Louis Navellier is making another short-term prediction of outsize gains for a small, low-priced company — and these predictions do work some of the time, and drive the prices up on the day the ads start rolling most of the time, so I thought I’d rush this out to you before the market opens … just in case you’re one of those wild cowboys who likes to trade around these recommendations. Not that I’m suggesting you do this, of course — the stock has doubled since its lows in October, and it may well collapse tomorrow.
The promise? Well, first Louis wants you to take his Quantum Growth newsletter out for a spin, but if you do he’ll tell you all about this stock …
“You Have 72 Hours to Snap Up This $5 Car Stock Before Earnings Drive It Up to $15!”
The last few times Louis made this kind of promise, about a short-term spike in a stock, results were mixed — Fuel Systems Solutions spiked on the Navellier ads, then fell back when attention waned, and later recovered a bit before steadying itself and outperforming much of the market this fall (meaning it didn’t fall as badly); Gran Tierra Energy, touted earlier last Summer with similar promises of short term gains, also reacted very strongly to Navellier’s attention but fell off badly with declining oil prices and has never recovered.
So will this stock appreciate Navellier’s attention? Let’s see …
The stock is, as Navellier delights in telling us, a car company (sort of).
He tells us that “You stand to make between 48% and 133% in the 7 days surrounding this tiny, tiny auto company’s earnings announcement.”
And he gives some historical info:
“During the equivalent earnings season in 2007, it beat estimates by 3 cents—and jumped 48% in 5 trading days.
“And during last earnings season, when it came in with 45 cents to the expected 20, it soared 133%—IN TEN DAYS!
“….the surprise it’s about to lay on Wall Street, where analysts project a lowball 14 cents in earnings, the surprise is a stunner.
Louis goes on to provide a few other clues about this company:
“… This company basically has one customer: The military.
“And the military, in case you missed it, is moving back into Afghanistan, big-time.
“Stabilizing the country and crushing the Taliban (again) is one of Barack Obama’s top priorities. Up to 60,000 U.S. and NATO troops are likely to be deployed in Afghanistan this spring.
“Armored vehicles—$7 billion-worth of them—are on order, and our tiny automaker will demonstrate the benefit of these contracts at their upcoming earnings announcement in a few days. We’re looking at an order backlog of 12 months here, even with 3 shifts and expanded factories.”
So what are we looking at here?
A few moments in the Thinkolator, and I can tell you that this is …
Spartan Motors (SPAR)
This is sort of a car company — in reality, it’s a chassis maker for some specialized heavy duty truck sectors, and, to a lesser degree, a maker of custom emergency vehicles.
What Navellier’s talking about with the military is what they call their specialty chassis business, the core of the company — a few years ago, this unit was primarily focused on designing and building custom chassis for fire trucks and class A motorhomes (the huge ones). That’s still a significant part of the business, but by far the fastest growing part of the business is in building custom chassis for a variety of Mine Resistant Ambush Protected vehicles — known as MRAPs, these are the heavy duty military trucks that have been rapidly designed and built for the Iraq war, from companies like BAE Systems and Force Protection.
Analysts are indeed a bit pessimistic about the company, at least if you compare next year and 2010 to the curren year. There are indeed three analysts, and they are predicting 14 cents in earnings (I assume this takes into account the big legal settlement which will hit about 17 cents against earnings in the fourth quarter, according to this press release).
So … I wanted to get this out to you, since it’s a tiny company and the shares may well be buffetted by Navellier’s advertising, but that means I haven’t spent a lot of time digging into the books. It looks, on the surface, that they might be “lucky” and see the MRAP business indeed help with what’s likely to be some down years for motorhomes, and perhaps for fire trucks if municipalities continue to suffer. Since the last quarter or two have been the first ones when big military orders hit their books, it probably shouldn’t be that surprising that the analysts had a hard time hitting the mark — SPAR did indeed surprise hugely to the upside last quarter, as Navellier tells us, by reporting 45 cents in earnings versus a 20 cent estimate. Of course, the prior quarter they missed by a few cents, and analysts right now think that earnings will drop from $1.36 in 2008 to less than 50 cents for all of 2009.
Is that reasonable? Beats me. If you’ve got a few minutes to take a gander at SPAR’s numbers, let us know what you think — the next earnings release is likely to be a ways off, last year the annual report was released on Valentine’s Day, so it may move today if Louis is hitting a lot of folks with this email, but you’ve probably got time to think if you’re worried about fundamentals and the next earnings report.
Enjoy your day, everyone, and happy investing!