Research on CHOP

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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