Wednesday, October 18, 2006


Position Updates: ERS

My biggest dog, ERS, has come all the way back and was featured on today.

Here is the excerpt:

Commodity stocks have been making a comeback lately after a late summer swoon. Many well known names have moved up sharply (ATI, RTI, TIE in the titanium sector; NUE, STLD, X in the steel sector etc.). We noticed that aluminum prices have begun to recover, which brought us to look at ERS. The stock has been forgotten, but was once a momentum favorite. ERS is near and dear to our heart as it's one of our best performing profiles ever. In May 2005, we profiled it at $5.20 then a year later it was trading as high as $64. It has since come back to earth, so we thought we'd revisit the name. Empire Resources is a distributor of semi-finished aluminum products to customers in the transportation, automotive, housing, appliance and packaging industries. The co does not typically purchase inventory for stock which lessens the commodity price risk. Instead, it places orders with suppliers based upon orders received from its customers (this sounds like a just-in-time system which allows the co to avoid exposure to swings in aluminum prices as it carries little inventory). Its largest customer is Ryerson (RYI), which accounts for 14% of revs. The co is profitable and Q2 revenue rose 23.4% yr/yr to $110.3 mln. The stock appears to have fallen off the radar and there is no coverage. However, the stock has established a decent base in the $10/11 area over the past few months. Also, as a former momentum name, most traders know of it but probably have not looked at it in a while. If the commodity rally continues, it's worth a look as a secondary play in the space given its small float of 4.6 mln shares and high short interest of 20%. Mkt cap $109 mln, avg vol 540K.

ers is a shitty stock
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