My Own Analyst

My Own Analyst: Midwest Tour, Round 2

I want to let everyone in on my plans as they develop.  I will be taking it to the road again this year.  I am just starting to set things up - so far I have meetings with KBALB and ASTE.  The visits will be 6/13 to 6/16, and I am starting in Chicago, hitting Indiana, maybe Ohio and then Tennessee. 

Last year we (a client and I) visited 13 companies in three states over four days.  The meetings gave me a lot of confidence in a couple of names - I also missed some unbelievable opportunities.  Here are the companies we visited - the S&P 500 is up 15.6% over the past year and 8 of the 13 have been better, scoring an average of over 30%:

• EGOV 76%
• SSYS 60%
• RAVN 54%
• HRL 45%
• STJ 32%
• DCI 32%
• SYNO 28%
• XEL 16%
• DRIV 15%
• NWE 13%
• DAKT 11% (I disliked this company and later was able to recommend a short-sale)
• TNC 7%
• LAYN 7%

HAYN: ST Trade Idea Closed

55.50 printed - I am done!  Congrats to any of you who liked this idea enough to pursue it.  Hopefully this makes up for the CRR fiasco.  We are still open on EZPW, though it's taking longer than I had hoped (targeting 32).

SKX - It's all in the inventory

Will report back after the call, but inventory fell sequentially on higher-than-expected sales.  Earnings were worse than expected, but that's not that important.  Clearing out inventory is the key factor.  I remain hopeful that this one is headed back to a more normalized 15PE on normal earnings once they get past  this issue.  Remember, the two pair I purchased were AFTER this report - good things ahead!

Day 4 - 2 Companies in KC

Almost home!  We decided to camp out near Dallas and head back in the early morning rather than arrive in Houston after midnight.  This trip, which included dropping my son in Northern Wisconsin, was a 4K mile adventure.  Here are the last two companies we visited:

First up was Layne Christensen (LAYN), a water infrastructure company I recently added to my watchlist.  Our meeting with the CFO was very helpful.  I like the company but will continue to watch it for an entry, as they face several obstacles in the near-term.

Our last company was NIC (EGOV).  This is quite an interesting outsourcing play with high growth and big barriers to entry.  I understand better why the stock has performed so poorly this year.  I will probably be adding this to my watchlist (like DRIV).

Day 3 - 3 South Dakota Companies

This trip is almost over - mixed feelings there.  I am not used to being away from the markets, but the learning has been fantastic.  A quick recap from my hotel in KC..

First up was DAKT.  It was a great visit, including a meeting with the CEO who led us on a tour as well.  I have a much greater appreciation for what they do and how they do and how they do it, but I have to admit some concerns as well.  I will be thinking about this one a little more.

RAVN, not surprisingly, was solid.  We met with the CFO. While I was familiar with a great many of the details, I learned a lot too.  As far as the new CEO, he may be in a better position to drive growth than retiring Moquist, who was more of a fixer apparently (but who did an excellent job repositioning the company).

The last visit was a bit impromptu, as we dropped in on Northwestern Energy (NWE).  This is a solid utility story, and I appreciated learning more about it.  The more interesting aspect of the visit was what I learned about utilities in general.

Day 2 - 4 Companies in Minnesota

We finished up in Minneapolis today, hit Austin and then ended up in South Dakota this evening in advance of three meetings tomorrow.

First up was Donaldson (DCI), a filtration manufacturer. I got the sense that this is an excellent company with some good internal drivers, but it doesn't stand out on valuation at this time.

Our next visit was with XCel Energy (XEL).  This is an excellent pure-play regulated electricity producer.  I think that they are doing some smart things.  5% yield is too generous, though I am happy with POR and ALE.

STJ was quick and with just an IR rep, but I learned a few things about the company as well as adding to my knowledge of Volcano (VOLC).

Hormel (HRL) was a nice visit spent primarily with the Head of IR, who was very helpful, but I most enjoyed our quick meeting with CEO Ettinger.

Day 1 - 4 Companies in Minnesota

Yesterday was my first day of visiting companies.  I will share brief observations...

First up was SYNO - met with CEO Rich Kramp briefly and with CFO Brett Reynolds.  I didn't learn too much (which isn't surprising since I have had numerous phone conversations over the past year), but it was interesting to tour their plant.  These guys are straight-shooters and are focused on blocking and tackling.  We discussed Pegasus transaction in great detail  I guess my biggest take-away was a better understanding of how CEO Kramp is going about his task to grow the company.

Our second company visit was probably the best.  I have been aware of Tennant Company (TNC) for quite some time, but I didn't understand the transformation there.  TNC makes industrial sweepers and floor cleners.  Before meeting with the CFO and the Controller, we toured their manufacturing facility and then visited their R&D center.  I plan to do more work on this one, but it is involved with a revolutionary new technology that is environmentally friendly and seemingly enjoying traction with major corporate customers.

Stratasys (SSYS) is one we used to own in the Top 20.   Our meeting was with the head of IR, who knows the company quite well.  He was an analyst who liked the company so much he went to work for them.  The most interesting thing here is a recent deal with HPQ that could be a homerun.  The stock is heavily shorted nonetheless.  The company makes "3-D printers" - cool stuff.  HPQ is clearly the best partner to help them penetrate the existing design customers who still use "2-D".  This company has so much promise, but it has never really delivered.

We ended up with Digital River (DRIV), which enables e-commerce.  Our meeting was with the head of IR, who was just full of info about the company, the space and retail.  This company recently lost a major client, though it was something Wall Street had feared or expected ultimately for many years.  The underlying growth is strong, and I plan to look closer at this cash-rich technology company.