Friday, August 31, 2007
BOOM: Explosive Gains
I have been long BOOM since early 2005. I have held a core position of 25k shares and trade around the core. The stock is given to radical swings, and it sometimes causes me fits of rage… and diarrhea. I have held up to ~50k shares at any one time, in order to exploit some of these radical swings.
As an aside…speaking of “information asymmetry,” I first learned of BOOM during a lunch appointment in Boulder, CO, the town in which I grew up. BOOM is based in Boulder. I’ll spare you the details, but suffice it to say that staying connected within your community is a great way to exploit little-known opportunities. This pick did not come from my aforementioned screening process.
- On July 26, BOOM reported 2Q results
- Net income of $5.7 million, or $0.46 per share, on revenues of $34.5 million.
- Revenues were up 24% and net income was up 13% YOY
- BOOM beat top and bottom line estimates by 5% and 10%, respectively
- Margins improved, mgmt guided margins higher
- Mgmt guided top-line growth up to 30%
- DEMAND: Backlog jumped to $84.7 million during a period of record revenues – meaning bookings have accelerated. Demand for their goods is exceptional. The company even revealed that they are now penetrating “alternative energy” spaces.
- CAPACITY: BOOM now has the power to unlock the backlog at a faster rate than ever while simultaneously meeting accelerating new bookings due to a doubling of capacity in its main plant in Mt. Braddock, PA. This was a costly and lengthy capital expansion (funded without debt, might I add). The company also modernized its European facility.
- SUPPLY CHAIN: A major bottleneck has been tight supply of raw materials. The company has indicated that the supply chain kinks have been smoothed.
- NEW PRODUCTS: Ramp up of a specialty welding division, servicing GE and Boeing among others.
- COMPETITION: None to speak of.
- SHORT SQUEEZE: 12M shares in the float, almost 100% institutional ownership, 2.3MM shares short. Some one is gonna get hurt.
Here’s a clip from Nashville-based rock group The Features; they too “Blow it out.”
UPDATE: Please visit Btuff's blog for in-depth discussion on BOOM.
I think I'll buy me some BOOM. Hopefully, it will do better than that VLCM shit.
supply chain could tighten for reasons outside of the company's control. rendering the expansion useless. backlog falls off as orders are canceled.
the institutional ownership piece is a two-edged sword. ride the wave up during accumulation, but as soon as even one major holder says bye-bye, with such low float, toast.
shorts are desperate to control this. the low available float gives them room to manipulate pps. very volitile intraday, even weekly.
frequently big rally days occur just after a decline to the 50 day. the thing bounces off the 50 day like a superball.
also i have always exited the day of earnings, before the announcement. i missed a huge run last time, but it what worked in the past. this time i am holding.
Or your blog, apparently. Did you shut it down?
Links to this post: