“Million Dollar Machines: Cell Towers and Border Patrol”

By Travis Johnson, Stock Gumshoe, December 16, 2007

Another one that’s partially from the archives: Navellier has been sending out a teaser mentioning seven “Million Dollar Machines” that he thinks are great investments right now. This whole “Million Dollar Machine” concept was one he trotted out over the Summer, too and apparently it was pretty successful (why else would we be seeing it again?).

But anyway, this group of seven stocks is a mix of some old and some new. These two from the list were ones that I wrote about in July, and I’m copying some of the information below straight from that writeup. The other ones I’m going to have to spend a few minutes on, sort out the new from the old and see what he’s offering us today.

Navellier’s concept was that these companies would help you put a million bucks in your portfolio. The example he gives to back this up is Hansen Natural, one of the top performing stocks of the past decade — if you had invested $100,000 when Navellier’s system recommended it, apparently, you’d have a million dollars today.

Of course, unless you’ve already got a million dollars, investing $100,000 in a single highly speculative growth stock is pretty crazy. And if you had spread the $100,000 among ten or twenty of his picks, which is even less diversification than he typically recommends in his newsletters, you’d have much, much less. Still a lot, probably, since his newsletters have generally been good performers, but certainly nowhere near a million dollars.

But anyway, we’ll take his premise that you are “One Stock Away from Financial Freedom” … and one of these seven could be that stock.

These are supposed to be fast growing, undiscovered companies, and the tease is for the Emerging Growth service by Navellier, which has so far helped us find a real mix of stinkers and winners in the short term.

Million Dollar Machine #4: “Border Patrol”

“Some of the biggest investment winners you will ever experience will break out because the Department of Defense says so.”

OK, so we’re dealing with some kind of defense company here. The sparse clues are that the firm makes infrared cameras and night vision equipment for the military and border patrol …

… and that this company is “much smaller [and] nimbler” than previous Navellier pick Precision Castparts, another defense (and aerospace) pick. (He also name drops Ceradyne to establish his defense cred).

Earnings should double, the stock price has climbed 45% this year to date, and, final clue, the company is located in Oregon.

So, did that last clue get you? That’s right, this company is …

FLIR systems (FLIR)

It’s a $3 billion company, so not tiny but certainly a lot smaller than Precision. It’s definitely in the night vision/thermal imaging business. This one is up 20% or so since Navellier teased it in the Summer, but it’s also about 20% off it’s highs from this fall. I’ve heard this one bandied about before, but don’t know much else about their financials. The company is headed for earnings this year of around $.90 a share, so at a share price just under $30 (it split quite recently) we’re clearly counting on some resounding growth to continue here.

I don’t know how they stack up against their competitors, but would be happy to hear what other folks think about this one.

Million Dollar Machine #5: “Tower of Power”

No, this isn’t our favorite soul band (which is, by the way, still going strong 30 years later) — this is something to do with cell phone towers and antennas for WiFi, WiMax, 3G, all that jazz.

So … the clues again are sparse:

“Better cell phone towers and antennas”

Up 80% since October.

Has “snapped up a top competitor”

And the companies has raised guidance and then beat the numbers, including an 8% pop for the stock after the last earnings report.

Might actually need the Thinkolator 4000 for this one, so let’s crank it up a little here … ah, I thought as much, I expect that this company is …

CommScope (CTV)

They did recently agree to buy up a big competitor (Andrew) in the telecom equipment space — which is really what they’re in, they do cables and other stuff like that in addition to the cellular tower and antenna products.

It is (or was) up about 80% from last October when it hit its highs in the Summer.

And the earnings did pop significantly after the last earnings release — the shares closed actually 7.5% higher, but I suppose a rounding up is OK.

They have raised guidance a couple times this year, including last week, which is usually a good sign, and news is good on their buyout of Andrew Corp (the Department of Justice “conditionally” approved it a couple weeks back, spiking the shares up, and Andrew shareholders approved it last week).

Does that make then a great buy? I dunno. They’re growing pretty nicely, they’re going to gain some more market with the merger, and the shares are down 25% since their highs in July despite the fact that they raised guidance a couple times. The shares spiked up 10% or so when the preliminary antitrust approval came through for the merger, so clearly investors like the deal.

Looking just at a snapshot, they trade at about an average market multiple (mid-teens PE), they’ve got about $5 a share in net cash and little debt, and the analysts are telling us that the Price/Earnings/Growth ratio (PEG) is just a bit under 1 — which is generally value territory. So there might be an argument to be made for this one as a “value” stock, which is certainly something you’re not going to hear out of Navellier’s mouth (he’s all about “growth” stocks).

Often when a stock looks undervalued like this, and is growing fast, there’s a hidden story of competition or worry about some future event (maybe the merger integration) or fear that we’re at the peak of the cycle for their business (and you don’t want to base your stock valuation on peak earnings) … I don’t know if that’s the case for these guys. And sometimes situations like this provide great opportunities — like the oil stocks in 2004, which had somewhat similar valuations.

So, clearly my knowledge of this company’s industry and future is somewhat limited … what do you think?

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5 Comments on "“Million Dollar Machines: Cell Towers and Border Patrol”"

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Anonymous
August 12, 2007 5:36 am

both are right, he actually did rec ctv initially in oct. 06

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Anonymous
December 17, 2007 11:24 pm

I added CTV to my portfolio for the reasons you’ve cited, as well as the recent strong guidance given by AT&T, which forecast increased spending on CTV equipment. Also, CTV has been added to Lehman Bros. short list of global stocks, a list I’ve benefited by quite a bit in the past.

womanwithportfolio

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Anonymous
December 18, 2007 1:31 am

It was noted that CTV was added to Lehman Bros. short list of global stocks,,,,The charts suggest that list should be for stocks to be shorted! If we had all shorted LEH at the beginning of the year when it was 85, we would now have a trade that would be up 24 points on the year……not bad!

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Anonymous
December 18, 2007 3:35 am

So how is the above comment supposed to enlighten investors on whether or not to invest in CTV?

womanwithportfolio

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Anonymous
December 18, 2007 4:48 pm

Investors are typically up thinkers only. Learning to think the downside, as repugnant as this sounds may make more money. Look at your portfolio and see where you would have been had you sold short on a shorter term basis.

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