Fly on WallStreet

My nom de plume, BOOMER, has nothing to do with my age. It has everything to do with the good fortune I have had investing in Dynamic Materials Corporation (Ticker Symbol: BOOM).

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.

Recent news:

• 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%

This company’s management team is very capable, but conservative as they come. They play it close to the vest. I believe the 30% top-line number is conservative. Consider:

• 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.
  

Bottom line: If BOOM is not acquired in the next few months (another story altogether) the company will blow out 3Q earnings. I forecast BOOM’s top line growth to exceed 40% this year. Price target $68.

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.