Income and up, going forward..
Where in the hell could you get a 20% return on your money today, a 5 dollar investment. Chop division one will go up in stock price we all have to be patient.
Based on a do nothing approach this division is worth today at least 10 bucks a share, minimum.
Ok, now we look at the new plant to be built and we will call this division two which will be funded by just the cash on hand and the secondary offering cash in division one. Even with this cash coming out of division one it is still worth at least ten bucks a share. Note division one will have the cash offering of 21 million and the additional allotment of 3.6 million on 720k shares and the 21 million net income to be earned from 7/1 to 12/31/09 and the 42 million net income next year 2010 totalling 88 million cash on hand to go to division two. But division two only needs 58 million so division one can keep the other 30 million for working capital. That is why divsion one in my estimation is still worth 10 bucks a share minimum.
Now, onto division two which will generate at least 55 to 60 million a year net income as opposed to division one. Why you say?
Well, both will generate about 200 million a year on metric ton capacity of 500 million. But division two will have machinery that will be manufacturing 75% of its revenue at a higher margin than division one. I would say around ten percent more, per the CC dialogue stating chrome producing products are at a ten percent higher margin. Therefore, 75% times 200 million is 150 millin at a ten percent higher margin which will result in a additional 15 million to the bottom line. Add another 2 to 3 million to net income for efficiencies stemming from running two divisions splitting a lot of shared costs, duplication costs, etc. etc. and we could see 60 million net income from division two, (42 million, plus 15 million plus 3 million).
Now here is the beauty, division two also gets the benefit of the 90 million of cash from the warrant and unit exercise on a fully diluted share basis of 19 million shares.
@#$%, 90 million in cash and 60 million net income results in 150 million sitting in division two after a complete full year of operation speaking of course on a pro-forma basis.
Results mind boggling, 150 million in cash and a division two doing 3.16 EPS ……yes over three dollars a share in net income.
Now to simplify it bring the two divisions together and we have around 225 million in cash, now don’t forget division one makes 42 million net income a year too.
Both divisions together will make 102 million a year and their combined eps will be 1.75 a year.
What would you say the value of a company with 225 million in cash no long term debt and tops 31 million in short term debt after aplication of restricted cash against short term debt 75 million and making 1.75 a share.
Shall we say Chop divisions one and two together are worth at least 21 dollars a share with a multiple of 10 plus cash of 3.50 a share all the way up to a top valuation of 30 dollars with a multiple of 15 plus cash.
Note, also that the 225 million will most likely buy a few of the small companies in this fragmented sector. No true leader in this sector right now , and I am talking domestically of course. they will be all cash deals and net income accretive immediately upon purchase.
All in all this is a great investment for the wise and long term investor.
Disclosure: LONG CHOP
Market Summary:
The new year began on a strong note as all three major indices made their way to new 52-week highs on the back of broad-based buying. Though trading volume wasn’t quite back to average levels, the move was supported by a solid pick up in participation… Stocks spent the entire session sporting strong gains. Initial support came amid handsome overseas gains and a pullback by the greenback… News that the ISM Manufacturing Index for December exceeded expectations (consensus called for 54.3) by improving to 55.9 from 53.6 in November helped keep the bullish bias intact. Participants generally shrugged off two-month old construction spending data that showed a slightly steeper-than-expected 0.6% monthly decline for November (consensus called for a 0.5% decline). Construction spending for October was revised downward to reflect a 0.5% decrease… After stocks ascended to new 12-month highs in late morning trade, they spent the rest of the session drifting sideways, which left the S&P 500 to remain in a range that spanned less than three points. Still, the steady grind locked in the stock market’s best single-session percentage gain in eight weeks… Energy stocks and materials stocks underpinned the gains. The two sectors both advanced 2.8% with help from both the broader market and higher commodity prices… With the dollar down 0.4% against a basket of foreign currencies, the CRB Commodity Index advanced 2.1%. Crude oil prices climbed 2.7% to $81.51 per barrel as they broke the $80 per barrel barrier for the first time since November. Meanwhile, precious metals prices, as a group, gained 3.1%… Though they weren’t quite the leaders that energy stocks and materials stocks were, financials also had a strong session. The financial sector tacked on 2.1% with particular strength exhibited by investment banks and brokerages, which spiked 3.4% in conjunction with an upgrade of Morgan Stanley (MS 30.91, +1.31) by analysts at both UBS and Credit Suisse… Despite broad strength this session, the defensive-oriented utilities sector was a relative laggard. It advanced a mere 0.2%… Retailers also lagged. As a group they finished flat. The uninspired performance came after shares of retailers bested the broader market for the past month; during December retailers advanced 2.2%, while the S&P 500 advanced 1.8%… Participation wasn’t quite back to normal, but it did improve so that more than 1.0 billion shares exchanged hands on the NYSE. The past two weeks have been underscored by poor participant turnout as many trading desks went thinly staffed amid end-of-year holidays. Dow +1.5%, Nasdaq +1.7%, S&P 500 +1.6%, Nasdaq 100 +1.4%, S&P 400 +1.6%, Russell 2000 +2.4%
Until next time;
HAPPY TRADING!
the C² Trading Team
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