New $SMSI Info, New Trades, & Using Hedgeye To Manage Risk

Stock Research 2 Minutes

As always, be sure to read my disclosures / disclaimers below!

 

I just did a quick (and unannounced) LIVE YouTube video to discuss “New SMSI Info, Two Trades, & Managing Risk w/Hedgeye”.

Check out the video for the new SMSI info. As for the trades, I’ve added SOLO to my “1% Portfolio” as a hedge against my FUV short. I’ve also closed out my BOXL short. See the video for details on why.

Finally, I provided more info on Hedgeye, using the following charts as a guide:

Hedgeye

Hedgeye2

See the video for full details on this and why its so important to your investment performance.

FYI, you can SUBSCRIBE free to receive alerts regarding my upcoming LIVE YouTube broadcasts by visiting my YouTube channel. You can also get my real-time stock commentary on StockTwits.

Cheers!

 

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Disclosures / Disclaimers: I am long SMSI and short FUV. However, this is not a solicitation to buy, sell, or otherwise transact any stock or its derivatives. Nor should it be construed as an endorsement of any particular investment or opinion of the stock’s current or future price. To be clear, I do not encourage or recommend for anyone to follow my lead on this or any other stocks, since I may enter, exit, or reverse a position at any time without notice, regardless of the facts or perceived implications of this article.

I am not a financial advisor. Nor am I providing any recommendations, price targets, or opinions about valuation regarding the companies discussed herein. Any disclosures regarding my holdings are true as of the time this article is written, but subject change without notice. I frequently trade my positions, often on an intraday basis. Thus, it is possible that I might be buying and/or selling the securities mentioned herein and/or its derivative at any time, regardless of (and possibly contrary to) the content of this article.

I undertake no responsibility to update my disclosures and they may therefore be inaccurate thereafter.  Likewise, any opinions are as of the date of publication, and are subject to change without notice and may not be updated. I believe that the sources of information I use are accurate but there can be no assurance that they are. All investments carry the risk of loss and the securities mentioned herein may entail a high level of risk. Investors considering an investment should perform their own research and consult with a qualified investment professional.

I wrote this article myself, and it expresses my own opinions. I am receiving no compensation for it, nor do I have a business relationship with any company whose stock is mentioned in this article. The information in this article is for informational purposes only and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

The primary purpose of this blog/forum is to attract new contacts with professional industry expertise to share research and receive feedback (confirmation / refutation) regarding my investment theses.

Published by Mark Gomes

Mark Gomes is an Information Technology expert with over 20 years of experience. During his career, Gomes led the investment research efforts at numerous IT consulting organizations, including International Data Corporation (1994-1998), and AMR Research (1998-2004), which was later acquired Gartner Group. In 2004, Mr. Gomes founded Pipeline Data, LLC where he provided investment consulting to many of America's most well-respected mutual fund and hedge fund managers. In 2008, Mr. Gomes semi-retired and began donating his research to Seeking Alpha. He quickly built a reputation for accurately identifying inflection points and M&A candidates. Outside of the investment world, Gomes is a Masters Track & Field World Champion and multi-time world record holder. In 2012, he published "Faster Than Forty", which detailed his diet, lifestyle, and training techniques. Today, he serves as a volunteer track coach to children and adults in the Miami Beach community.

Published

34 thoughts on “New $SMSI Info, New Trades, & Using Hedgeye To Manage Risk”

  1. Hi Mark;

    Just watched the video. Thanks for sharing all that info on SMSI and for the heads-up on Hedgeye.
    Appreciate your commitment to educating us!

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  2. Former Walmart CEO comments on Whole Foods and Amazon.

    Interesting points although seems to be lacking discussion of the trend towards online shopping.

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  3. Per your feedback request today, indifferent on the video length as I watch long or short to learn as much as possible regardless of topic as i find it all valuable. Short videos probably make specific content easier to find. Longer ones more likely to make people watch it all to learn it all rather than the tiny piece they may be looking for out of context or incomplete of the full or related story. Their loss I suppose. Caught 2 of 3 live and will watch the other later. Thanks for all you do. Your time is much appreciated.

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  5. TPCS-THE SUBMARINES AND AIRCRAFT CARRIERS ARE COMING…DON’T MISS THE BOAT!
    BLOCK V TO BE AWARDED THIS MONTH
    SHARES COULD TRIPLE IN 18 MONTHS

    THE STORY:
    Tech Precision (TPCS) produces high precision parts for nuclear submarines, proton beam accelerators and nuclear casks.

    The nuclear submarine market is reported to be the strongest it’s been in the last 30 years. TPCS makes many different parts for the subs including hatches, missile launch tubes and sonar housings.

    Within the next three months the DOD will release 10-13 Block V Virginia Class submarines valued at 30 plus billion dollars.

    Additionally, the company recently began making parts for Aircraft Carriers.

    TPCS will bid on 75-100 million of work within the next 24 months. The work for submarines is “sticky”. Unless you screw up you are likely to get the parts year after year.

    TPCS’s backlog of high margin submarine parts is likely to triple within 12-18 months.

    Tech Precision is one of the best risk/reward plays I have come across in the last 10 years.

    Here is a summary of catalysts for Tech Precision

    • TPCS makes many parts for submarines including hatches, sonar housings and fairings and vertical launch missile tubes. Other new parts are likely being added as General Dynamics Electric Boat reduced their approved vendor list from 15,000 to about 5,000.
    • TPCS’s share of the submarine business could be 600-900 Million Dollars over the life of the Virginia Class and Columbia Class Program. Do the math. It works out to about 37-56 Million Dollars per year for TPCS over the 15-20 year period. This could be an excellent annuity stream of earnings and cash flow.
    • One risk to the annuity is an early buy-out of the company as the story develops. On the November 13, 2017 conference call, Alex Shen CEO said, “First, I will share something from Rich McGowan, our Chairman of our Board, who stated, the board is very aware of the significant drag on earnings caused by the costs of being a public company at our revenue level. We have been and continue to actively investigate and pursue all ways to improve this.”
    • On September 28, 2018, the Department of Defense announced they are beginning the new fiscal year on October 1 with funding for the first time in more than 10 years. Of the $716 billion defense funding which includes other non-DOD entities, such as the Department of Energy, $686 billion is allocated for DOD. Hello submarine orders and aircraft carriers!
    • General Dynamic’s Electric Boat has greatly reduced the number of contractors they will use for submarine parts/construction from 15,000 to 5,000. TPCS made the cut and should pick up additional work.
    • August 2, 2018-Huntington Ingals CEO Mike Petters said, “This is the most exciting time that I’ve seen in ship building in 30 years.”
    • Presentation from Capt. Stevens of the Naval Sea Systems Command
    Block V (FY19-23 ships) – Planned award Oct 2018
    Up to 10 ships – Multi-Year Procurement (MYP) contract with Economic Order Quantity (EOQ)
    Includes VIRGINIA Payload Module (VPM) and Acoustic Superiority (AS)
    • Good explanation of the nuclear submarine program from General Dynamics Electric Boat to its suppliers. Clearly states Block V Virginia Class will be released late this year (2018) or early next year with construction starting in the first quarter of 2019.

    Click to access SIB_Issue_2_2018.pdf

    • Contracts For Jan. 31, 2019

    NAVY
    Huntington Ingalls Industries – Newport News Shipbuilding, Newport News, Virginia, is awarded the detail design and construction (DD&C) efforts for nuclear-powered aircraft carriers Enterprise (CVN 80) and unnamed CVN 81 under the following contract actions: (1) A $14,917,738,145 fixed-price-incentive-firm target modification to previously awarded contract N00024-16-C-2116 for DD&C efforts for the future USS Enterprise (CVN 80) and unnamed CVN 81.
    • ARS Investment Partners filed form SC 13G ownership at 12/31/18 of 3,815,214 (13.2 percent) of TPCS.

    http://archive.fast-edgar.com//20190214/A42LE222W222B222222U22X2BHHVZ22292B2/
    • General Dynamics Electric Boat received another 2 Billion dollar add on for Block V Virginia Class advance materials. It also allows economic order quantity for parts. This should bode well for TPCS. https://finance.yahoo.com/news/electric-boat-awarded-2-billion-211500884.html
    • Strategic Outlook by management to investors on May 8, 2018. “All signals from the Navy indicate the two SSNs per year build rate will continue through three more multi-year Blocks of the Virginia Class Program (Block V, Block Vl and Block Vll) Procurement is expected to continue through FY2033” http://filings.irdirect.net/data/1328792/000114420418025816/tv493247_8k.pdf
    • Navy to award Block V Virginia Class Sub Contract in April 2019. https://insidedefense.com/insider/navy-award-block-v-virginia-class-sub-contract-next-month

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  8. TPCS

    From my friend Jim K on Yahoo Finance:

    https://www.defensenews.com/naval/2019/03/19/the-us-navy-facing-a-shortfall-aims-to-ink-an-enormous-attack-sub-contract-next-month/

    Not sure why they say likely to be the largest sub contract. The new subs with the Virginia Payload Module upgrades are 3.2 billion dollars a copy. The contract should be north of 30 billion dollars!

    Remember, the subs and aircraft carriers are coming…don’t miss the boat!

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  9. Any color on the the deal by Audiencex to become exclusive provider for the MarinOne Platform to Mid Market Brands and Agencies? How are such partnerships normally structured? Curious on how much more exposure it will bring for MarinOne to MidMarket brands and agencies and if it has any impact on reducing Marin sales expenses or allows them to just focus more resources on larger enterprise. I noticed Sizmek signed a similar agreement with Audeincex. Sizmek cited the Facebook & Google Duopoly representing more than 1/2 of digital Ad spend in the US leaving the rest of the Ad-Tech sector to tussle for the rest. They also believed Midmarket would increasingly turn to Ad-Tech in coming years and represented the size of Midmarket at roughly 9 million accounts. Should be interesting to see what type of volume the deal with Mrin can yield. I guess with mid market it’s a volume game to offset lower spend and Audeincex seems to be focused on the mid market space.

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  11. Hi Mark, so I downloaded What’s App but I cannot figure out how to read the messages or join in real time. Thanks Eric

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    2. You have to get it set up on your mobile device first. Then if you want to use your computer, instead of your phone, you can link it to your phone. I use chrome on my computer for the whatsapp site.

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      1. Also, on the WhatsApp download page (https://www.whatsapp.com/download ) you can download a MacOS or Windows native application. The current version for MacOS is 0.3.2848. However, you still need to download the WhatsApp application to your phone (Android or iPhone) and get that set up before you can use the desktop application. When you start the WatsApp desktop appplication it pops up a QR code that you need to scan on your phone via the phone’s WhatsApp application before you can use the desktop application. IE: You cannot use the desktop application without your phone! Kind of wierd but I guess it has something to do with security.

        Best of luck! Kevin

        >

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  15. Hey Mark, I’m going to ask a really stupid question here because I can’t seem to figure it out. In your model, you multiply the PEG Ratio as a variable to get the company value. So with all things equal, the denominator of the PEG ratio is projected earnings growth. That mean if I say hmmm…I originally thought a company was going to have 10% growth but change it to 20% growth, that increases the denominator, which lowers the PEG ratio, and then actually lowers the company value. Can you tell me what I’m missing there? That seems like it should work the opposite.
    Thanks man!

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    1. Or do you treat PEG Ratio as more of a risk value? Because what the public considers the value is not in alignment with what the perceived growth is?

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      1. For the record, I don’t like PEG ratio, Because DCF is really the best way to value a company. Unfortunately, people like lazy measures and this is one of them. So be it.

        Twitter your question, PEG stands for PE divided by growth. People like to see a PEG ratio of 1. So, if the company is growing 10% per year, they think a PE ratio of 10 is appropriate. If the company is growing 20% per year they think a PE ratio of 20 is appropriate.

        So as the growth rate increases, so does the PE.

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          1. The models I do are usually 5 years out and then I come up with a terminal value after that. That’s what I try to do anyway.

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  16. Comcast posted strong growth at its wireless business Xfinity Mobile which was launched less then two years ago. The service reached a total of 1.4 million subs compared with 577000 last year. Mark does SMSI get paid per sub or how does there business model work. If I remember correctly Comcast bought a bulk license then after that I am not sure.

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