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Ciena Corporation

4/25/2017

0 Comments

 
Ciena Corporation is a network strategy and technology company, providing solutions that enable network operators to adopt next-generation communication architectures and deliver a broad array of services needed by enterprise and consumers. They provide equipment, software and services that support the transport, switching, aggregation, service delivery and management of voice, video and data traffic on communications networks.

The Company's high-capacity hardware and network management and control software enable open, multi-vendor, programmable networks that improve automation, reduce network complexity and flexibly support changing service requirements. Their solutions yield business and operational value for customers by enabling them to support new applications, introduce new revenue-generating services and reduce network complexity and expense.

The Company's Converged Packet Optical, Packet Networking and Optical Transport products are used by a diverse set of customers and market segments including communications service providers, cable and multiservice operators, Web-scale providers, submarine network operators, governments, enterprises, research and education (R&E) institutions, and other emerging network operators. These products allow network operators to scale capacity, increase transmission speeds, allocate traffic and adapt dynamically to changing end-user service demands.

In addition to their portfolio of high-capacity hardware platforms, Ciena offers network management and control software platforms designed to simplify the creation, automation and delivery of services across multi-vendor and multi-domain network environments. Their software solutions are oriented around their modular Blue Planet software platform for multi-domain service orchestration, network function virtualization, and network management and control. To complement the hardware and software solutions, they offer a broad range of transformation and automation services that help customers design, optimize, integrate, deploy, manage and maintain networks. 

​Ciena Corporation provides equipment, software, and services that support the transport, switching, aggregation, service delivery, and management of voice, video, and data traffic on communications networks worldwide. The company's Networking Platforms segment offers hardware networking solutions optimized for the convergence of coherent optical transport, optical transport network switching, and packet switching. Its products include 6500 Packet-Optical Platform and the 5430 Reconfigurable Switching System, Waveserver stackable interconnect system, CoreDirector Multiservice Optical Switches, and OTN configuration for the 5410 Reconfigurable Switching System, as well as Z-Series Packet-Optical Platform; 3000 family of service delivery switches and service aggregation switches, and the 5000 family of service aggregation switches, as well as 8700 Packetwave Platform and the Ethernet packet configuration for the 5410 Service Aggregation Switch; and 4200 Advanced Services Platform, Corestream 5100/5200 Advanced Services Platform, Common Photonic Layer, and 6100 Multiservice Optical Platform. This segment also sells operating system software and enhanced software features embedded in each of these products. The company's Software and Software-Related Services segment offers network management solutions, including the OneControl Unified Management System, ON-Center Network & Service Management Suite, Ethernet Services Manager, Optical Suite Release, and Planet Operate; and Blue Planet network virtualization, service orchestration, and network management software platform, as well as related installation, support, and consulting services. Its Global Services segment provides consulting and network design, installation and deployment, maintenance support, and training services. The company sells its products through direct and indirect sales channels to network operators. Ciena Corporation was founded in 1992 and is headquartered in Hanover, Maryland.
(Summary) (Company) (Chart)
23 April 2017
Price $21.77
1yr Target $28.72
Analysts 19
Dividend $0.00
Payout Ratio 0.00%

1yr Cap Gain 31.92%
Yield ---
1yr Tot Return 31.92%

P/E 39.80
PEG 2.42
Beta 1.69
EPS (ttm) $0.55
EPS next yr $1.99
Forward P/E 10.92
EPS next 5yr 16.45%
1yr Price Support $32.73

Market Cap $3.08 Bil
Revenues $2.65 Bil
Earnings $88.00 Mil
Profit Margin 3.32%

Quick Ratio 2.00
Current Ratio 2.40
Debt/Equity 1.62
1yr RevGR 6.33%
3yr RevGR 7.60%
5yr RevGR 8.35%

1yr EarnGR 410.00%
3yr EarnGR ---
5yr EarnGR ---

1yr DivGR ---
3yr DivGR ---
5yr DivGR ---

ROA 3.00%
ROE 11.90%
Network Traffic Growth is Growing Exponentially 

The markets where Ciena sells their communications networking solutions have been subject to significant changes in recent years. In particular, optical networks — which carry voice, video and data traffic using multiple wavelengths of light across fiber optic cables — have experienced a multi-year period of strong traffic growth. This growth in network traffic, and the resulting requirements for increased network capacity, is being driven by the rapid proliferation and increased reliance upon a diverse set of communications services and applications. These services and applications, including those set forth below, have fundamentally affected and are redefining the bandwidth and service demands placed upon networks, and are challenging the business models of network operators.
  • Cloud-Based Services. Enterprises and consumers are continuing to adopt a broad array of innovative cloud-based service offerings that host key applications, store data, enable the viewing and downloading of content, and utilize on-demand computing resources. Through cloud-based service models such as Platform as a Service (PaaS), Software as a Service (SaaS) and Infrastructure as a Service (IaaS), smaller enterprises and consumers can subscribe to an expanding range of services to replace locally-housed computing and storage requirements. Larger enterprises and data center operators can use private clouds to consolidate their own resources and public clouds to accommodate peak demand situations, sometimes in combination. Today, infrastructures exist to allocate centralized network storage and computing resources dynamically from the cloud to end users. As a result, networks must be capable of adapting in real time to changing demands, capacity requirements and locations.
  • Over-the-Top (OTT) Services and Video Streaming. OTT content refers to video, multimedia and other applications provided directly from the content provider to the viewer or end user. Traffic from streaming and OTT services, including high definition and ultra-high definition video, has expanded with the increased availability of and end user demand for video content accessible through a variety of devices and media. The growth in bandwidth-intensive traffic associated with streaming and OTT content, and the required quality of experience for such services, are imposing significant demands upon the infrastructures of communications service providers and multi-service operators.
  • On-Demand Services. Users of communications services are increasingly requiring an on-demand service level that allows them to be connected to content and bandwidth wherever they desire. Businesses rely upon enterprise services and data center connectivity that facilitate global operations, employee mobility and access to critical business applications and data. Consumers expect broadband technologies, including peer-to-peer internet applications, augmented reality applications and multimedia streaming and downloads, to be available on-demand. The on-demand nature of an application-centric, cloud-driven world is changing user bandwidth consumption patterns, leading to less predictable traffic patterns and usage.
  • Mobile Devices and Applications. Traffic from mobile applications, including internet, video and data services, has expanded with the proliferation of smartphones, tablets and other wireless devices. Because wireless traffic ultimately travels over a wireline network in order to reach its destination, growth in mobile communications continues to place demands upon wireline networks, including backhaul and fronthaul networks emanating from cell sites.

In addition, emerging services and applications are likely to present further challenges for and place significant service, capacity and automation demands upon network infrastructures. These include:
  • Internet of Things. As the number of networked connections between devices and servers grows, machine-to-machine-related traffic (M2M) is expected to represent an increasing portion of traffic in what some refer to as the “Internet of Things” (IoT). These connections can provide value-added services and allow sharing of data that can be monitored and analyzed. We expect network traffic relating to the interconnection of devices to grow as internet and cloud-based content delivery, smartgrid applications, health care and safety monitoring, resource and inventory management, home entertainment, consumer appliances, connected transportation, and other M2M data applications become more widely adopted.
  • Fifth-Generation Wireless Broadband Technology (5G). Wireless network operators will be required to deliver greater capacity and to adopt next- generation mobile network standards in order to cost-effectively accommodate increased bandwidth and service demands. 5G is expected to enable significant increases in data consumption by a growing number of users and devices, thereby better supporting IoT and other emerging applications. 5G mobile networks will significantly affect both wireless and wireline networks, requiring improvements in mobile backhaul and access networks.
  • Ultra-High Definition TV and Virtual and Augmented Reality. Ultra-high definition TV and the advent of immersive technologies like 360° video, virtual reality, and augmented reality are likely to place meaningful capacity and capability demands on networks as adoption of these technologies grows. The television, internet and consumer electronics industries are rapidly advancing these innovations and making them more widely available and affordable to consumers. As these services become more prevalent and are connected over networks, network operators will need to accommodate resulting additional bandwidth requirements.
    We believe that increased traffic from these services and applications, along with the desire to provide content and service delivery closer to the end user for an improved quality of experience, will require network operators to adopt higher capacity networks with increased transmission speeds, particularly in regional and metropolitan networks. 

The Network is Transitioning to an Open, Programmable Network
​
The dynamics discussed above along with efforts to reduce costs and promote flexibility are causing customers to evaluate and adopt next-generation infrastructures that are more open, programmable and automated. Network operators are increasingly leveraging information technology strategies that emphasize software capability, virtualization and standardized network solutions where possible. By leveraging software programmability, network operators can adapt more quickly to changing end-user demands, provide network functions virtually and on demand, and more efficiently deliver a wider range of revenue-generating services. It is expected that network operators will increasingly look to adopt networking strategies that enable more open and programmable networks, including one or more of the following:
  • Software-Defined Networking (SDN). Network resources have been traditionally managed on an individual network element basis. SDN seeks to separate or abstract that control from individual elements, enabling them to be directly programmable by standards-based software control. The result of this enhanced programmability provides end-to-end visibility of network flows, enabling the ability to optimize traffic paths and control data flows through a network. SDN seeks to simplify networks, which creates more open environments that ease management, support automation, and more quickly deliver customized services to end users.
  • Network Function Virtualization (NFV). Virtualization is the decoupling of physical IT or communications assets from the services or capabilities they can provide. These virtualization principles — previously applied to computing and storage resources — are now being applied to communications networks. Through NFV, network operators can eliminate costly, single-function or dedicated network appliances, such as firewalls and wide area network (WAN) accelerators, enabling their functions via software and general computing hardware and servers. We believe that NFV can decrease power and space requirements, reduce cost, and improve network flexibility and agility.
  • Orchestration and Evolution of Operations Support Systems and Business Support Systems (OSS/BSS). Historically, many network operators have relied upon OSS/BSS systems to support network management functions such as inventory, service provisioning, network configuration and fault management. These platforms are often complicated, inflexible, proprietary environments that struggle to keep pace with the change required to meet today’s network demands. We believe that network virtualization and operational transformation may be better achieved through an orchestration and control platform that is open, extensible, and vendor-agnostic as to the equipment and software it controls. Because orchestration simplifies the end-to-end creation, automation and deployment of services across multiple physical and virtual domains, we believe it presents an opportunity to reduce network complexity and may provide an alternative to elements of traditional OSS/BSS systems. 

Network Platforms
​
The Company's networking platforms segment consists of the Converged Packet Optical, Packet Networking and Optical Transport product portfolios.

Converged Packet Optical. The Company's Converged Packet Optical portfolio includes a range of hardware networking solutions optimized for the convergence of coherent optical transport, optical transport network (OTN) switching and packet switching.

Using coherent optical transport technology, the Company's 6500 Packet-Optical Platform provides a flexible and scalable dense wavelength division multiplexing (DWDM) solution that adds capacity to core, regional, metro, and submarine networks and enables efficient transport at high transmission speeds. Their 6500 Packet-Optical Platform provides leading 10G, 40G, and 100G coherent and control plane capabilities for scale and service differentiation, and it utilizes hybrid OTN and packet switching technologies for efficient use of network resources, minimizing amplifiers, regenerators and dispersion compensation devices. Their 6500 Packet-Optical Platform also includes certain integrated switching elements, addressing market demand for converged network features, functions and layers to drive more robust and cost-effective network infrastructures. This platform, which includes several chassis sizes and a comprehensive set of line cards optimized for individual services or applications, can be used throughout the network, from customer premises to metropolitan networks, to the regional core, where the need for high capacity and carrier-class performance is essential.

The Waveserver product is a stackable data center interconnect (DCI) platform that allows network operators, including Web-scale providers and data center operators, to scale bandwidth quickly and to support high-speed data transfer, virtual machine migration and disaster recovery/backup between data centers. Waveserver is a specialized platform, purpose-built for connecting data centers within a single metro area. It combines our leading coherent chipset with an operations model optimized for the capacity, speed, space and power requirements of data center environments. Waveserver is designed to leverage the data server user experience, with open application programming interfaces (APIs) and server-like deployment, provisioning and programmability via smart devices.

The Converged Packet Optical portfolio also includes products that provide packet switching capability to allocate network capacity efficiently and to enable rapid service delivery. Their 5430 Reconfigurable Switching System includes a family of multi-terabit reconfigurable switching systems that utilize intelligent mesh networking to provide resiliency, and it features an integrated optical control plane to automate the provisioning and bandwidth control of high-capacity services. Their CoreDirector® Multiservice Optical Switch and 5430 Reconfigurable Switching System offer multiservice, multi-protocol switching systems that consolidate the functionality of an add/drop multiplexer, digital cross-connect and packet switch into a single, high-capacity intelligent switching system. These products address both core and metro segments of communications networks and support key managed services, including Ethernet/TDM Private Line and IP services.

The Converged Packet Optical solutions also include a family of Z-Series high-capacity, multi-layer switching and transport platforms acquired from Cyan. Their Z-Series family is used in regional and metro networks and it is designed to support a variety of use cases including increasing capacity for optical transport, traffic aggregation at the network edge and switching optimized for handoff at the network core.

Packet Networking. The Company's Packet Networking products allow customers to simplify the deployment and delivery of new, revenue-generating services to consumer and enterprise end users. These products have applications from the edge of metro and core networks, where they aggregate traffic, to the access tiers of networks where they can be deployed to support wireless backhaul infrastructures and to deliver business data services. Their Packet Networking products facilitate network simplicity and cost effectiveness, including reduced costs associated with power and space, as compared to traditional IP routing network designs.

The Packet Networking portfolio includes the 8700 Packetwave platform, a multi-terabit packet switching platform for high-density metro networks and inter-data center wide area networks. The 8700 combines high-capacity Ethernet switching and optical transport technologies for both data center networks and metro networks, to help network operators rapidly deliver cloud-based services, streaming video, and internet content distribution, efficiently aggregate users, and provide express connections to data centers. By increasing the traffic density while reducing power and space requirements, the 8700 also enables network operators to reduce capital and operating expense associated with their networks and to simplify service management and enablement.

To date, revenue from the Packet Networking segment has been primarily related to the 3000 family of service delivery switches and service aggregation switches, and our 5000 family of service aggregation switches. The 3000 and 5000 families support the access and aggregation tiers of communications networks and have principally been deployed to support business data services and wireless backhaul infrastructures. Their 3000 family of service delivery switches are purpose-built to fit small, medium, and large customer sites as well as multi-tenant office and residential buildings. Their 5000 family of service aggregation switches provide aggregation to fill higher capacity links efficiently within both the metro access and aggregation tiers of networks, minimizing the number of router assets required in the core.

Optical Transport. The Company's Optical Transport products include stand-alone WDM and SONET/SDH-based optical transport solutions that add capacity to core, regional, metro, and submarine networks and enable cost-effective and efficient transport of voice, video and data traffic at high transmission speeds. The products in this segment principally include the 4200 Advanced Services Platform, Corestream® Agility Optical Transport System, 5100/5200 Advanced Services Platform, Common Photonic Layer (CPL) and 6100 Multiservice Optical Platform. The Optical Transport portfolio includes our traditional SONET/SDH transport and data networking products, as well as certain enterprise-oriented transport solutions that support storage and LAN extension, interconnection of data centers, and virtual private networks. The Optical Transport products have either been previously discontinued, or are expected to be discontinued, reflecting network operators’ transition toward next-generation converged network architectures addressed by solutions within our Converged Packet Optical product line. 

Software and Software-Related Services

The Company's software business has principally consisted of the development and licensing of element and network management software and software-related services that support our hardware offerings. In connection with our acquisition of Cyan during the fourth quarter of fiscal 2015, the Company unified the software resources and activities of both companies with a focus on providing next-generation, multi-vendor network virtualization, service orchestration and management solutions oriented around our Blue Planet platform. During fiscal 2016, software revenue was principally derived from our element and network management solutions related to our hardware sales. The market relating to the SDN, NFV and orchestration use cases for our Blue Planet software platform is in the early stages. As such, revenue from the Blue Planet software has been immaterial to date.

Blue Planet Software Platform. The Company's Blue Planet software platform is a modular, network virtualization, service orchestration and network management software platform that simplifies the creation, automation and delivery of services across multi-vendor and multi-domain network environments. Blue Planet is multi-functional in that it is designed to simplify the management, deployment and orchestration of hardware and software elements and services, from us or third-party vendors, based on the requirements of a network operator. Blue Planet utilizes a container-based, micro-services software architecture that provides flexibility to support the following use cases from a unified software platform:

WAN Automation. Multi-layer WANs have historically operated using vendor-specific management systems, with limited awareness of adjacent layers or network resources, resulting in additional complexity and cost, and challenging network management. Through its automation, management and control of multi-vendor and multi-layer network infrastructures, our SDN-based WAN automation solution eliminates this complexity. The Company's WAN automation solution enables network operators to visualize and control these disparate network elements through a unified solution that incorporates open APIs and resource adapters to control a range of third-party network elements. They believe this solution can enable network operators to simplify their network environments and accelerate end-to-end service delivery.

Multi-Domain Service Orchestration (MDSO). Network infrastructures are comprised of multiple technology layers and domains — such as the data center, cloud, metro, access and core networks — and it is often complex for network operators to offer services end-to-end in this environment. Blue Planet enables service orchestration across multiple network (physical and virtual) domains and multiple hardware and software vendors. By using open APIs and model-driven templates, Blue Planet integrates with third-party SDN controllers, element and network management systems, and orchestration platforms. The Company believes their MDSO solution can enable network operators to minimize vendor-specific management silos, reduce network complexity and enhance service management.

NFV Orchestration (NFVO). To reduce dependence upon single-purpose hardware platforms and accelerate the time to market for new revenue-generating services, network operators are increasingly looking for solutions that enable network functions through software that runs on industry-standard servers, network and storage platforms. Blue Planet provides network operators with carrier-grade, NFV management and orchestration capabilities for instantiating and managing virtualized network functions and data center resources. Blue Planet uses an open, vendor-agnostic approach that allows network operators to select and scale those virtual network functions (VNFs) they wish to offer to their end customers. We believe that our NFVO solution can enable network operators to increase network programmability, reduce complexity and cost, and reduce time-to-market with new, revenue-generating services.

SD-WAN Service Orchestration. This overlay technology allows service providers and enterprises to create low cost, secure virtual connections between branch offices and cloud or corporate data centers. Unlike traditional dedicated IP services, SD-WANs run “over the top” of the public internet, leveraging available broadband access links provided by physical or virtual customer premises equipment (CPE). The Company's flexible, open orchestration framework helps service providers overcome a number of key challenges and avoid the creation of vendor-specific operational silos. By serving as a vendor-agnostic abstraction layer, their SD-WAN orchestration solution enables integration with an existing OSS platforms and a highly differentiated services offering that combines cloud, NFV, and WAN resources.

The Company's software portfolio also includes the Navigate path computation engine and network-level software applications that enable WAN services over an open network ecosystem. The Blue Planet V-WAN application provides service providers the tools to offer enterprise, content, and cloud services to end users in a more automated and self-service oriented manner. They also offer network-level software applications, including Protect and Optimize, that enable network operators to improve reliability, to allow for more rapid network restoration, and to better monetize cloud-based services.

Element and Network Management Solutions and Software. The Company's software offerings also include our OneControl Unified Management System used by network operators in connection with our networking platforms. This integrated network and service management solution supports our Converged Packet Optical, Packet Networking and Optical Transport product lines from a single platform. OneControl offers end-to-end service creation, activation, and assurance to enable rapid deployment of next-generation wavelength, OTN and packet services. It also provides visualization of fault and performance information for network health status and it enables management functions, including network inventory, network element configuration backup, network element software delivery and security administration.

The Company's element and network management software offering also includes a number of software solutions that support our installed base of network solutions. These include:
  • ON-Center® Network & Service Management Suite, which provides network and service management for our installed base of 4200 Advanced Services Platform and Corestream products;
  • Optical Suite Release, which provides network and service management for our installed base of traditional SONET/SDH transport Optical Transport products;
  • Ethernet Services Manager, which provides network and service management for our installed base of Packet Networking products; and
  • Planet Operate, which provides network and service management for our installed base of Z-Series products acquired from Cyan.
    As we seek adoption of our Blue Planet software platform and transition certain existing features, functionality and customers to this platform, including our next-generation network management software to be based on the Blue Planet platform, we expect revenues from our existing element and network management solutions to decline.

The Company's software suite also includes Ciena OnePlanner, a suite of planning tools for advanced, multi-layer network design. OnePlanner correlates data from different network layers, allowing the network planner to easily see the association between services, facilities, and equipment.
​
Software-Related Services. Software-related services include software subscription services, consulting, network migration and integration, installation and upgrade support services, and technical support relating to our software offerings. 

​My Path Forward

Ciena Corporation is another one of the companies that fall into that rather broad and expanding area of fiber optic networking. As such, it has potential written all over it, for me. Based on it's great fundamentals as well as its recent share price pullback, I feel this is a company with a reasonable price and an explosive future. I intend to start a small position in this company in the very near future and then see how it reacts to the markets. As a DGI I wish it paid a dividend but very few of the companies in this area are paying any dividend at all. 

I believe there's potential here for this company as well as others in this space and I intend to be part of this industry as it moves forward. I expect there to continue to be an unending and ever expanding appetite for digital media and as the demand increases, the capacity must increase also. Profits will follow that demand.

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Applied Optoelectronics

4/20/2017

3 Comments

 
Fiber Optic Networking has been in the news lately as the cloud moves toward 100 Gb transfer rates. This industry may be one of the hotter areas to invest in during the next year so it may be time to look at a few of the leaders. Today I want to dig into the fundamentals of Applied Optoelectronics as well as the technical aspects of its stock chart. 

Applied Optoelectronics is a leading provider of fiber‑optic networking products and they serve three growing end-markets: Cable Television Broadband (CATV), fiber-to-the-home (FTTH), and internet data centers (Data Center). They design and manufacture a range of optical communications products employing their vertical integration strategy from laser chips, components, subassemblies and modules to complete turn-key equipment. The Company designs, manufactures and integrates their own analog and digital lasers using a proprietary Molecular Beam Epitaxy (MBE) fabrication process, which they believe is unique in their industry. The lasers they manufacture are proven to be reliable over time and highly tolerant of changes in temperature and humidity (delivering millions of hours service), making them well-suited to the CATV and FTTH markets where networking equipment is often installed outdoors.

All three of their end markets are driven by bandwidth demand fueled by the growth of network‑connected devices, that included video traffic, cloud computing and online social networking. To address this increased bandwidth demand, CATV and telecommunications service providers are competing directly against each other by providing bundles of voice, video and data services to their subscribers and investing to enhance the capacity, reliability and capability of their networks. The trend of rising bandwidth consumption also impacts the internet data center market, as reflected in the shift to higher speed server connections. As a result of these trends, fiber‑optic networking technology is becoming essential in all three of these target markets, as it is often the only economic way to deliver desired bandwidth.

Applied Optoelectronics is a vertically integrated company with a state-of–the-art semiconductor component fab at their USA Headquarters near Houston, Texas. Coupled with an SMT production line at their China operation, a high degree of manufacturing integration enables them to deliver performance with fast lead times at a competitive cost.

The Company's transceiver products feature lasers with superior performance and excellent reliability. The transceivers are designed in and manufactured from our Taiwan Division. Each division of the Company has assembled a world-class pool of talent, from optoelectronics professionals, to mechanical engineers, RF and digital circuit designers, all with the goal of developing best-in-class products.

Broad product lines make Applied Optoelectronics capable of extending its addressable market to more fiber optic applications. Equipped with excellent design capability, key in-house optical components, and volume manufacturing facilities, the Company offers a uniquely high level of price competiveness and performance.
​

Applied Optoelectronics, Inc. designs, manufactures, and sells fiber-optic networking products primarily for Internet data center, cable television (CATV), and fiber-to-the-home (FTTH) networking end-markets. It offers optical modules, lasers, transmitters and transceivers, and turn-key equipment, as well as headend, node, and distribution equipment. The company sells its products to Internet data center operators, CATV and telecommunications equipment manufacturers, and Internet service providers through its direct and indirect sales channels worldwide. Applied Optoelectronics, Inc. was founded in 1997 and is headquartered in Sugar Land, Texas.
(Summary) (Company) (Chart)
16 April 2017
Price $45.30
1yr Target $63.33
Analysts 6
Dividend ---
Payout Ratio ---

1yr Cap Gain 39.80%
Yield ---
1yr Tot Return 39.80%

P/E 26.20
PEG 1.50
Beta 2.82
EPS (ttm) $1.73
EPS next yr $3.70
Forward P/E 12.24
EPS next 5yr 17.50%
1yr Price Support $64.75

Market Cap $877.01 Mil
Revenues $260.70 Mil
Earnings $31.20 Mil
Profit Margin 11.96%

Quick Ratio 1.80
Current Ratio 2.60
Debt/Equity 0.19
1yr RevGR 37.28%
3yr RevGR ---
5yr RevGR ---

1yr EarnGR 170.76%
3yr EarnGR ---
5yr EarnGR ---

1yr DivGR ---
3yr DivGR ---
5yr DivGR ---

ROA 10.00%
ROE 16.70%
Operations

Applied Optoelectronics is a leading, vertically integrated provider of fiber-optic networking products, primarily for four networking end- markets: internet data center, cable television, or CATV, fiber-to-the-home, or FTTH, and telecommunications, or telecom. They design and manufacture a range of optical communications products at varying levels of integration, from components, subassemblies and modules to complete turn-key equipment.

In designing products for their customers, they begin with the fundamental building blocks of lasers and laser components. From these foundational products, they design and manufacture a wide range of products to meet our customers’ needs and specifications, and such products differ from each other by their end market, intended use and level of integration. They are primarily focused on the higher-performance segments within all four of our target markets, which increasingly demand faster connectivity and innovation.

The four end markets the Company targets are all driven by significant bandwidth demand fueled by the growth of network-connected devices, video traffic, cloud computing and online social networking. To address this increased bandwidth demand, CATV and telecommunications service providers are competing directly against each other by providing bundles of voice, video and data services to their subscribers and investing to enhance the capacity, reliability and capability of their networks. The trend of rising bandwidth consumption also impacts the internet data center market, as reflected in the shift to higher speed server connections. As a result of these trends, fiber-optic networking technology is becoming essential in all four of their target markets, as it is often the only economic way to deliver the desired bandwidth.

The internet data center market is the Company's largest and fastest growing market. Their customers in this market are generally large internet-based data center operators that they supply optical transceivers that plug into switches and servers within the data center and allow these network devices to send and receive data over fiber optic cables. The majority of the data center optical transceivers that they sell utilize their own lasers and subassemblies, and they believe that their in-house technology and manufacturing capability for these lasers and subassemblies gives them an advantage over many of their competitors who often lack either development or manufacturing capabilities for these advanced optical modules.

The CATV market is the Company's most established market, for which they supply a broad array of products including lasers, transmitters and transceivers, and turn-key equipment. Sales of headend, node and distribution equipment have contributed significantly to their revenue in recent years as a result of their ability to meet the needs of CATV equipment vendors who have continued to outsource both the design and manufacturing of this equipment. While equipment vendors have relied upon third parties to assemble portions of their products, within the past seven years certain of our customers have accelerated the outsourcing of the design and manufacturing of both headend equipment and node equipment to third parties. The shift is due in part to the sophisticated engineering expertise needed to perform this work. Applied Optoelectronics believes that their extensive high-speed optical, mixed-signal semiconductor and mechanical engineering capabilities position us well to benefit from these industry dynamics.

The Company's vertically integrated manufacturing model provides us several advantages, including rapid product development, fast response times to customer requests and control over product quality and manufacturing costs. The Company designs, manufactures and integrates their own analog and digital lasers using a combination of Metal Organic Chemical Vapor Deposition, or MOCVD, and their proprietary Molecular Beam Epitaxy, or MBE, fabrication process, which they believe is unique to their industry. The Company manufactures the majority of the laser chips and optical components that are used in their products. The lasers they manufacture are proven to be reliable over time and highly tolerant of changes in temperature and humidity, making them well-suited to the CATV and FTTH markets where networking equipment is often installed outdoors. 

Products

Applied Optoelectronics' products include an array of optical communications solutions at varying levels of integration. The Company begins from the fundamental building blocks of lasers and laser components. From these foundational products, they design and manufacture a wide range of products from optical modules to complete turn-key equipment. The Company designs their products to target customers in identified markets to meet their needs and specifications.

The Company's components often incorporate one or more of their optical laser chips inside a precision housing that provides mechanical protection as well as standardized electrical contacts. More complex optical components may also include optical filters or other optical elements by which optical signals are routed internally within the component. These more advanced components may also include coolers, heaters and sensors that allow the temperature of the laser chip to be measured and controlled. The Company manufactures the majority of the laser chips and optical components that are used in their own products.

At the next level of integration, their module or sub-assembly products typically contain one or more optical components and some additional control circuitry. At the highest level of integration and complexity, their equipment products typically contain one or more optical components, modules and additional electronic control circuitry required to enable these subsystems to operate independently. 

My Strategy Going Forward

This company doesn't fit into a Dividend Growth Strategy so if that's your strategy, you might just want to look elsewhere. Applied Optoelectronics is also a relatively small company in a very competitive environment. But despite that, it's in an industry that's finally growing into its own as the need for bandwidth is increasing exponentially and spreading beyond a centralized cloud to a distributed cloud. 

Now I don't pretend to have an in-depth knowledge of the fiber optics industry, but I analyze stocks based on their fundamentals, technicals or both. In this case it looks like the analysts are calling for a 66% increase in the stock price over the next 12 months. Projections based solely on the projected earnings growth rate still predict a 40+% return over 12 months. And that ain't bad. 

Add in the possibility that consolidation may occur in this industry as demand exceeds the capacity of any one  company and owning a piece of Oclaro starts to make sense, from a speculative view. Therefore, I intend to accumulate a small position in this company and see where it goes. As long as it continues to climb I'll hold on and perhaps even add to my position. Finally, I'll also be looking at a few other companies in this space for additional positions. This really looks like an interesting area to own a piece of over the next few years. 

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3 Comments

Oclaro

4/18/2017

0 Comments

 
Fiber Optic Networking has been in the news lately as the cloud moves toward 100 Gb transfer rates. This industry may be one of the hotter areas to invest in during the next year so I may be time to look at a few of the leaders. Today I want to dig into the fundamentals of Oclaro Inc as well as the technical aspects of its stock chart. 

Oclaro is a leading provider and innovator of optical communication solutions for the core optical, enterprise and data center markets. Oclaro’s optical components, modules and subsystems are at the heart of the fast optical networks and high-speed interconnects driving the next wave of streaming video, cloud computing, voice over IP and other bandwidth-intensive and high-speed applications.​
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​Oclaro, Inc. designs, manufactures, and markets lasers and optical components, modules, and subsystems for the optical communications, industrial, and consumer laser markets worldwide. The company's products generate, detect, combine, and separate light signals in optical communications networks. It offers client side transceivers, including pluggable transceivers; line side transceivers; tunable laser transmitters, such as discrete lasers and co-packaged laser modulators; lithium niobate modulators to manipulate the phase or the amplitude of an optical signal; transponder modules for transmitter and receiver functions; and discrete lasers and receivers for metro and long-haul applications. The company markets its products through direct sales force, as well as through sales representatives and resellers. It serves network equipment manufacturers of telecommunications and datacom systems, and hyperscale data center operators. The company was formerly known as Bookham, Inc. and changed its name to Oclaro, Inc. in April 2009. Oclaro, Inc. was founded in 1988 and is headquartered in San Jose, California.
(Summary) (Company) (Chart)
16 April 2017
Price $8.57
1yr Target $14.28
Analysts 9
Dividend ---
Payout Ratio ---

1yr Cap Gain 66.62%
Yield ---
1yr Tot Return 66.62%

P/E 28.38
PEG 1.89
Beta 1.67
EPS (ttm) $0.30
EPS next yr $0.82
Forward P/E 10.44
EPS next 5yr 15.00%
1yr Price Support $12.30

Market Cap $1.41 Bil
Revenues $515.60 Mil
Earnings $45.60 Mil
Profit Margin 8.84%

Quick Ratio 3.10
Current Ratio 3.70
Debt/Equity 0.01
1yr RevGR 19.52%
3yr RevGR 0.26%
5yr RevGR ---

1yr EarnGR ---
3yr EarnGR ---
5yr EarnGR ---

1yr DivGR ---
3yr DivGR ---
5yr DivGR ---

ROA 10.30%
ROE 16.50%
Operations

Ocular is a supplier of core optical network technology to leading telecommunications and data communications equipment companies. The Company targets communications equipment manufacturers that integrate their optical technology into the switching, routing and transport systems offered to the global service and content providers that are building, upgrading and operating high-performance optical networks. Service and content providers are increasingly demanding greater levels of network capacity from their communications equipment suppliers, the Company's primary customers, in order to meet their rapidly growing network bandwidth requirements. This is being driven by bandwidth intensive applications and devices that are at the access or edge of the network, such as all forms of mobile devices, streaming video, social media, cloud computing and voice over Internet Protocol ("VoIP").

The optical communications market has started to expand beyond a small number of very large service providers, and is now transitioning to a variety of open and captive networks created solely for in house use by large video services, search engines and companies offering a variety of cloud computing services. Oclaro believes that the trend toward an increase in demand for optical solutions, which increase network capacity, is in response to growing bandwidth demand driven by increased transmission of video, voice and data over optical communications networks. Service providers also seek to decrease the total cost of ownership of their networks, and many of our advanced optical solutions, both now and potentially in terms of future optical technologies to enable new network architectures, can provide a level of flexibility and responsiveness that will support these goals by enabling savings in both operational and capital expenses.

The rapid development of network infrastructure underway in developing countries is also driving growth in demand for optical solutions. Increasingly, internet content providers with their own wide area networks have similar requirements and are also becoming customers for our optical network products. Oclaro designs, manufactures and markets optical components, modules and subsystems that generate, detect, combine and separate light signals in optical communications networks. During fiscal year 2016, the Company was a leading supplier of optical products at the component level, including tunable lasers, external modulators, integrated lasers and modulators and receivers. During fiscal year 2016, they were also a leading supplier of products at the module and subsystem levels, including transceivers, transponders and controlled subsystems. Many of their products enable increased flexibility in optical communications networks, making the networks more dynamic in nature. Oclaro supplies transmission products at the component level and the module level into 10 gigabits per second ("Gb/s"), 40 Gb/s and 100 Gb/s communications solutions.

Additionally, in data communications, enterprises and institutions such as data centers have grown in complexity as they manage the rapidly escalating demands for increased bandwidth and diverse types of data driven through the consumerization of information technology and the transition to Software as a Service ("SaaS") services. These next generation architectures, such as hyperscale data centers, require very high speed interconnects to support intensive data traffic within and between corporate data centers. The providers of hyperscale data centers are upgrading and deploying their own high speed local, storage and wide- area networks, also called LANs, SANs and WANs, respectively. These deployments increase the ability to utilize high-bandwidth applications that are growing in importance to their organizations and also increase utilization across telecommunications networks as this traffic leaves the LANs, SANs and WANs and travels over the network service providers’ edge and core networks. Ocular is a leading supplier of client-side and short reach optical transceivers at 10 Gb/s and 100 Gb/s into datacom and enterprise solutions.

With the increasing demand of mobile connectivity on an ever increasing range of devices, from phones to tablet computers, enabling the consumer to use bandwidth intensive applications such as video streaming requires mobile infrastructure providers to use optical solutions from the mast head to a remote terminal and/or central office. Oclaro is a supplier of optical transceivers at speeds up to 25 Gb/s into the wireless fronthaul and backhaul market.

For the years ended July 2, 2016, June 27, 2015 and June 28, 2014, their revenues were $407.9 million, $341.3 million and $390.9 million, respectively. They had net income of $8.6 million and $17.8 million for the years ended July 2, 2016 and June 28, 2014, respectively, and incurred a net loss of $56.7 million for the year ended June 27, 2015. As of July 2, 2016, June 27, 2015 and June 28, 2014, their total assets were $359.0 million, 325.9 million and 365.7 million, respectively. 

Products

Client Side Transceivers. Oclaro's pluggable transceiver portfolio includes fixed wavelength SFP at data rates less than 10 Gb/s, X2, XFP and SFP+ at 10 Gb/s, CFP at 40 Gb/s, and CFP, CFP2, CFP4 and QSFP28 at 100 Gb/s. These package form factors support different link distances based on different optical connectors and media types, in both industry standard and proprietary optical specifications. These link distances typically go from 100 meters to 100 kilometers, depending on the laser and receiver technology utilized. 

Line Side Transceivers. The Company believes the photonic integration of their internal components represents a differentiator and a competitive advantage in our 10 Gb/s tunable XFP and tunable SFP+ products. They were the first company to supply coherent CFP2 transceivers at 100 Gb/s and 200 GB/s. Their internal device and sub-assembly technology enables our customers to provide coherent pluggable 100 Gb/s and 200 Gb/s solutions for metro and long haul networks.

Tunable laser transmitters. The Company's tunable laser products include discrete lasers and co-packaged laser modulators to optimize performance and reduce the size of the product. Their tunable products at the component level include a tunable optical sub assembly and a 10 Gb/s co-packaged tunable laser mach-zender modulator. They also include an integrated tunable laser assembly ("iTLA") and a 100 Gb/s or 200 Gb/s tunable laser assembly plus modulator ("iTXA"). They are in production of our micro-iTLA and iTXA, tunable laser products which are suitable for 100 Gb/s and 200 Gb/s systems.

Lithium niobate modulators. The Company's lithium niobate external modulators are optical devices that manipulate the phase or the amplitude of an optical signal. Their primary function is to transfer information on an optical carrier by modulating the light. These devices externally modulate the lasers of discrete transmitter products including, but not limited to, our own standalone laser products. They are leaders in the market for 100 Gb/s and 200 Gb/s modulators for coherent applications. They also supply a 400 Gb/s modulators for coherent applications.

Transponder modules. The Company's transponder modules provide both transmitter and receiver functions. A transponder includes electrical circuitry to control the laser diode and modulation function of the transmitter as well as the receiver electronics. They supply a small form factor tunable transponder at 10 Gb/s. We believe the photonic integration of our internal componentry can represent a differentiator and a competitive advantage in certain of these products.

Discrete lasers and receivers. The Company's portfolio of discrete receivers for metro and long-haul applications includes 10 Gb/s XMD PIN and avalanche photodiode ("APD") receivers, 10 Gb/s coplanar receivers in PIN and APD configurations and 20 Gb/s balanced receivers. They also supply distributed feedback ("DFB") laser die at 10 Gb/s and 25 Gb/s. 

My Strategy Going Forward

This company doesn't fit into a Dividend Growth Strategy so if that's your strategy, you might just want to look elsewhere. Oclaro is also a relatively small company in a very competitive environment. But despite that, it's in an industry that's finally growing into its own as the need for bandwidth is increasing exponentially and spreading beyond a centralized cloud to a distributed cloud. 

Now I don't pretend to have an in-depth knowledge of the fiber optics industry, but I analyze stocks based on their fundamentals, technicals or both. In this case it looks like the analysts are calling for a 66% increase in the stock price over the next 12 months. Projections based solely on the projected earnings growth rate still predict a 40+% return over 12 months. And that ain't bad. 

Add in the possibility that consolidation may occur in this industry as demand exceeds the capacity of any one company and owning a piece of Oclaro starts to make sense, from a speculative view. Therefore, I intend to accumulate a small position in this company and see where it goes. As long as it continues to climb I'll hold on and perhaps even add to my position. Finally, I'll also be looking at a few other companies in this space for additional positions. This really looks like an interesting area to own a piece of over the next few years. 

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MGP Ingredients

4/17/2017

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MGP Ingredients is not a large company but it is a leading producer and supplier of premium distilled spirits and specialty wheat proteins and starches. The Company's distilled spirits include premium bourbon and rye whiskeys, and grain neutral spirits, including vodka and gin. The Company’s proteins and starches provide a host of functional, nutritional and sensory benefits for a wide range of food products to serve the packaged goods industry.

MGP is also a top producer of high quality industrial alcohol for use in both food and non-food applications. The Company's distillery products are derived from corn and other grains (including rye, barley, wheat, barley malt, and milo), and their ingredient products are derived from wheat flour. The majority of their sales are made directly to, or through distributors, manufacturers and processors of finished packaged goods or to bakeries.
The Company is headquartered in Atchison, Kansas, where distilled alcohol products and food ingredients are produced at the Company's production facility ("Atchison facility"). Premium spirits are also distilled and matured at the Company’s facility in Lawrenceburg and Greendale, Indiana ("Lawrenceburg facility"). 

The name MGP doesn't seem to be an acronym for anything currently (that I can find) but it may have once stood for Midwest Grain Products.
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​MGP Ingredients, Inc. produces and supplies distilled spirits, and specialty wheat proteins and starch food ingredients. The company operates through two segments, Distillery Products and Ingredient Solutions. The Distillery Products segment provides food grade alcohol for beverage applications that include bourbon and rye whiskeys, as well as grain neutral spirits, including vodka and gin; and food grade industrial alcohol, which is used as an ingredient in foods, personal care products, cleaning solutions, pharmaceuticals, and various other products, as well as for various industrial processors. This segment also provides distillery co-products, such as distillers feed, fuel grade alcohol, and corn oil; and warehouse services, including barrel put away, barrel storage, and barrel retrieval services. The Ingredient Solutions segment provides specialty wheat starches for food applications under the trademarks Fibersym Resistant Starch series, FiberRite RW Resistant Starch, Pregel Instant Starch series, and Midsol Cook-up Starch series; and specialty wheat proteins, commodity wheat starch, and commodity wheat proteins. It sells its products directly or through distributors to the manufacturers and processors of finished packaged goods or to bakeries primarily in the United States, Japan, Thailand, and Canada. MGP Ingredients, Inc. was founded in 1941 and is headquartered in Atchison, Kansas.
(Summary) (Company) (Chart)
11 April 2017
Price $53.03
1yr Target $60.67
Analysts 3
Dividend $0.16
Payout Ratio 8.79%

1yr Cap Gain 14.40%
Yield 0.30%
1yr Tot Return 14.70%

P/E 29.22
PEG 1.95
Beta 1.29
EPS (ttm) $1.82
EPS next yr $2.00
Forward P/E 26.51
EPS next 5yr 15.00%
1yr Price Support $30.00

Market Cap $921.13 Mil
Revenues $318.30 Mil
Earnings $30.20 Mil
Profit Margin 9.48%

Quick Ratio 0.90
Current Ratio 3.00
Debt/Equity 0.25
1yr RevGR -2.86%
3yr RevGR -0.52%
5yr RevGR ---

1yr EarnGR 22.97%
3yr EarnGR ---
5yr EarnGR ---

1yr DivGR 100.00%
3yr DivGR 33.49%
5yr DivGR ---

ROA 14.10%
ROE 22.50%
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MGP Ingredients Monthly Chart
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MGP Ingredients Dividend History
Operations

As of December 31, 2015, the Company has two reportable segments: distillery products and ingredient solutions. 

Distillery Products Segment - The Company processes corn and other grains into food grade alcohol and distillery co-products, such as distillers feed (commonly called dried distillers grain in the industry), fuel grade alcohol, and corn oil. They also provide warehouse services, including barrel put away, barrel storage, and barrel retrieval services. The Company has certain contracts with customers to supply distilled products as well as certain contracts with customers to provide barreling and warehousing services. Contracts with customers may be monthly, annual, and multi-year with periodic review of pricing. Sales of fuel grade alcohol are made on the spot market. During 2015, the five largest distillery products customers, combined, accounted for about 23.3 percent of consolidated net sales.

Food Grade Alcohol - The majority of the Company's distillery capacities are dedicated to the production of high quality, high purity food grade alcohol for beverage and industrial applications.

Food grade alcohol sold for beverage applications consists primarily of premium bourbon and rye whiskeys, and grain neutral spirits, including vodka and gin. The Company's premium bourbon is created by distilling grains, primarily corn. Their whiskey is made from fermented grain mash, including rye and corn. Whiskeys are primarily sold as unaged new distillate, which are then aged by customers from two to four years and are sold at various proof concentrations. Grain neutral spirits are sold in bulk quantities at various proof concentrations. Gin is created by redistilling grain neutral spirits together with proprietary customer formulations of botanicals or botanical oils.

In July 2015, MGP Ingredients announced their first retail-distributed brand which was made available for retail sale in September 2015. The brand, Metze's Select, is a limited edition Indiana Straight Bourbon Whiskey.

Food-grade industrial alcohol is used as an ingredient in foods (e.g., vinegar and food flavorings), personal care products (e.g., hair sprays and hand sanitizers), cleaning solutions, pharmaceuticals, and a variety of other products. The Company sells food-grade industrial alcohol in tank truck or rail car quantities direct to a number of industrial processors.

Distillers Feed and related Co-Products - The bulk alcohol co-products sales include distillers feed, fuel grade alcohol, and corn oil. Distillers feed is principally derived from the mash from alcohol processing operations. The mash is dried and sold primarily to processors of animal feeds as a high protein additive. The Company produces fuel grade alcohol as a co-product of our food grade alcohol business at their distillery in Atchison. They produce corn oil as a value-added co-product through a corn oil extraction process.

Fuel grade alcohol is sold primarily for blending with gasoline to increase the octane and oxygen levels of the gasoline. As an octane enhancer, fuel grade alcohol can serve as a substitute for lead and petroleum-based octane enhancers. As an oxygenate, fuel grade alcohol has been used in gasoline to meet certain environmental regulations and laws relating to air quality by reducing carbon monoxide, hydrocarbon particulates and other toxic emissions generated from the burning of gasoline.

Warehouse revenue - Customers who purchase unaged barreled whiskey distillate may, and in most cases do, also enter into separate warehouse service agreements with MGP for the storage of product for aging that includes services for barrel put away, barrel storage and barrel retrieval. Revenue from warehousing services is recognized upon providing the service and/or over the passage of time, as in the case of storage fees.

Ingredient Solutions Segment - The Company's ingredient solutions segment consists primarily of specialty wheat starches, specialty wheat proteins, commodity wheat starch and commodity wheat protein. Contracts with ingredients customers are generally price, volume, and term agreements which are fixed for three or six month periods, with very few agreements of 12 months duration or more. During 2015, their five largest ingredient solutions customers, combined, accounted for about 11.2 percent of our consolidated net sales.

Specialty Wheat Starches - Wheat starch constitutes the carbohydrate-bearing portion of wheat flour. MGP produces a premium wheat starch powder by extracting the starch from the starch slurry, substantially free of all impurities and fibers, and then dry the starch in spray, flash or drum dryers. A substantial portion of their premium wheat starch is altered during processing to produce certain unique specialty wheat starches designed for special applications. They sell their specialty starches on a global basis, primarily to food processors and distributors.

MGP markets their specialty wheat starches under the trademarks Fibersym Resistant Starch series, FiberRite RW Resistant Starch, Pregel Instant Starch series, and Midsol Cook-up Starch series. They are used primarily for food applications as an ingredient in a variety of food products to affect their nutritional profile, appearance, texture, tenderness, taste, palatability, cooking temperature, stability, viscosity, binding and freeze-thaw characteristics. Important physical properties contributed by wheat starch include whiteness, clean flavor, viscosity and texture. For example, the starches are used to improve the taste and texture of cream puffs, éclairs, puddings, pie fillings, breading and batters; to improve the size, symmetry and taste of angel food cakes; to alter the viscosity of soups, sauces and gravies; to improve the freeze-thaw stability and shelf life of fruit pies and other frozen foods; to improve moisture retention in microwavable foods; and to add stability and to improve spreadability in frostings, mixes, glazes and sugar coatings.

The Company's wheat starches, as a whole, generally compete primarily with corn starch, which dominates the United States starch market. However, the unique characteristics of the Company's specialty wheat starches provide a number of advantages over corn and other starches for certain baking and other end uses.

Specialty Wheat Proteins - MGP has developed a number of specialty wheat proteins for food applications. Specialty wheat proteins are derived from vital wheat gluten through a variety of proprietary processes which change its molecular structure. Specialty wheat proteins for food applications include products in the Arise , Optein, and Trutex. The specialty wheat proteins generally compete with other ingredients and modified proteins having similar characteristics, primarily soy proteins and other wheat proteins, with differentiation being based on factors such as functionality, price and, in the case of food applications, flavor.

Commodity Wheat Starch - As is the case with value-added wheat starches, the Company's commodity wheat starch has both food and non-food applications, but such applications are more limited than those of value-added wheat starches and typically sell for a lower price in the marketplace. Commodity wheat starch competes primarily with corn starches, which dominate the marketplace and prices generally track the fluctuations in the corn starch market.
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Commodity Wheat Proteins - Commodity wheat protein, or vital wheat gluten, is a free-flowing light tan powder which contains approximately 70 to 80 percent protein. When MGP processes wheat flour to derive starch, they also derive vital wheat gluten. Vital wheat gluten is added by bakeries and food processors to baked goods, such as breads, and to pet foods, cereals, processed meats, and fish and poultry to improve the nutritional content, texture, strength, shape and volume of the product. The neutral flavor and color of vital wheat gluten also enhances the flavor and color of certain foods. The cohesiveness and elasticity of the gluten enables the dough in wheat and other high protein breads to rise and to support added ingredients, such as whole cracked grains, raisins and fibers. This allows bakers to make an array of different breads by varying the gluten content of the dough. Vital wheat gluten is also added to white breads, hot dog buns, and hamburger buns to improve the strength and cohesiveness of the product. 

My Strategy Going Forward

I'm always interested in "Behind the Scenes" companies that seem to sell their products to other companies rather than into the highly competitive retail market. Retail customers are rarely as loyal to companies as other companies are that depend on a constant supply of ingredients for their manufacturing process. And MGP Ingredients is one of these companies.

For the most part I like this company but the fundamentals are not growing like I'd like them to grow. Earnings are beginning to grow but revenues aren't growing at all. And that bothers me. In addition, the stock chart has moved extremely higher in a rather quick manner without the normally associated increase in fundamentals. So at this point my interest in the company will place it on my watch list but the extended price will keep me from buying it at this time. If, in the future, the fundamentals begin to increase in relation to the stock price I will consider starting a position in this company. But at this time, it'll have to stay on my watch list.

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LCI Industries

4/13/2017

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The new year brought a new name to Drew Industries. On 3 January 2017, Drew Industries became LCI Industries. 

LCI Industries supplies a broad array of components for the leading OEMs of recreational vehicles (RVs) and adjacent industries, as well as the aftermarkets of these industries.  LCI's business has grown considerably over the past decade, and the new corporate name was selected to better align the investment community with the strength of the LCI brand in the industries it serves.

From 48 manufacturing and distribution center located throughout the US, Canada and Italy, LCI Industries supplies OEMs of RVs and adjacent industries including buses, trailers used to haul boats, livestock, equipment and other cargo, pontoon boats, manufactured homes and factory-built mobile office units. The Company also supplies components to the related aftermarkets of these industries, primarily by selling to retail dealers, wholesale distributors and service centers. LCI Industry's products include steel chassis and related components, axles and suspension solutions, slide-out mechanisms and solutions, thermoformed bath, kitchen and other products, vinyl, aluminum and frameless windows, manual, electric and hydraulic stabilizer and leveling systems, furniture and mattresses, entry, luggage, patio and ramp doors, electric and manual entry steps, awnings and awning accessories, electronic components. appliances. LED televisions and sound systems, navigation systems, wireless backup cameras, and other accessories.

​LCI Industries manufactures and supplies components for the manufacturers of recreational vehicles and manufactured homes in the United States. The company operates through two segments, Recreational Vehicle Products (RV) and Manufactured Housing Products (MH). The RV segment manufactures and markets various products used primarily in the production of RVs, including steel chassis for towable RVs; furniture and mattresses; axles and suspension solutions for towable RVs; entry, luggage, patio, and ramp doors; slide-out mechanisms and solutions; electric and manual entry steps; thermoformed bath, kitchen, and other products; awnings and awning accessories; windows; electronic components; manual, electric, and hydraulic stabilizer and leveling systems; LED televisions, sound systems, navigation systems, and wireless backup cameras; chassis components; and other accessories. This segment sells its products to the manufacturers of RVs, the other OEMs, manufacturers in adjacent industries, and distributors and retail dealers of aftermarket products. The MH segment manufactures and markets various products that are used primarily in the production of manufactured homes, such as vinyl and aluminum windows, aluminum and vinyl patio doors, thermoformed bath and kitchen products, steel chassis and related components, steel and fiberglass entry doors, and axles. This segment sells its products to producers of manufactured homes, other OEMs, manufacturers in adjacent industries, and distributors of aftermarket products. It also offers components for adjacent industries, including buses; trailers used to haul boats, livestock, equipment and other cargo; pontoon boats; modular housing; and factory-built mobile office units. The company was formerly known as Drew Industries Incorporated and changed its name to LCI Industries in December 2016. LCI Industries was founded in 1962 and is based in Elkhart, Indiana.
(Summary) (Company) (Chart)
10 April 2017
Price $93.85
1yr Target $125.00
Analysts 4
Dividend $2.00
Payout Ratio 38.46%

1yr Cap Gain 33.19%
Yield 2.13%
1yr Tot Return 35.32%

P/E 18.06
PEG 1.20
Beta 1.28
EPS (ttm) $5.20
EPS next yr $6.69
Forward P/E 14.02
EPS next 5yr 15.00%
1yr Price Support $100.35

Market Cap $2.29 Bil
Revenues $1.68 Bil
Earnings $129.70 Mil
Profit Margin 7.67%

Quick Ratio 1.20
Current Ratio 2.50
Debt/Equity 0.09
1yr RevGR %
3yr RevGR %
5yr RevGR %

1yr EarnGR %
3yr EarnGR %
5yr EarnGR %

1yr DivGR %
3yr DivGR %
5yr DivGR %

ROA 17.10%
ROE 25.30%
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LCI Industries Monthly Chart
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LCI Industries Dividend History

​Operations

LCI Industries Incorporated supplies a broad array of components in the US and abroad for the leading manufacturers of recreational vehicles and manufactured homes and for the related aftermarkets of those industries. The company also supplies components for adjacent industries including buses; trailers used to haul boats, livestock, equipment and other cargo; pontoon boats; modular housing; and factory-built mobile office units.

The Company has two reportable segments: the recreational vehicle products segment (the “RV Segment”) and the manufactured housing products segment (the “MH Segment”). The RV Segment accounted for 92 percent of consolidated net sales for 2015, and the MH Segment accounted for 8 percent of consolidated net sales for 2015. Approximately 73 percent of the Company’s RV Segment net sales in 2015 were of products to manufacturers of travel trailer and fifth-wheel RVs.

The company is focused on profitable growth, both organic and through the acquisition of manufacturers of components for RVs, manufactured homes and adjacent industries. In order to support this growth, over the past several years the company has expanded its geographic market and product lines, consolidated manufacturing facilities, and integrated manufacturing, distribution and administrative functions. At December 31, 2015, the company operated 42 manufacturing and distribution facilities in 16 states and Quebec and reported consolidated net sales of $1.4 billion for the year ended December 31, 2015.
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Sales and Profits

Net sales for 2015 increased to a record $1.4 billion, 18 percent higher than 2014. Acquisitions completed by the Company in 2015, as well as the Furrion Limited distribution and supply agreement for premium electronics, added $52 million in net sales in 2015. A five percent increase in industry-wide wholesale shipments of travel trailer and fifth-wheel RVs, the Company’s primary RV market, as well as increased content per unit through market share gains, also positively impacted net sales growth in 2015.

In 2015, the Company continued to grow sales to both adjacent industries and the aftermarket for the RV and MH Segments. Aggregate net sales to adjacent industries increased 40 percent to $193 million and aftermarket net sales increased 62 percent to $103 million. Together, these markets now account for 21 percent of consolidated net sales, double the percentage from 2010.

​For the full-year 2015, the Company’s net income increased to $74.3 million, or $3.02 per diluted share, up from net income of $62.3 million, or $2.56 per diluted share, in 2014. Excluding certain charges for severance, environmental and legal costs in 2015, net income would have been $79.0 million in 2015, or $3.20 per diluted share, and excluding the 2014 loss on the sale of the Company's aluminum extrusion-related assets, net income would have been $63.5 million in 2014, or $2.61 per diluted share. 

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Recent Acquisitions

During 2015 and 2016 the company completed five acquisitions:

In January 2015, the company acquired the business and certain assets of EA Technologies, an Elkhart, Indiana-based manufacturer of custom steel and aluminum parts and provider of electro-deposition and powder coating services for RV, bus, medium-duty truck, automotive, recreational marine, specialty and utility trailer, and military applications. Net sales reported by EA Technologies for 2014 were $17 million. The purchase price was $9.2 million. In connection with this acquisition, the Company also acquired a 250,000 square foot facility.

In April 2015, the company acquired the business and certain assets of Industries Spectal, Inc., a Canadian based manufacturer of windows and doors primarily for school buses, as well as commercial buses, emergency vehicles, trucks, agricultural equipment and RVs. Net sales reported by Spectal for 2014 were $25 million. The purchase price was $22.3 million.

In August 2015, the company acquired the business and certain assets of Roehm Marine, LLC, also known as Signature Seating, a Ft. Wayne, Indiana based manufacturer of furniture solutions for fresh water boat manufacturers, primarily pontoon boats. Net sales reported by Signature for the twelve months ended June 2015 were approximately $16 million. The purchase price was $16.0 million.

In January 2016, the company acquired the business and certain assets of the pontoon furniture manufacturing operation of Highwater Marine, LLC, a leading manufacturer of pontoon and other recreational boats located in Elkhart, Indiana. Estimated net sales of the marine furniture business were approximately $20 million. The purchase price was $10.0 million. Concurrently with the acquisition, the company entered into a five-year supply agreement for marine furniture and other products with Highwater and Elkhart, Indiana-based Bennington, the largest manufacturer of pontoon boats in the United States.

​In February 2016, the company acquired the business and certain assets of Flair Interiors, a Goshen, Indiana based manufacturer of RV furniture. Net sales reported by Flair for 2015 were approximately $25 million. The purchase price was $8.1 million. 

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RV Segment

Through its wholly-owned subsidiaries, the company manufactures or distributes a variety of products used in the production of RVs, including:

● Steel chassis for towable RVs
● Axles and suspension solutions for towable RVs
● Slide-out mechanisms and solutions
● Thermoformed bath, kitchen and other products
● Windows
● Manual, electric and hydraulic stabilizer and leveling systems
● Chassis components
● Furniture and mattresses
● Entry, luggage, patio and ramp doors
● Electric and manual entry steps
● Awnings and awning accessories
● Electronic components
● LED televisions, sound systems, navigation systems and wireless backup cameras
● Other accessories 

The company also supplies certain of these products to the RV aftermarket and to adjacent industries, including buses, trailers used to haul boats, livestock, equipment and other cargo, and pontoon boats. In 2015, the RV Segment represented 92 percent of the Company’s consolidated net sales, and 90 percent of consolidated segment operating profit. RVs may be motorized (motorhomes) or towable (travel trailers, fifth-wheel travel trailers, folding camping trailers and truck campers). Approximately 73 percent of the Company’s RV Segment net sales in 2015 were of products to manufacturers of travel trailer and fifth-wheel RVs.

Raw materials used by the Company’s RV Segment, consisting primarily of steel (coil, sheet, tube and I-beam), extruded aluminum, glass, wood, fabric and foam are available from a number of sources, both domestic and foreign.

Operations of the Company’s RV Segment consist primarily of fabricating, welding, thermoforming, painting, sewing and assembling components into finished products. The Company’s RV Segment operations are conducted at 38 manufacturing and warehouse facilities throughout the United States and Canada, strategically located in proximity to the customers they serve. Of these facilities, 7 also conduct operations in the Company’s MH Segment. 

The Company’s RV Segment products are sold primarily to major manufacturers of RVs such as Thor Industries, Forest River, Jayco and to manufacturers in adjacent industries and distributors and retail dealers of aftermarket products.


MH Segment

Through its wholly-owned subsidiaries, the company manufactures or distributes a variety of products used in the production of manufactured homes, including:

●Vinyl and aluminum windows
●Thermoformed bath and kitchen products
●Steel and fiberglass entry doors
●Aluminum and vinyl patio doors
●Steel chassis and related components
●Axles

The company also supplies certain of these products to the manufactured housing aftermarket and to adjacent industries, including modular housing and mobile office units. In 2015, the MH Segment represented 8 percent of the company’s consolidated net sales, and 10 percent of consolidated segment operating profit. Certain of the company’s MH Segment customers manufacture both manufactured homes and modular homes, and certain of the products manufactured by the Company are suitable for both types of homes. As a result, the company is not always able to determine in which type of home its products are installed.

Raw materials used by the company’s MH Segment, consisting primarily of steel (coil, sheet and I-beam), extruded aluminum and vinyl, glass, and ABS resin, are available from a number of sources, both domestic and foreign. 

Operations of the company’s MH Segment consist primarily of fabricating, welding, thermoforming, painting and assembling components into finished products. The company’s MH Segment operations are conducted at 13 manufacturing and warehouse facilities throughout the United States, strategically located in proximity to the customers they serve. 

The company’s manufactured housing products are sold primarily to major producers of manufactured homes such as Clayton Homes, Cavco Industries, Inc., and to manufacturers in adjacent industries and distributors of aftermarket products.
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My Strategy Going Forward

Just looking at the fundamentals this company is currently reasonably priced. But that's because the price has recently fallen. And because of that, this might just be the right time to start accumulating these shares. And that's exactly what I intend to do.

At this price the estimated one year return is over 30% for a company that has a yield of over 2%. Add in the fact that the forward P/E is less than 15 while the debt coverage is excellent, and the deal starts to get even better. Finally throw in a demographic that's demonstrating an aging and retiring population of baby boomers and this starts to seem like a no-brainer. 

I expect to have a position in this company in the near future which I will allow to grow through dividend reinvestment as well as buying additional shares with funds received for the sale of covered call options. It's a strategy that's worked for me with other investments and I expect it will also work with this investment. I expect this to be a long term hold. 
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CryoLife

4/11/2017

0 Comments

 
CryoLife, Inc. is a leader in manufacturing, processing, and distribution of medical devices and implantable human tissues used in cardiac surgical procedures. CryoLife’s medical devices include: BioGlue Surgical Adhesive, BioFoam Surgical Matrix, On-X valves and surgical products, the CardioGenesis cardiac laser therapy product line which includes a laser console system and single-use, fiber-optic handpieces that are used for the treatment of coronary artery disease in patients with severe angina, PerClot, an absorbable powdered hemostat, which the company distributes internationally for Starch Medical, Inc., and PhotoFixTM, a bovine pericardial patch stabilized using a dye-mediated photo-fixation process that requires no glutaraldehyde.

The cardiac and vascular human tissues distributed by CryoLife include the CryoValve SG pulmonary heart valve and the CryoPatch SG pulmonary cardiac patch, both of which are processed using CryoLife’s proprietary SynerGraft® technology. 
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CryoLife, Inc. manufactures and distributes medical devices worldwide. It also processes and distributes implantable human tissues for use in cardiac and vascular surgeries. The company operates in two segments, Medical Devices and Preservation Services. It offers surgical sealants and hemostats, including BioGlue Surgical Adhesive, an agent for cross-linking proteins for cardiac, vascular, pulmonary, and general surgical applications; BioFoam Surgical Matrix, which is used as an adjunct in sealing abdominal parenchymal tissues, as well as an adjunct for hemostasis in cardiovascular surgery; and PerClot, an absorbable powdered hemostat for use in surgical procedures, including cardiac, vascular, orthopedic, neurological, gynecological, ENT, and trauma surgeries. The company also provides cardiac laser therapy products, which include laser console system and single-use, as well as fiber-optic hand-pieces for the treatment of coronary artery disease in patients with severe angina; and On-X heart valves for aortic and mitral indications. In addition, it distributes ProCol vascular bioprosthesis, a biological graft that provides vascular access for end-stage renal disease in hemodialysis patients; and PhotoFix, a bovine pericardial patch for use in cardiac and vascular repairing activities. Further, it distributes CryoValve SG pulmonary heart valves and CryoPatch SG pulmonary cardiac patch tissues that are processed using its proprietary SynerGraft technology; and vascular preservation services, such as CryoVein and CryoArtery tissues to treat various vascular reconstructions, such as peripheral bypass, hemodialysis access, and aortic infections. The company serves physicians, hospitals, and other healthcare facilities, as well as cardiac, vascular, thoracic, and general surgeons. CryoLife, Inc. was founded in 1984 and is headquartered in Kennesaw, Georgia.
(Summary) (Company) (Chart)
9 April 2017
Price $15.90
1yr Target $21.30
Analysts 5
Dividend $0.12
Payout Ratio ---

1yr Cap Gain 33.96%
Yield 0.75%
1yr Tot Return 34.71%

P/E 49.38
PEG 1.65
Beta 1.20
EPS (ttm) $0.32
EPS next yr $0.48
Forward P/E 32.92
EPS next 5yr 30.00%
1yr Price Support $14.40

Market Cap $536.78 Mil
Revenues $180.40 Mil
Earnings $10.60 Mil
Profit Margin 5.87%

Quick Ratio 4.00
Current Ratio 4.90
Debt/Equity 0.34
1yr RevGR 23.63%
3yr RevGR 8.52%
5yr RevGR 8.56%

1yr EarnGR 128.57%
3yr EarnGR -17.35%
5yr EarnGR 4.24%

1yr DivGR ---
3yr DivGR ---
5yr DivGR ---

ROA 3.50%
ROE 5.20%
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CryoLife Monthly Chart
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CryoLife Dividend History
Company Products

Surgical Sealants

Closing internal wounds effectively following surgical procedures is critical to the restoration of the function of tissue and to the ultimate success of the surgical procedure. Failure to seal surgical wounds effectively can result in leakage of blood in cardiac surgeries, air in lung surgeries, cerebrospinal fluid in neurosurgeries, and gastrointestinal contents in abdominal surgeries. Fluid, air, and content leakage resulting from surgical procedures can lead to prolonged hospitalization, higher levels of post-operative pain, higher costs, and a higher mortality rate.

Sutures and staples facilitate healing by joining wound edges to allow the body to heal naturally. However, sutures and staples cannot consistently eliminate air and fluid leakage at the wound site, particularly when used to close tissues containing air or fluids under pressure, such as in blood vessels, the lobes of the lung, the dural membrane surrounding the brain and spinal cord, and the gastrointestinal tract. In some cases, the tissues may be friable, which complicates the ability to achieve closure. In addition, it can be difficult and time consuming for the physician to apply sutures and staples in minimally invasive surgical procedures where the physician must operate through small access openings. The Company believes that the use of surgical adhesives and sealants with, or without, sutures and staples could enhance the efficacy of these procedures through more effective and rapid wound closure. In order to address the inherent limitations of sutures and staples, the Company developed and commercialized its protein hydrogel technology (“PHT”) platform. The PHT platform is based on a bovine protein that mirrors an array of amino acids that perform complex functions in the human body. Together with a cross- linker, the protein forms a hydrogel, a water-based biomaterial somewhat similar to human tissue. Materials and implantable replacement devices created with PHT may have the potential to provide structure, form, and function similar to certain human tissues. CryoLife developed and currently markets the surgical sealants BioGlue and BioFoam from its PHT platform.

BioGlue

CryoLife’s proprietary product, BioGlue, is a polymer consisting of bovine blood protein and an agent for cross-linking proteins, which was developed for use in cardiac, vascular, pulmonary, and general surgical applications. BioGlue has a tensile strength that is four to five times that of fibrin sealants, and it is stronger than other cardiovascular sealants. BioGlue begins to polymerize within 20 to 30 seconds and reaches its bonding strength within two minutes. BioGlue is dispensed by a controlled delivery system that consists of a disposable syringe, which may be used with, or without, a multi-use delivery device, and various applicator tips. BioGlue is pre-filled in 2ml, 5ml, and 10ml volumes. Applicator tips are available in standard size, 12mm and 16mm spreader tips, 10cm and 27cm flexible extender tips, and 10cm, 27cm, and 35cm delivery tip extenders.

BioGlue is FDA approved as an adjunct to sutures and staples for use in adult patients in open surgical repair of large vessels. CryoLife distributes BioGlue under Conformité Européene Mark product certification (“CE Mark”) in the EEA for repair of soft tissues (which include cardiac, vascular, pulmonary, and additional soft tissues). CryoLife also distributes BioGlue in Japan which is indicated for adhesion and support of hemostasis for aortotomy closure sites, suture/anastomosis sites (including aortic dissection and anastomosis sites with use of a prosthetic graft), and suture sites on the heart. Additional marketing approvals have been granted for specified applications in several other countries throughout the world. 

CryoLife distributes BioGlue throughout the U.S. and in approximately 80 other countries. Revenues from BioGlue represented 35%, 40%, and 43% of total Company revenues in 2016, 2015, and 2014, respectively.

BioFoam

CryoLife’s proprietary product, BioFoam, is a protein hydrogel biomaterial with an expansion agent, which generates a mixed-cell foam. The foam creates a mechanical barrier to decrease blood flow and develops pores for the blood to enter, leading to cellular aggregation and enhanced hemostasis. BioFoam was developed to seal organs, such as the liver, rapidly and for use in cardiovascular surgeries, and may provide hemostasis in penetrating wounds and trauma. It is easily applied and could potentially be used intra-operatively to control internal organ hemorrhage, limit blood loss, and reduce the need for future re-operations in liver resections.

CryoLife distributes BioFoam in Europe under a CE Mark for use as an adjunct in the sealing of abdominal parenchymal tissues (liver and spleen) and as an adjunct to hemostasis in cardiovascular surgery when cessation of bleeding by ligature or other conventional methods is ineffective or impractical.

CryoLife distributes BioFoam in approximately 45 countries, primarily in Europe. Revenues from BioFoam represented less than 1% of total Company revenues in each of 2016, 2015, and 2014.

Cardiac Repair and Reconstruction

Patients with congenital cardiac defects such as Tetralogy of Fallot, Truncus Arteriosis, and Pulmonary Atresia can require complex cardiac reconstructive surgery to repair the defect. Patients with heart disease can experience valve insufficiency, regurgitation, or stenosis that may require heart valve repair or replacement surgery. Cardiac surgery can include the implantation of mechanical heart valves, bioprosthetic (animal-derived or xenograft) tissues, synthetic tissues, or donated human tissues.

Mechanical heart valves are durable and are often a solution that will last for the remainder of a patient’s life without replacement. Mechanical valves are readily available and are a relatively inexpensive solution for those requiring a valve replacement. These valves contain a synthetic sewing ring to facilitate implantation. Patients who receive mechanical heart valves are required to undergo long-term blood thinning or anticoagulation drug therapy to minimize the risk of complications from blood clots.

Bioprosthetic tissues, including bovine, equine, or porcine tissue values, are available in heart valves and surgical patches. Bioprosthetic valves are readily available and are a relatively inexpensive solution for those requiring a valve replacement. Bioprosthetic heart valves usually have a life of 7 to 20 years, after which a degenerating valve must be replaced, which can be a significant concern for younger patient populations. Bioprosthetic tissues are typically processed with glutaraldehyde, which may result in progressive calcification, or hardening of the tissue over time. These valves often contain a synthetic sewing ring to facilitate implantation. Patients receiving a bioprosthetic heart valve may not require long-term anticoagulation drug therapy, although certain of these patients may require anticoagulation drug therapy for other heart or vascular conditions.

Synthetic surgical patches are available for use in cardiac repair and synthetic materials are used in sewing rings for mechanical and bioprosthetic heart valves. These synthetic sewing rings may harbor bacteria and lead to endocarditis, which can be difficult to treat with antibiotics. Patients with an infected mechanical or bioprosthetic valve may require valve replacement. 

Human heart valves are available for use in valve replacement procedures. Human heart valves allow for more normal blood flow and often provide higher cardiac output than mechanical and bioprosthetic heart valves. Human tissue responds better to treatment for infections, such as endocarditis and is not as susceptible to progressive calcification as glutaraldehyde-fixed bioprosthetic tissues. Human heart valves do not require anticoagulation drug therapy, as do mechanical valves. Human tissue patches are also available for use in cardiac repair and human vascular tissues are used in cardiac bypass surgery. However, the transplant of any human tissue that has not been preserved must be accomplished within extremely short time limits. Cryopreservation, or cooling and storing at extremely cold temperatures, expands the treatment options available by extending these timelines.

The 2013 Society of Thoracic Surgeons Guidelines, as published in the Annals of Thoracic Surgery, have increased the indication (from Class II to Class I) and broadened the scope for using a human heart valve during aortic valve replacement surgery due to endocarditis. This means that when endocarditis has functionally destroyed the aortic valve annulus, an aortic homograft is the recommended course of treatment. Previously, the Guidelines’ indication for aortic homograft use was Class II, which meant only that it was an acceptable course of treatment. Consequently, for many physicians, human heart valves are the preferred alternative to animal-derived and mechanical valves for patients who have, or are at risk to contract, endocarditis.

CryoLife currently markets the On-X aortic and mitral mechanical heart valves for valve replacement procedures and PhotoFix for cardiac repair. CryoLife also markets its cardiac preservation services, including its CryoValve and CryoValve SG tissues for heart valve replacement surgeries and its CryoPatch and CryoPatch SG tissues for cardiac repair procedures.

On-X Heart Valves

The On-X catalogue of products includes the On-X prosthetic aortic and mitral heart valve and the On-X ascending aortic prosthesis. The Company also distributes CarbonAid CO2 diffusion catheters, manufactures Chord-X ePTFE sutures for mitral chordal replacement, and offers pyrolytic carbon coating services to other medical device manufacturers as part of the On-X family of products.

The On-X heart valve is a bileaflet mechanical valve composed of a graphite substrate coated with On-X’s pyrolytic carbon coating. The On-X heart valve is available for both aortic and mitral indications and with a variety of sewing ring options to suit physician’s preferences. The On-X AAP is an On-X aortic valve combined with a Vascutek Gelweave ValsalvaTM Graft to allow physicians to more conveniently treat patients requiring both an aortic valve replacement and an aortic graft.

All mechanical valve patients require anticoagulation therapy with warfarin, which creates a risk of harmful bleeding. The On-X aortic heart valve is the only mechanical valve U.S. Food and Drug Administration approved to be marketed as, and clinically proven to be, safer with use by the patient of less warfarin. In a prospective randomized clinical trial comparing reduced warfarin to standard warfarin dose in On-X aortic heart valve patients, the reduced warfarin dose group had 65% fewer harmful bleeding events without an increase in stroke risk.

The On-X heart valve is FDA approved for the replacement of diseased, damaged, or malfunctioning native or prosthetic heart valves in the aortic and mitral positions, and is classified as a Class III medical device. On-X distributes the On-X heart valve under CE Mark in the EEA. Additional marketing approvals have been granted in several other countries throughout the world.

CryoLife began distribution of On-X heart valves throughout the U.S. and in approximately 95 other countries in January 2016 when it acquired On-X. Revenues from On-X products represented 19% of total Company revenues in 2016.

PhotoFix

In 2014 CryoLife entered into an exclusive supply and distribution agreement with Genesee Biomedical, Inc. to acquire the distribution rights to PhotoFix, a bovine pericardial patch stabilized using a dye-mediated photo-fixation process that requires no glutaraldehyde. On April 13, 2016 the Company exercised its right to acquire the PhotoFix technology from GBI and is in the process of transferring manufacturing of PhotoFix to the Company’s headquarters facilities. PhotoFix has FDA 510(k) clearance and is indicated for use in intracardiac repair, including ventricular repair and atrial repair, great vessel repair and suture line buttressing, and pericardial closure. 

In January 2015 the Company received its initial shipments and launched its distribution of PhotoFix in the U.S. Revenues from PhotoFix represented approximately 1% of total Company revenues in each of 2016 and 2015.

Cardiac Preservation Services

The Company’s proprietary preservation process involves dissection, processing, preservation, and storage of tissues by the Company, until they are shipped to an implanting physician. The cardiac tissues currently preserved by the Company include aortic and pulmonary heart valves and cardiac patches in three primary anatomic configurations: pulmonary hemi-artery, pulmonary trunk, and pulmonary branch. Each of these tissues maintains a structure which more closely resembles and simulates the performance of the patient’s own tissue compared to non-human tissue alternatives. The Company’s cardiac tissues have been used in a variety of valve replacement and cardiac reconstruction surgeries. Management believes the human tissues it distributes offer specific advantages over mechanical, synthetic, and bioprosthetic alternatives. Depending on the alternative, the advantages of the Company’s heart valves include more natural blood flow properties, the ability to use the valve with patients who have endocarditis, the elimination of a need for long-term drug therapy to prevent excessive blood clotting, and a reduced risk of catastrophic failure, thromboembolism (stroke), or calcification.

The Company’s cardiac tissues include the CryoValve SGPV and the CryoPatch SG, both processed with the Company’s proprietary SynerGraft decellularization technology. A multi-center study showed that at 10 years, patients with the Company’s proprietary SynerGraft valves had a 17 percent re- operation rate, as compared to a 40 percent re-operation rate for patients with non-SynerGraft valves. CryoLife uses the SynerGraft technology for a significant portion of its pulmonary valve and pulmonary cardiac patch tissue processing.

CryoLife distributes human cardiac tissues to implanting institutions throughout the U.S. The Company’s CryoValve SGPV and CryoPatch SG are distributed under 510(k) clearance from the FDA. CryoLife also distributes tissues in Canada and has limited distribution through a special access program in Germany.

Revenues from cardiac tissue preservation services accounted for 17%, 19%, and 20% of total Company revenues in 2016, 2015, and 2014, respectively.

Management believes that at least one domestic tissue bank, LifeNet Health, Inc., offers preserved human heart valves and patches in competition with the Company. Alternatives to human heart valves processed by the Company include valve repair and valve replacement with bioprosthetic valves or mechanical valves. The Company competes with bioprosthetic or mechanical valves from companies including Medtronic, Inc., Edwards Life Sciences, Inc., LivaNova, and Abbott Laboratories. Alternatives to the Company’s human cardiac patches include xenograft small intestine submucosa and glutaraldehyde fixed bovine pericardial patches. 

Management believes that the human heart valves preserved by the Company compare favorably with bioprosthetic and mechanical valves, for certain indications and patient populations, and that the human cardiac patches preserved by the Company compare favorably with xenograft SIS and glutaraldehyde fixed bovine pericardial patches, due to the benefits of human tissue discussed above. In addition, human tissue is the preferred replacement alternative with respect to certain medical conditions, such as pediatric cardiac reconstruction, congenital cardiac defect repair, valve replacements for women in their child-bearing years, and valve replacements for patients with endocarditis. In addition, implantation of the SynerGraft treated cardiac tissue reduces the risk for induction of class I and class II alloantibodies, based on Panel Reactive Antibody measured at up to one year, compared to standard processed cardiac tissues. The Company believes that this may provide a competitive advantage for CryoValve SGPV and CryoPatch SG for patients that may later require a whole organ transplant, as an increased PRA can decrease the number of possible donors for subsequent organ transplants and increase time on transplant waiting lists.

Vascular Repair and Reconstruction

Patients with peripheral vascular disease can experience reduced blood flow, usually in the arms and legs. This can result in poor circulation, pain, and sores that do not heal. Failure to achieve revascularization of an obstructed vessel may result in the loss of a limb or even death of the patient. When patients require peripheral bypass surgery, the surgeon’s first choice generally is a graft of the patient’s own tissue (autograft). However, in cases of advanced vascular disease, patients may not have suitable vascular tissue for transplantation. Other artery and vascular repair procedures include infected abdominal aortic grafts, insufficient vascular access, carotid endarterectomy, or vessel repair. These procedures may include the use of bioprosthetic patches, synthetic grafts or patches, or donated human vascular tissues. Alternative treatments may include the repair, partial removal, or complete removal of the damaged tissue.

Bioprosthetic vascular grafts and patches, including those made of bovine or porcine tissue, can be used for a variety of vascular repair procedures. Bioprosthetic grafts are readily available and are a relatively inexpensive solution for those requiring a vascular repair procedure. Bioprosthetic tissues are typically processed with glutaraldehyde, which may result in progressive calcification, or hardening of the tissue over time.

Synthetic vascular grafts and patches can be used for a variety of vascular repair procedures. Synthetic grafts are readily available and are a relatively inexpensive solution for those requiring a vascular repair procedure. However, synthetic grafts and patches are generally not suitable for use in infected areas because they may harbor bacteria and are difficult to treat with antibiotics. Synthetic vascular grafts have a tendency to obstruct over time, particularly in below-the-knee surgeries.

Human vascular tissues tend to respond better to treatment for infection and remain open and accessible for longer periods of time and, as such, are used in indications where synthetic grafts typically fail, such as in infected areas and for below-the-knee surgeries. Human vascular and arterial tissues are also used in a variety of other reconstruction procedures such as cardiac bypass surgery and as vascular access grafts for hemodialysis. The transplant of human tissue that has not been preserved must be accomplished within extremely short time limits. Cryopreservation, or cooling and storing at extremely cold temperatures, expands the treatment options available by extending these timelines.

CryoLife currently markets its vascular preservation services, including its CryoVein® and CryoArtery® tissues for vascular reconstruction surgeries.

Vascular Preservation Services

The Company’s proprietary preservation process involves dissection, processing, preservation, and storage of tissues by the Company, until they are shipped to an implanting physician. The vascular tissues currently preserved by the Company include saphenous veins, aortoilliac arteries, and femoral veins and arteries. Each of these tissues maintains a structure, which more closely resembles and simulates the performance of the patient’s own tissue compared to non-human tissue alternatives. The Company’s vascular tissues have been used to treat a variety of vascular reconstructions, such as peripheral bypass, hemodialysis access, and aortic infections, which have saved the lives and limbs of patients. Management believes the human tissues it distributes offer specific advantages over mechanical, synthetic, and bioprosthesis alternatives.

CryoLife distributes human vascular tissues to implanting institutions throughout the U.S. CryoLife also distributes tissues in Canada and has limited distribution through a special access program in Germany.

Revenues from vascular preservation services accounted for 20%, 24%, and 23% of total Company revenues in 2016, 2015, and 2014, respectively.

Management believes that at a small number of domestic tissue banks, including LifeNet, LeMaitre Vascular, Inc., and Vascular Transplant Services, offer vascular tissue in competition with the Company. There are also a number of providers of synthetic alternatives to veins preserved by the Company and those alternatives are available primarily in medium and large diameters. 

Management believes that it competes with other entities that preserve human tissue on the basis of the preference of surgeons, documented clinical data, technology, and customer service. Management believes the Company offers advantages in the areas of clinical data and customer service, particularly with respect to the capabilities of our field representatives, as compared to the sales organizations of other human tissue processors. 

Angina Treatment

Angina consists of pressure, discomfort, and/or pain in the chest typically due to narrowed or blocked arteries, resulting in ischemic heart disease. Patients with severe angina are often treated with surgical procedures including angioplasty or coronary artery bypass or with medications such as aspirin, nitrates, beta-blockers, statins, or calcium channel blockers. Pain may be chronic or may become pronounced with exercise. Angina can also be treated with Transmyocardial Revascularization (“TMR”), a procedure that can be performed as an open surgical procedure or through a minimally invasive surgery either as a stand-alone procedure or concurrently with coronary artery bypass. During TMR, the surgeon uses a disposable handpiece to deliver precise bursts of laser energy directly to an area of heart muscle that is suffering from ischemic heart disease through a small incision or small ports with the patient under general anesthesia and without stopping the heart. TMR is typically performed with a CO2 or Holmium: YAG laser. It takes approximately 6 to 10 pulses of the laser to traverse the myocardium and create channels of one millimeter in diameter. During a typical procedure, approximately 20 to 40 channels are made in the heart muscle. The external openings seal with little blood loss. Angina usually subsides with improved oxygen supply to the targeted areas of the damaged heart muscle. CryoLife currently sells the CardioGenesis cardiac laser therapy product line to perform TMR.

CardioGenesis Cardiac Laser Therapy

CryoLife’s CardioGenesis cardiac laser therapy product line consists of Holmium: YAG laser consoles, related service and maintenance, and single-use, fiber-optic handpieces, which are used in TMR to treat patients with severe angina resulting from diffuse coronary artery disease. Patients undergoing TMR treatment with CardioGenesis products have been shown to have angina reduction, longer event-free survival, reduction in cardiac related hospitalizations, and increased exercise tolerance. CryoLife’s SolarGen 2100s Console (“Console”) uses the solid-state technology of the Holmium: YAG laser system to provide a stable and reliable energy platform that is designed to deliver precise energy output. The Console has an advanced electronic and cooling system technology, which allows for a smaller and lighter system, while providing 115V power capability. The Company also provides service plan options to ensure that the Console is operating within the critical factory specifications. CryoLife distributes the SoloGrip® III disposable handpieces, which consist of multiple, fine fiber-optic strands in a one millimeter diameter bundle and are designed to work with the Console. The SoloGrip III handpiece has an ergonomic design and is pre-calibrated in the factory to provide easy and convenient access for treating all regions of the left ventricle.

The CardioGenesis cardiac laser therapy product line is FDA approved for treating patients with severe angina that is not responsive to conventional therapy. CryoLife began distributing the CardioGenesis cardiac laser therapy product line, primarily in the U.S., in May 2011 when it completed the acquisition of Cardiogenesis Corporation. Although the CardioGenesis cardiac laser therapy product line has a CE Mark allowing commercial distribution into the EEA, CryoLife does not actively market the product line internationally.
CryoLife distributes handpieces and CardioGenesis laser consoles primarily in the U.S. Revenues from CardioGenesis cardiac laser therapy represented 5%, 6%, and 6% of total Company revenues in 2016, 2015, and 2014, respectively.

The Company’s CardioGenesis cardiac laser therapy competes with other methods for the treatment of coronary artery disease, including drug therapy, percutaneous coronary intervention, coronary artery bypass surgery, and enhanced external counterpulsation. Currently, the only directly competitive laser technology for the performance of TMR is the CO2 Heart Laser System manufactured by Novadaq Technologies, Inc. The Company’s revascularization technology competes on the basis of its ease of use, versatility, size of laser console, and improved access to the treatment area with a smaller fiber-optic system.

Hemostats

Hemostatic agents are frequently utilized as an adjunct to sutures and staples to control inter-operative bleeding. Hemostatic agents prevent excess blood loss and can help maintain good visibility of the operative site. These products may reduce operating room time and decrease the number of blood transfusions required in surgical procedures. Hemostatic agents are available in various forms including pads, sponges, liquids, and powders. CryoLife currently markets the hemostatic agent PerClot. 

PerClot

PerClot is an absorbable powdered hemostat, consisting of plant starch modified into ultra-hydrophilic, adhesive-forming hemostatic polymers. PerClot granules are biocompatible, absorbable polysaccharides containing no animal or human components. The purified plant source material helps to minimize the risks of infection and bleeding-related complications during surgery. PerClot granules have a molecular structure that rapidly absorbs water, forming a gelled adhesive matrix that provides a mechanical barrier to any further bleeding and results in the accumulation of platelets, red blood cells, and coagulation proteins (thrombin, fibrinogen, etc.) at the site of application. This gelled adhesive matrix promotes the normal physiological clotting cascade. PerClot does not require additional operating room preparation or special storage conditions and is easy to apply. PerClot is readily dissolved by saline irrigation and is totally absorbed by the body within several days. PerClot is currently available in 1 gram, 3 gram, and 5 gram configurations with a 100mm or 200mm applicator tip for certain sizes. PerClot Laparoscopic is available in a 3 gram configuration with a 380mm applicator tip. In September 2010 CryoLife entered into a distribution agreement and a license and manufacturing agreement with SMI, which allows CryoLife to distribute PerClot worldwide, except in China, Hong Kong, Macau, Taiwan, North Korea, Iran, and Syria.

PerClot has a CE Mark allowing commercial distribution into the EEA and other markets. PerClot is indicated for use in surgical procedures, including cardiac, vascular, orthopaedic, neurological, gynecological, ENT, and trauma surgery as an adjunct hemostat when control of bleeding from capillary, venular, or arteriolar vessels by pressure, ligature, and other conventional means is either ineffective or impractical. CryoLife distributes PerClot in Europe and other international countries.

CryoLife has received approval to begin clinical trials for the purpose of obtaining FDA Premarket Approval to distribute PerClot in the U.S., as discussed further in “Research and Development and Clinical Research” below.

CryoLife distributes PerClot in approximately 60 countries. Revenues from PerClot represented 2%, 3%, and 3% of total Company revenues in 2016, 2015, and 2014, respectively.

Vascular Access

ESRD refers to the stage of renal disease when the kidneys do not work well enough for the patient to live without dialysis or transplant. Patients with ESRD often undergo hemodialysis through an access site. CryoLife markets its CryoVein femoral vein and CryoArtery femoral artery vascular preservation services for vascular access and previously marketed the HeRO Graft and ProCol for vascular access.

HeRO Graft and ProCol

CryoLife began distributing the HeRO Graft in the U.S. in May 2012 when it acquired Hemosphere, Inc. and distributed the product until the Company divested the product line in February 2016. CryoLife distributed the HeRO Graft in the U.S. and approximately 40 other countries. Revenues from the HeRO Graft represented 1%, 5%, and 5% of total Company revenues in 2016, 2015, and 2014, respectively.

CryoLife began distributing ProCol in the U.S. in March 2014 under a distribution agreement with Hancock Jaffe and distributed the product until the Company divested the product line in March 2016. Revenues from ProCol represented less than 1% of total Company revenues in each of 2016, 2015, and 2014.

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​My Strategy Forward

This looks like a great company that has a small market cap but it's growing both rapidly and erratically. Therefore it's going on to my watch list for potential accumulation at a more appropriate price. I believe that at the current price and P/E this company is simply to expensive for my type of investing. Also a look at a long term chart shows potential support near $12 per share. 

While the shares have already fallen 20% off their high, they'd need to fall another 20% before they would be in an area that I would consider. This may or may not happen but by placing these shares on my watch list I'll be following them on a daily basis. In the event they fall below $13 per share, I start a position in them. But only time will tell if that will happen.

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0 Comments

Air Lease Corp

4/6/2017

0 Comments

 
Air Lease Corporation is an aircraft leasing company founded in 2010 that purchases new commercial aircraft through direct orders from Boeing, Airbus, Embraer and ATR, and leases them to its airline customers worldwide through specialized aircraft leasing and financing. Air Lease Corp provides airline companies with net operating leases, which require the lessee to pay for maintenance, insurance, taxes and all other aircraft operating expenses during the lease term. As of 2015, Air Lease has on order approximately 400 aircraft, worth over $30B. 

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​Air Lease Corporation, an aircraft leasing company, engages in the purchase and leasing of commercial jet transport aircraft to airlines in Asia, the Pacific Rim, Latin America, the Middle East, Europe, Africa, and North America. The company also sells aircraft from its operating lease portfolio to third parties, including other leasing companies, financial services companies, and airlines. In addition, it provides fleet management services to investors and owners of aircraft portfolios. As of December 31, 2016, the company owned a fleet of 237 aircraft, including 188 single-aisle narrowbody jet aircraft and 49 twin-aisle widebody jet aircraft. Air Lease Corporation was founded in 2010 and is based in Los Angeles, California.
(Summary) (Company) (Chart)
2 April 2017
Price $38.75
1yr Target $47.00
Analysts 13
Dividend $0.30
Payout Ratio 8.72%

1yr Cap Gain 21.29%
Yield 0.77%
1yr Tot Return 22.06%

P/E 11.28
PEG 0.71
Beta 1.69
EPS (ttm) $3.44
EPS next yr $4.29
Forward P/E 9.03
EPS next 5yr 15.9%
1yr Price Support $68.21

Market Cap $4.01 Bil
Revenues $1.42 Bil
Earnings $374.90 Mil
Profit Margin 26.33%

Quick Ratio ---
Current Ratio ---
Debt/Equity 2.58
1yr RevGR 16.12%
3yr RevGR 18.06%
5yr RevGR 33.39%

1yr EarnGR 47.00%
3yr EarnGR 23.82%
5yr EarnGR 42.27%

1yr DivGR 32.35%
3yr DivGR 28.59%
5yr DivGR ---

ROA 2.80%
ROE 11.60%
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Air Lease Corp Monthly Chart
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Air Lease Corp Dividend History

Operations

Air Lease Corporation is a leading aircraft leasing company that was founded by aircraft leasing industry pioneer Steven F. Udvar-Házy. The company is principally engaged in purchasing new commercial jet transport aircraft directly from aircraft manufacturers, such as The Boeing Company and Airbus S.A.S., and then leasing those aircraft to airlines throughout the world with the intention to generate attractive returns on equity. 

In addition to our leasing activities, Air Lease sells aircraft from their operating lease portfolio to third parties, including other leasing companies, financial services companies and airlines. The company also provides fleet management services to investors and owners of aircraft portfolios for a management fee. Air Lease's operating performance is driven by the growth of their fleet, the terms of their leases, the interest rates on their debt, and the aggregate amount of their indebtedness, supplemented by the gains from aircraft sales, trading activities and management fees. 

Air Lease currently has relationships with over 200 airlines across 70 countries. They operate their business on a global basis, providing aircraft to airline customers in every major geographical region, including markets such as Asia, the Pacific Rim, Latin America, the Middle East, Europe, Africa and North America. Many of these markets are experiencing increased demand for passenger airline travel and have lower market saturation than more mature markets such as the United States and Western Europe. The company expects that these markets will also present significant replacement opportunities in upcoming years as many airlines look to replace aging aircraft with new, modern technology, fuel efficient jet aircraft. An important focus of our strategy is meeting the needs of this replacement market. Airlines in some of these markets have fewer financing alternatives, enabling Air Lease to command relatively higher lease rates compared to those in more mature markets. 

Air Lease mitigates the risks of owning and leasing aircraft through careful management and diversification of their leases and lessees by geography, lease term, and aircraft age and type. The company believes that diversification of their operating lease portfolio reduces the risks associated with individual lessee defaults and adverse geopolitical and regional economic events. They mitigate the risks associated with cyclical variations in the airline industry by managing customer concentrations and lease maturities in their operating lease portfolio to minimize periods of concentrated lease expirations. In order to maximize residual values and minimize the risk of obsolescence, their strategy is to own an aircraft during the first third of its expected 25 year useful life. 
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During the year ended December 31, 2016, the net book value of the company's fleet increased by 11.4% to $12.0 billion. During 2016, Air Lease purchased 43 aircraft and sold 46 aircraft, ending the year with a total of 237 owned aircraft and 30 aircraft in their managed fleet portfolio. The company leased and managed aircraft to a globally diversified customer base comprised of 85 airlines in 51 countries. As of December 31, 2016, the weighted average lease term remaining of their operating lease portfolio was 6.9 years and the weighted average age of our fleet was 3.8 years.

During 2016, Air Lease entered into supplemental agreements and amendments to existing agreements with Airbus and Boeing to purchase 10 additional aircraft. Air Lease agreed to purchase from Airbus one A350-900 aircraft and one A321-200 aircraft. From Boeing, they agreed to purchase six additional 737-8MAX aircraft and two 787-9 aircraft. Deliveries of the 10 additional aircraft are scheduled to commence in 2017 and continue through 2021. As of December 31, 2016, the company had commitments to purchase 363 aircraft from Boeing and Airbus for delivery through 2023, with an estimate aggregate commitment of $27.9 billion, making Air Lease one of the world’s largest customers for new commercial jet aircraft.

During 2016, the company signed lease agreements, letters of intent, and lease extension agreements for 122 aircraft with 39 customers across 33 countries. As a result, the minimum future rental payments that our airline customers have committed to the company have increased to $23.8 billion from $20.9 billion in the prior year. This includes $9.4 billion in contracted minimum rental payments on the 237 aircraft in their existing fleet and $14.4 billion in minimum future rental payments on the 167 aircraft that they have ordered from the manufacturers which will deliver between 2017 and 2021.

In 2016, total revenues increased by 16.0% to $1.42 billion, compared to 2015. This is comprised of rental revenues on their operating lease portfolio of $1.34 billion and aircraft sales, trading and other revenue of $80.1 million. During the year ended December 31, 2016, the company sold 46 aircraft for proceeds of $1.2 billion, recording gains on aircraft sales and trading activity of $61.5 million. During the year ended December 31, 2015, the company sold 24 aircraft for proceeds of $784.7 million, recording gains on aircraft sales and trading activity of $33.9 million.

In December 2015, the company entered into an agreement to sell their fleet of 25 ATR turboprop aircraft. As of December 31, 2016, Air Lease has completed the sale of all the ATR aircraft to Nordic Aviation Capital. In addition, in May 2016, the company entered into an agreement to sell 25 Embraer E190 and E175 aircraft to NAC. As of December 31, 2016, 20 aircraft had been transferred to NAC and the remaining five aircraft were held for sale. The company expects the sale of the five aircraft held for sale to be completed during the first quarter of 2017.

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​Air Lease finances the purchase of aircraft and their business with available cash balances, internally generated funds, including aircraft sales and trading activities, and debt financings. The company's debt financing strategy is focused on raising unsecured debt in the global bank and debt capital markets, with a limited utilization of export credit or secured financing. In 2016, the company issued $2.0 billion senior unsecured notes with an average interest rate of 2.875%, with maturities ranging from 2020 to 2023. In 2016, they increased their unsecured revolving credit facility capacity to $3.2 billion, representing a 14.3% increase from 2015 and extended the final maturity to May 5, 2020. Air Lease ended 2016 with total debt outstanding, net of discounts and issuance costs, of $8.7 billion, of which 83.5% was at a fixed rate and 92.4% of which was unsecured, with a composite cost of funds of 3.42%. 

In October 2016, Standard and Poor’s rating services raised the company's corporate credit and senior unsecured ratings to ‘BBB’ with a stable outlook, and Kroll Bond Ratings reconfirmed their credit rating of ‘A-’ with a stable outlook in December 2016. In January 2017, Fitch Ratings, Inc. assigned an investment grade rating of ‘BBB’ to their senior unsecured debt and long-term issuer default rating with a stable outlook. This investment grade credit ratings helps them lower their cost of funds and broadens theyr access to attractively priced capital. 

Net income for the year ended December 31, 2016 was $374.9 million compared to $253.4 million for the year ended December 31, 2015, an increase of $121.5 million or 48.0%. Diluted earnings per share for the year ended December 31, 2016 was $3.44 compared to $2.34 for the year ended December 31, 2015. Pre-tax profit margin for the year ended December 31, 2016 was 40.9% compared to 32.1% for the year ended December 31, 2015. 

Excluding the effects of certain non-cash items, one-time or non-recurring items, such as settlement expense, net of recoveries, that are not expected to continue in the future and certain other items, the company's adjusted net income before income taxes was $622.9 million for the year ended December 31, 2016 compared to $508.0 million for the year ended December 31, 2015, an increase of $114.9 million or 22.6%. Adjusted margin before income taxes for the year ended December 31, 2016 was 44.1% compared to 41.7% for the year ended December 31, 2015. Adjusted diluted earnings per share before income taxes increased to $5.67 for the year ended December 31, 2016, compared to $4.64 for the year ended December 31, 2015.
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​My Path Forward

As air flight expands around the world with the increase in the middle class, Air Lease will expand along with it. I'm actually amazed that this company isn't already in my portfolio. It's similar to REITs which I like and it's similar to rental companies, which I also like. Everything about this business seems to fit in with my investing style. So I don't understand why I don't already own shares. 

But I'm going to fix that situation quickly. I intend to pick up shares as soon as possible as funds become available this week. This company has a one year expected capital gain of over 20% and even it does only half that I'll be very happy. Add in a very small but growing dividend and it becomes even more appealing. Notice the payout ratio of less than 9% for a company that's growing earnings at 47% and you just know they're going to increase that dividend quickly. 

I think at this point a projected stock price one year from now of $47 is very low. This stock could easily hit in the mid $60 range and not break a sweat based on its low P/E ratio and its estimated 5 year earnings growth. That's the kind of expansion in stock price that I'm looking for in all my investments. 

My only regret is that I didn't start buying these shares last year as it pulled back below $30 per share and I'd already be up almost 30%, but that's water under the bridge. Finally, one word of caution. It appears that the shares may hit resistance near $40 but that should be short lived. It will, however, provide an opportunity to get in below that resistance for a few day before it pushes through it. Once that happens it should be free sailing through the 40s and higher. 

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0 Comments

Ultra Clean Holdings

4/5/2017

0 Comments

 
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​Ultra Clean Holdings, Inc. designs, develops, prototypes, engineers, manufactures, and tests production tools, modules, and subsystems for the semiconductor capital equipment and equipment industry segments primarily in North America, Asia, and Europe. It offers precision robotic systems that are used when accurate controlled motion is required; gas delivery systems, which include one or more gas lines consisting of small diameter internally polished stainless steel tubing products, filters, mass flow controllers, regulators, pressure transducers and valves, component heaters, and an integrated electronic and/or pneumatic control system; and various industrial and automation production equipment products. The company also provides subsystems, such as wafer cleaning sub-systems; chemical delivery modules that deliver gases and reactive chemicals in a liquid or gaseous form from a centralized subsystem to the reaction chamber; frame assemblies, which are support structures fabricated from steel tubing or folded sheet metal; and top-plate assemblies. In addition, it offers liquid delivery systems; process modules, which are the subsystems of semiconductor manufacturing tools that process integrated circuits onto wafers; and other high level assemblies. The company primarily serves original equipment manufacturing customers in the semiconductor capital equipment, consumer, medical, energy, industrial, flat panel, and research industries. Ultra Clean Holding, Inc. was founded in 1991 and is headquartered in Hayward, California.
(Summary) (Company) (Chart)
4 April 2017
Price $16.56
1yr Target $16.75
Analysts 4
Dividend $0.00
Payout Ratio ---

1yr Cap Gain 1.14%
Yield 0.00%
1yr Tot Return 1.14%

P/E 56.33
PEG 2.82
Beta 1.28
EPS (ttm) $0.29
EPS next yr $1.33
Forward P/E 12.42
EPS next 5yr 20.00%
1yr Price Support $26.60

Market Cap $542.17 Mil
Revenues $562.80 Bil
Earnings $10.10 Mil
Profit Margin 1.79%

Quick Ratio 1.30
Current Ratio 1.30
Debt/Equity 0.31
1yr RevGR 19.96%
3yr RevGR 8.13%
5yr RevGR 4.45%

1yr EarnGR ---
3yr EarnGR -5.84%
5yr EarnGR -21.56%

1yr DivGR ---
3yr DivGR ---
5yr DivGR ---

ROA 2.80%
ROE 4.90%
Operations

Ultra Clean Holdings, Inc. was founded in November 2002 to acquire Ultra Clean Technology Systems and Services, Inc. a US-based company founded in 1991 by Mitsubishi Corporation and operated as a subsidiary of Mitsubishi, and became a publicly traded company in March 2004. In 2006, the company acquired Sieger Engineering, Inc. to better position themselves as a subsystem supplier to the semiconductor, research, flat panel, energy and medical equipment industries.

To facilitate Asia operations, Ultra Clean Technology (Shanghai) and Ultra Clean Micro-Electronics Equipment (Shanghai) were established in China in 2005 and 2007, respectively, and Ultra Clean Asia Pacific was established in Singapore in 2008. The July 2012 American Integration Technologies LLC acquisition added to the company's existing customer base in the semiconductor and medical spaces and provided additional manufacturing capabilities. In 2014, the company launched Prototype Asia, their 3D printing business in Singapore, to develop additive manufacturing capabilities for their customer base.

In February 2015, the company acquired Marchi Thermal Systems, Inc. and in July 2015, acquired MICONEX, both privately held companies with a majority of their sales in the semiconductor market. Marchi designs and manufactures specialty heaters, thermocouples and temperature controllers, delivering flexible heating elements and thermal solutions to our customers. The company believes heaters are increasingly critical in equipment design for the most advanced semiconductor nodes. Miconex is a provider of advanced precision fabrication of plastics that has expanded the company's capabilities with existing customers. 

Ultra Clean Holdings is also a global leader in the design, engineering, and manufacture of production tools, modules and subsystems for the semiconductor capital equipment and equipment industry segments with similar requirements including flat panel display, consumer, and medical. The company provides their customers specialized engineering and manufacturing solutions for highly complex, highly configurable, limited volume applications. 

Solutions
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Ultra Clean Holdings's focus is on providing specialized engineering and manufacturing solutions for highly complex, highly configurable, limited volume systems. The company enables ther customers to realize lower manufacturing costs and reduced design-to-delivery cycle times while maintaining high quality standards. The company offers their customers:
  • Vertically integrated solution for complex and highly configurable systems. The company provides original equipment manufacturing customers a complete outsourced solution for the development, design, component sourcing, prototyping, engineering, turnkey manufacturing and testing of advanced systems. The company utilizes theyr machining, sheet metal, and frame fabrication capabilities with highly specialized engineering, global supply chain management, and assembly capabilities to produce high performance products that are customized to meet the needs of our customers, as well as their respective end users. The company minimizes the overall number of suppliers and manages their global supply chain logistics to reduce inventory levels that customers would otherwise be required to manage.
  • Improved design-to-delivery cycle times. The company's strong relationships with their customers and familiarity with their product requirements and the ever changing needs of their customer base help them reduce their design-to-delivery cycle times. Ultra Clean has optimized their supply chain management, design and manufacturing coordination and controls to respond rapidly to order requests, enabling us to decrease design-to-delivery cycle times for our customers. Because the engineers work closely with customers’ engineers and understand the fabrication, assembly and testing of their products, Ultra Clean often improves their design for manufacturability, thereby improving their cost, quality and consistency.
  • Component neutral design and manufacturing. Ultra Clean does not manufacture components such as mass flow controllers and valves which are selected based on manufacturer published specifications. The company's component neutral position enables them to recommend components on the basis of technology, performance and cost and to optimize customers’ overall designs based on these criteria. 
  • Component testing capabilities. Ultra Clean utilizes their technical expertise to test and characterize key components and subsystems. The company has made significant investments in advanced analytical and automated test equipment, enabling them to test and qualify key components. The company performs diagnostic tests, design verifications and failure analyses for customers and suppliers. The analytical and testing capabilities of supplier components provide the company the ability to recommend their customers a wide range of appropriate component and design choices for their products.
  • Increased integration with OEMs through local presence. The company's local presence in close proximity to the facilities of most of their OEM customers enables the company to remain closely integrated with their design, development and implementation teams. This level of integration enables Ultra Clean to respond quickly and efficiently to customer changes and requests.
  • Precision machining capabilities. Ultra Clean manufactures high quality, precision machined parts using equipment capable of efficiently providing complex parts with exacting tolerances. Their diverse precision fabrication equipment enables them to manufacture a broad range of machined parts using a wide range of materials, from exotic metals to high purity plastics. The company's manufacturing capabilities include horizontal and vertical milling, turning, welding and joining, amongst numerous others.   
  • Precision frame fabrication. The company designs and manufacture frames using tubing or sheet metal in all sizes with exacting standards to meet and exceed their customers’ needs. Ultra Clean utilizes over 25 years of experience in the fabrication of complex frames to provide a cost competitive edge in their vertical integration model. Many of their customers require frames that are powder coated and in 2016, the company added this capability to their Chandler, Arizona frame fabrication facility.
  • Precision sheet metal fabrication. Ultra Clean's ability to provide complete sheet metal solutions for our customers enables us to support prototype to volume production, from brackets to sheet metal frames, and from structural to high quality cosmetic finishing of the final product. Their automated equipment and design capabilities allow them to develop accurate prototype and final production products for their customers.
  • Custom fabricated heaters. The company's acquisition of Marchi enables them to design and manufacture heaters, sensors, and controllers for precise temperature control. These products are complementary to our gas delivery systems products. 

Strategy 
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Ultra Clean's objective is to maintain their position as a leading solutions provider in the markets they serve, primarily the semiconductor capital equipment market, while supporting other technologically similar markets in the flat panel, consumer, medical, energy, industrial and research industries. Their strategy is comprised of the following key elements:
  • Expand market share with semiconductor capital equipment OEMs. Ultra Clean believes that outsourcing among OEMs creates a significant market opportunity for the company to grow Their business with existing and new customers. The company believes their customers will continue to outsource critical subsystems and that they are well positioned to capture a significant portion of these outsourcing opportunities.
  • Develop solutions that allow our customer’s customers to succeed at the latest 2x or 1x nanometer semiconductor processing nodes. The company is expanding the number and type of subsystems that they offer in this advanced semiconductor market.
  • Leverage our geographic presence in lower cost manufacturing regions. The company's manufacturing facilities in Shanghai, China allow them to produce in a low cost region. The company's manufacturing facilities in Shanghai house the precision machined parts and subsystem assembly operations. In Singapore the company has a procurement office and substantial manufacturing capabilities. 
  • Drive profitable growth with our flexible cost structure. The company implements cost containment and capacity enhancement initiatives throughout the semiconductor capital equipment demand cycle and benefit greatly from the global presence and efficiencies of our supply chain. In addition, they believe their Shanghai and Singapore facilities position them to respond effectively to future business demands.
  • Continue to selectively pursue strategic acquisitions. The company will continue to consider strategic acquisitions that will enable them to expand their geographic presence, secure new customers and diversify into complementary products and markets as well as broaden technological capabilities in the markets they serve.
  • Develop unique solutions to enhance our customers’ manufacturing. With the acquisition of Marchi, the company is able to provide additional thermal products, leveraging the company's core capability in heaters, thermocouples and controllers. With the acquisition of Miconex, they further expanded our capabilities to include manufacturing services in advanced precision milling and welding of plastics. 
  • Expand our market share in other industries. The company believes they can leverage the attributes and skill sets to succeed in the semiconductor capital equipment industry and to increase our market share in technologically similar markets including medical, flat panel and research equipment. 

Products

Ultra Clean designs, develops, prototypes, manufactures and tests subsystems, primarily for semiconductor capital equipment. They also support customers in the flat panel, consumer, medical, energy, industrial, and research industries. Their products include precision robotic solutions, gas delivery systems, a variety of industrial and automation production equipment products; subsystems that includes wafer cleaning sub-systems, chemical delivery modules, top-plate assemblies, frame assemblies, and process modules.
  • Chemical delivery modules: Chemical delivery modules deliver gases and reactive chemicals in a liquid or gaseous form from a centralized subsystem to the reaction chamber. The module may be a gas delivery system in combination with liquid and vapor precursor delivery systems or may be a liquid delivery system in combination with a liquid storage system.
  • Frame assemblies: Frame assemblies are support structures fabricated from steel tubing or folded sheet metal and form the backbone to which all other assemblies are attached. The complexity of the frames includes powder coating, pneumatic harnesses and cables that connect other critical subsystems together.
  • Gas delivery systems: A typical OEM gas delivery system consists of one or more gas lines, comprised of small diameter internally polished stainless steel tubing, filters, mass flow controllers, regulators, pressure transducers and valves, component heaters, and an integrated electronic and/or pneumatic control system. These systems are mounted on a pallet and are typically enclosed in a sheet metal encasing. Our gas delivery system designs are developed in collaboration with our customers and are customized to meet the needs of specific processing requirements for OEMs. Our customers either specify the particular brands of components they want incorporated into a particular system or rely on our design expertise and component characterization capabilities to help them select the appropriate components for their particular system.
  • Liquid delivery system: A typical OEM liquid delivery system consists of one or more chemical delivery units, comprised of small diameter high purity PFA tubing, filters, flow controllers, regulators, component heaters, and an integrated electronic and/or pneumatic control system. These units are typically contained in a plastic enclosure and further integrated into a frame. Our liquid delivery system designs are developed in collaboration with our customers and are customized to meet the needs of specific processing requirement for OEMs. Our customers either specify the particular materials and the brands of components they want incorporated into a particular system or rely on our design expertise and component characterization capabilities to help them select the appropriate components for their particular system.
  • Precision robotics: Precision robotic systems are used when accurate controlled motion is required. Some of the systems that employ robotic systems are: semiconductor wafer and chip handling, wire bonding and industrial equipment.
  • Process modules: Process modules refer to the larger subsystems of semiconductor manufacturing tools that process integrated circuits onto wafers. Process modules include several smaller subsystems such as the frame assembly, top-plate assembly and gas and chemical delivery modules, as well as the chamber and electronic, pneumatic and mechanical subsystems.
  • Other high level assemblies: Other high level assemblies refer to large subsystems used in semiconductor manufacturing, medical, energy, industrial, flat panel and research industries. 

My Strategy

​This is truly an investment in inertia. This stock has been moving higher since the beginning of 2016 where it bottomed after hitting a high of $15 per share in early 2014. As the stock recently broke through resistance at $15 and moved higher, that was the signal for me to begin buying. There's no doubt at this point that the stock is showing every sign of being overbought but there's no sign that the stock wants to go anywhere but higher. 

What I've done is initiate a "Buy, Write" strategy while monitoring the position with a constant eye. I believe this company will continue to head higher and I will continue to sell covered calls with the intent of losing the shares at a nice profit. I can normally get a 3-4% return on the options over a 4 week period along with the possibility of loosing the shares during any option period at an 8-10% profit.

I see this as nothing more than a short term income producer while at anytime selling out at a nice profit. This obviously does not fit into any of my dividend growth strategies but it is a nice trade for a nimble trader. All others might want to look elsewhere.
 
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0 Comments

La Z Boy

4/4/2017

0 Comments

 
The recent pullback in the shares of La-Z-Boy may have opened up an opportunity for me to start a position in this great furniture company. Most investors are familiar with their products because they probably have at least one of the La-Z-Boy upholstered recliners, sofas, stationary chairs, lift chairs or sleeper sofas in their home or office. The only thing to discover now is whether the fundamentals and technicals line up with the investment strategy that I implement. 
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La-Z-Boy Incorporated manufactures, markets, imports, exports, distributes, and retails upholstery furniture products, accessories, and casegoods furniture products in the United States, Canada, and internationally. The company also produces reclining chairs; and manufactures and distributes residential furniture in the United States. It operates through Upholstery, Casegoods, and Retail segments. The Upholstery segment manufactures or imports upholstered furniture, such as recliners and motion furniture, sofas, loveseats, chairs, sectionals, modulars, ottomans, and sleeper sofas. This segment sells its products directly to La-Z-Boy Furniture Galleries stores, operators of Comfort Studios and England custom comfort center locations, dealers, and other independent retailers. The Casegoods segment manufactures, imports, markets, and distributes casegoods furniture, including bedroom sets, dining room sets, entertainment centers and occasional pieces, and upholstered furniture. This segment sells its products to dealers, La-Z-Boy Furniture Galleries stores, and other independent retailers under the American Drew, Hammary, and Kincaid brand names. The Retail segment sells upholstered furniture, casegoods, and other accessories to the end consumer through its retail network. La-Z-Boy Incorporated sells its products through a network of 338 La-Z-Boy Furniture Galleries stores and 559 Comfort Studio locations, as well as in-store programs for its Kincaid and England operating units. The company was formerly known as La-Z-Boy Chair Company and changed its name to La-Z-Boy Incorporated in 1996. La-Z-Boy Incorporated was founded in 1927 and is based in Monroe, Michigan.
(Summary) (Company) (Chart)
2 April 2017
Price $27.00
1yr Target $34.00
Analysts 3
Dividend $0.44
Payout Ratio 27.32%

1yr Cap Gain 25.92%
Yield 1.62%
1yr Tot Return 27.54%

P/E 16.74
PEG 0.96
Beta 0.67
EPS (ttm) $1.61
EPS next yr $1.83
Forward P/E 14.75
EPS next 5yr 17.50%
1yr Price Support $32.02

Market Cap $1.32 Bil
Revenues $1.52 Bil
Earnings $80.20 Mil
Profit Margin 5.26%

Quick Ratio 1.60
Current Ratio 2.60
Debt/Equity 0.00
1yr RevGR 7.01%
3yr RevGR 6.14%
5yr RevGR 5.13%

1yr EarnGR 15.67%
3yr EarnGR 21.92%
5yr EarnGR 28.06%

1yr DivGR 26.66%
3yr DivGR 46.28%
5yr DivGR ---

ROA 9.80%
ROE 14.40%
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La-Z-Boy Weekly Chart
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La-Z-Boy Dividend History
Operations

La-Z-Boy manufactures, markets, imports, exports, and distributes retail upholstery furniture products worldwide. In addition, the company imports and distributes retail accessories and casegoods (wood) furniture products. The company is the leading global producer of reclining chairs and the second largest manufacturer/distributor of residential furniture in the United States. The La-Z-Boy Furniture Galleries stores retail network is the third largest retailer of single-branded furniture in the United States. La-Z-Boy has seven major North American manufacturing locations and six regional retail distribution centers in the US to support their speed-to- market and customization strategy.

La-Z-Boy sells their products primarily in the US and Canada but also internationally, to furniture retailers and directly to consumers through stores that the company owns and operates. The centerpiece of their retail distribution strategy is their network of 338 La-Z-Boy Furniture Galleries stores and 559 Comfort Studio locations, each dedicated to marketing the La-Z-Boy branded products. The company considers this dedicated space to be "branded outlets" or "proprietary."

In addition to the almost 900 branded outlets dedicated to selling La-Z-Boy product, approximately 1,900 other dealers also sell La-Z-Boy, including some of the best known names in the industry, such as Art Van, Nebraska Furniture Mart, Slumberland and Raymour & Flanigan Furniture. The company owns 124 of the La-Z-Boy Furniture Galleries stores with the remainder of the La-Z-Boy Furniture Galleries stores, as well as all 559 Comfort Studio locations, are independently owned and operated.

La-Z-Boy Furniture Galleries stores help consumers furnish their homes by combining the style, comfort and quality of La-Z-Boy furniture with our available In-Home Design service. La-Z-Boy Comfort Studio locations are defined spaces within larger independent retailers that are dedicated to displaying and selling La-Z-Boy branded products. The company's other brands—England, Kincaid, American Drew, and Hammary—enjoy distribution through a combined 1,500 dealers. Kincaid and England have their own dedicated proprietary in-store programs with 500 outlets and over 1.5 million square feet of proprietary floor space.

Principal Products and Industry Segments

Reportable operating segments are the Upholstery segment, the Casegoods segment and the Retail segment.

Upholstery Segment. The Upholstery segment is the company's largest business and consists primarily of two operating units: La-Z-Boy, the largest operating unit, and their England subsidiary. The Upholstery segment manufactures and imports upholstered furniture such as recliners and motion furniture, sofas, loveseats, chairs, sectionals, modulars, ottomans and sleeper sofas. The Upholstery segment sells directly to La-Z-Boy Furniture Galleries stores, operators of Comfort Studio locations and England Custom Comfort Center locations, major dealers and a wide cross-section of other independent retailers.

Casegoods Segment. The company's Casegoods segment is an importer, marketer and distributor of casegoods (wood) furniture such as bedroom sets, dining room sets, entertainment centers and occasional pieces, and also manufactures some coordinated upholstered furniture. The Casegoods segment consists of three brands: American Drew, Hammary, and Kincaid. The Casegoods segment sells directly to major dealers, as well as La-Z-Boy Furniture Galleries® stores, and a wide cross-section of other independent retailers.

Retail Segment. The company's Retail segment consists of 124 company-owned La-Z-Boy Furniture Galleries stores. The Retail segment primarily sells upholstered furniture, in addition to some casegoods and other accessories, to the end consumer through our retail network. 

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​My Path Forward

​La-Z-Boy has been around for 90 years and has been a very successful company but it went through a difficult time financially during the last recession and had to stop paying its dividend. If I had been a shareholder in 2008-2009 when this occurred I would have been quick to sell the shares and moved on. And that would have been the end of it. 

Today it's a different story. The company survived the recession and in 2012 re-established its dividend. Since then the dividend has consistently increased and the stock has recovered nicely. With the recent pullback from around $32 per share in December 2016 to $27 per share today has created an opportunity to pick up these shares at a reasonable price and at a reasonable P/E ratio. In fact the P/E ratio today is about equal to the forward estimated earnings growth rate so I would expect the shares to grow in the future at nearly 17.50%. 

I also like companies with little debt and a low payout ratio. This company has both. Therefore this company is an excellent candidate for accumulation. I intend to start a position in this company in the next week or so as long as the price stays near $27 per share. I'll continue to buy shares of this company as long as it stays below $30 per share and institute a dividend reinvestment strategy. In addition I'll sell covered calls to receive additional income which I can use to buy additional shares. 

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0 Comments

Weekend Review Charts

4/1/2017

0 Comments

 
Stock charts of companies that are technically strong can often be a fertile place to look for potential stock purchases for Aggressive Growth Investors. But one of the reasons they're technically strong is because they've already moved higher for an extended period of time, which makes them vulnerable to a pullback in price. So investors in these types of securities need to be a little more nimble than buy and hold Dividend Growth Investors. 

But for those that are willing to spend the time and energy to closely monitor their investments, technically strong stocks can be very rewarding. Below I've provided daily charts for 21 companies that may be of interest to Aggressive Growth Investors. 

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Advance Micro Devices
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Micron Technology
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NRG Energy
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Nvidia
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United Rentals International
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CSX Corp
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Incyte Corp
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Western Digital Corp
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IDEXX Laboratories
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Tellurian Inc
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Corrections Corp of America
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Arista Networks
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Applied Optoelectronics
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Cara Therapeutics
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Experian Therapeutics
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Chemours Company
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Money Gram International
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Tetraphase Therapeutics
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ViewRay Inc
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Immunomedics Inc
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National Beverage Corp
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    Author

    I am an Individual Investor with specific interest in long term growth and then enhancing my returns with income from dividends and derivatives. I don't recommend stocks to anyone (it's a good way to lose friends) and no one reading this should misinterpret my blog as a recommendation for any type of investment. I am writing this solely for myself and my kids.

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     I am not a licensed investment adviser, and I am not providing investment advise for you on this site. Please consult with an investment professional before you invest your money. Any opinion expressed here should not be treated as investment advice. I am not liable for any losses suffered by any party because of data or information published on this blog. Past performance is not a guarantee of future performance. Unless your investments are FDIC insured, they may decline in value.
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