GMalloy Likes
Gencor
by
GMalloy
GMalloy is a long-time participant at the Fool and
a money manager for a Wall Street firm. GMalloy openly admits having clients
with positions in this stock and advises everyone who reads this to do their
own research before investing in anything.
As a stock investor for over 18 years, and a portfolio manager for a Wall
Street firm, I am happy to see some formal recognition of the CANSLIM
methodology, since it is part of the roots of how I put together real portfolios
in real life for real people.
The company I am discussing today is the largest member of my current portfolio,
and as might be guessed, the one I am the most optimistic about. The company
is called GENCOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: GX)") else Response.Write("(AMEX: GX)") end if %>. Current price is about $11 13/16. Gencor
is a company with two business directions: their oldest business, which involves
putting asphalt on roadways, and, their more recent purchase of a company
that will allow them to compete in the food manufacturing business. The food
would be mostly bulk produced and fed to animals, bu there are also potentially
wider applications. The company has very little competition in this business.
As an active member in the CANSLIM folder, I will give the numbers as we
do there:
C = Current quarterly earnings are up
50%.
A = 5 year annualized growth in earnings equals
48%.
N = Gencor is within 8% of its all time high. New products
as described.
S = Shares outstanding are a mere 2.4 million. This is a fantastic
small company. Insiders own nearly 25% of stock as
well.
L = A definite market leader. Relative Strength=97, EPS rank
=95.
I = Institutions own 3% of the stock. Plenty of room for
more!
M = I have the market pegged at bull confirmed. The
group is also bull confirmed.
The company trades at a mere 12 times earnings. While the debt level is
relatively high, in a low interest rate environment, it could be a short
run positive. Return on equity is a staggering 34%. I could envision the
stock moving up as much as 100% or more from current levels. At that level,
the company still trades at less than its 5-year growth rate. The company
has a stated goal of hitting 500 million in sales in approximately three
years, nearly five times current levels.
This stock should work out quite well as long as earnings continue to move
up in the positive fashion that we have enjoyed to date. As is true with
most stocks, the fly in the ointment would probably be disappointing earnings.
The other negative factor could be a bad market in general. An earnings increase
in the next quarter of less than 20-30% would probably lead me to sell some
portion of what I own. A drop in price below $10 would also cause me to sell
most if not all because the last "breakout" occurred at about $10 1/2.
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