Emcore Corporation (EMKR – Nasdaq)
Dear Bottarelli Research Member,
We sure started off the week with a bang, as we sold a quarter of our Canadian Solar (CSIQ – NASDAQ) position for a 208.58% gain. With $50.00 to $60.00 right around the corner, I expect to see CSIQ shares moving even higher into the summer months (especially with oil prices hitting $135.00 per barrel!). But despite the continued upside forecast for CSIQ, I also want to lock in gains on the remainder of our position at the best possible prices. Therefore, be sure to review my continued tactical guidance for CSIQ in the Updates section below.
On Tuesday and Wednesday, the major market averages sold off quite aggressively. The Dow shed over 460 points in two trading sessions, which is exactly what I alluded to last week when I made note of the items bothering me about the markets. This powerful sell-off supported my feelings, as the ever-increasing prices of oil, gas, and even food are most certainly inflationary. Anyone who thinks otherwise has either lost their minds or lives on another planet.
Over the next several months, we’ll begin seeing the effects of these inflated prices factored into the weekly and monthly governmental statistics, and I sincerely hope that the Federal Reserve remains proactive about fighting these economic obstacles. I’ll continue to carefully monitor this situation, but in the meantime, I’ve uncovered another small-cap investing opportunity that is both powerful and unique.
For this week, we’ll once again jump into the small-cap solar sector — but today’s pick is a little different because they manufacture solar receivers. You see, this company is the leading provider of semiconductor-based components for the broadband, fiber optic, satellite, and terrestrial solar power markets. Over the last year, the amount of solar contracts this gem has secured is incredible — and as I poured over every facet of their business model, I quickly realized that this was a company we must own. Not only is their solar business growing rapidly, but they’ve quietly positioned themselves as a top player in a niche solar sector where nobody else is looking. In fact, I want to briefly hit on the major benchmarks this company has already established so far this year, and you’ll see they’re really gaining some powerful momentum.
- February 2008: Secured a $39 million solar cell receiver order for their SunCube CPV systems.
- April 2008: Secured a $4.6 million order for solar cell receiver assemblies from Concentration Solar in La Mancha, Spain.
- April 2008: Agreed to supply CPV systems to XinAo Group in China — one of China’s largest energy companies well known for their clean-energy technologies.
- May 2008: Secured a $28 million supply agreement with ES System of Gwang-Ju, South Korea.
This monthly timeline gives you a very good idea of just how far their products have penetrated the solar industry (with orders coming from Korea and China). And the best part is the fact that none of these new contracts have truly been factored into their earnings. But nevertheless, this company still reported a 42% year-over-year earnings increase. And if that wasn’t enough, they also have a new assembly line scheduled to begin shipments in June. This will position them as the only vertically-integrated CPV manufacturer to the global photovoltaic industry. When all of this information sunk in, I told Bryan, “We have made some serious money off our small-cap solar plays, but buddy, I think I’ve just found the next big solar winner.”
The truly exciting part of this story is that this company is not even on Wall Street’s radar screen, making it a wonderful addition to our small-cap portfolio. The pick is Emcore Corporation (EMKR – NASDAQ), and with shares currently trading for $7.20, I feel this company could explode to $16.00 within a year.
As more orders come in, another assembly line is added, and their earnings begin to truly reflect their financial position, I firmly believe this little gem could be the next big solar winner in theour portfolio. Let’s buy EMKR at or under $9.00.
UPDATES
Echelon Corporation (ELON – NASDAQ): They reported decent earnings this week, yet the stock remains weak. Based on the growing number of contracts they have coming in, we should see shares ramp up by Q3. I still believe ELON has an awesome product for energy conservation, and as natural gas and electric rates continue moving up, I would think more and more companies will turn to ELON’s technology for help. Let’s give ELON some room, as we’ve seen that patience pays off. Hold.
OceanFreight (OCNF – NASDAQ): This week, OCNF paid out a sweet $0.77 dividend, and boy do we love that! They also reported earnings that were excellent. For the quarter ended March 31st, gross revenues hit $38.4 million, operating income hit $15.6 million, and net income came in at $6.4 million (which amounted to $0.44 per share). But the real music to my ears was the fact that this was the very first quarter that OCNF had their entire fleet of eleven vessels operational. Combine that with a red-hot shipping sector, and the tone is set for small-cap shippers like OCNF to hand early shareholders very strong returns. The bullish thesis remains in tact. Hold.
Canadian Solar (CSIQ – NASDAQ): After taking our huge gains on Monday, I wanted to highlight the gap on the stock chart right under $40.00 per share. Bryan and I religiously study stock charts, and we both know that gaps like this usually get filled, which started to occur on Thursday. So on that note, let’s go ahead and sell the remainder of our position now. After all, we can always re-buy if the gap gets filled. So once gain, congrats on a stellar return, but it’s time to close off this winner for good. Take remaining profits and sell.
Brigham Exploration (BEXP – NASDAQ): Another screamer! BEXP has officially broken out and is running for new highs. Therefore, let’s go ahead and take half of our profits at the 40% level and hold the remainder for more upside. These Bakken plays have a whole lot further to go (including NOG), but we also know the golden rule of taking profits — which is to never let them go. Therefore, lock in a portion of our gains now. Sell half of BEXP. Hold the remainder.
Gran Tierra Energy (GTE – AMEX): The news keeps getting better!As I mentioned in my original alert, GTE is a stock that we should all have as a core holding in our small-cap portfolio. As I write, shares are closing in on a 100% gain in a very short order, so let’s continue our system of locking in profits. Sell a quarter of your position if they hit the 100% level and hold the remainder for more upside. As I pour over the internals of GTE, I still expect to see a move to $10.00 by year’s end. Heck, we could be the proud owners of the future “Exxon Mobile of South America,” so we certainly want to enjoy the upside yet to come. Sell a quarter of your position and hold the remainder.
Skins (SKNN.OB): This is probably the most speculative play in our small-cap ledger, and even though it’s under our original buy price, I want to continue to hold. Their new round of financing (which was done by company insiders) was a very bold move, and this tells me that the commitment to growing this tiny shoe company remains strong. Hold.
China Precision Steel (CPSL – NASDAQ): Blastoff! When this puppy gets some upside momentum, it sure does make a powerful move. Let’s continue to give this one room to grow, as they’re now firing on all cylinders. Hold.
Beacon Power (BCON – NASDAQ): This week, BCON was given the contract to build its first 20-megawatt flywheel frequency regulation plant in Stephentown, New York. The approval (referred to as a “negative declaration” under the State Environmental Quality Review Act) was granted during a meeting held on May 15th. The Board’s vote was unanimous, 5-0. Folks, we have been saying to pick up BCON on the cheap, and now more than ever, alternative energy plays like this one should really come alive. Hold.
Metalline Mining (MMG – AMEX): This little gem is now on its way to proving just how much silver they have within their Sierra Mojada project in Coahuila, Mexico. They have already proven how much zinc they have, and it’s huge. In fact, it just might be the largest zinc mine on the globe. So what we have is a double play on both sliver and zinc — quite rare for a small-cap mining company. Their latest work proposal calls for a scheduled completion by late September 2008, and this will give everyone a far better understanding of just what MMG is holding. Therefore, if yo have yet to own MMG, I would be buying in advance of their September completion date. And for those who do who already own MMG, continue to hold. Buy/Hold.
Evergreen Solar (ESLR – NASDAQ): Even more good news. Shares of ESLR shot 20% higher on Thursday after they announced two long-term sales contracts worth nearly $1 billion. With news like this, I can’t help but remain bullish on ESLR. Hold.
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Sincerely,
The Next Big Solar Winner
Our Last Three Bottarelli Research Solar Plays Gained 200%. Is EMKR Next?
We all know the strong performance record of our Bottarelli Research Small Cap solar plays.
- It started with a 206.12% gainer on JA Solar Holdings (JASO – NASDAQ).
- Then came a 229.42% gain in Solarfun Power Holdings (SOLF – NASDAQ).
- And not to be overshadowed, our latest winner on Canadian Solar (CSIQ – NASDAQ) just broke through the magical 200% profit level as well, officially triggering a 208.58% gain this past Monday.
No matter how you look at it, that’s quite an amazing performance.
These strong returns make it quite clear that the solar sector is red hot, and will remain red hot for the foreseeable future. That’s why today’s new small-cap pick is so exciting.
You see, today’s solar pick is still “undiscovered” on Wall Street. And the reason it’s undiscovered is because they’re engaged in many aspects of the semiconductor business — one of them being the concentrated PV market.
In other words, while investors remain excited about land-based solar panels, EMKR operates in a solar niche technology that uses mirrors to reflect sunlight onto efficient and relatively small areas of PV cells.
But let’s start from the top…
EMKR provides semiconductor-based components and subsystems for the broadband, fiber optic, satellite, and terrestrial solar power markets. Their business operations are broken down into the following two segments:
- Fiber Optics Segment: Offers optical components and subsystems that enable the transmission of video, voice, and data over fiber optic cables for high-speed data and telecommunications, cable television, and fiber networks.
- Solar Power Segment: Provides solar products for satellite applications, including compound semiconductor-based gallium arsenide solar cells and integrated solar panels. They also provide terrestrial applications, like concentrating photovoltaic systems (CPV), gallium arsenide solar cells, and CPV components for solar power concentrator systems.
It’s their Photovoltaic (or PV) segment that’s the investment play here — because this segment provides products for both satellite and terrestrial applications. For satellite applications, EMCORE offers high efficiency Gallium Arsenide (GaAs) solar cells, Covered Interconnect Cells (CICs) and panels. For terrestrial applications, EMCORE is adapting its high-efficiency GaAs solar cells for use in solar concentrator systems.
Their technology has many experts calling them a “next-generation PV company” because they make the world’s highest efficiency solar cells. You see, the concentrated PV market (which uses mirrors to reflect sunlight onto PV cells) is what gives EMKR their enormous potential — and they’re the market leader in this niche solar technology.
Less than a year ago, Emcore announced that they attained a record 39% conversion efficiency under 1000x concentrated illumination on its multi-junction solar cell products. This advancement positioned EMKR as the leader in advanced terrestrial photovoltaic technology – setting offhigh volume production for these solar cells for Concentrator Photovoltaic (CPV) applications.
In fact, Emcore has currently shipped several million concentrator solar cells to CPV system manufacturers worldwide, yet Wall Street has yet to recognize that the stock is a true solar player with explosive potential. To tell you the truth, Wall Street is quite confused when it comes to assigning a value to EMKR — and that’s where the investment opportunity comes into play.
You see, in their latest earnings release (dated May 8th 2008), EMKR threw Wall Street a curve ball. They reported a wider Q2 loss, but then they turned around and raised their Q3 and full year forecasts above their previous estimates.
For the quarter ended March 31st, EMKR posted a loss of $17.5 million ($0.27 per share) compared with a loss of $13.4 million ($0.26 per share) in the same period a year earlier. On average, analysts at Thomson Financial were expecting a loss of $0.05 cents per share. This obviously came in below expectations. Bad news.
But then, EMKR turned around and forecasted Q3 sales between $77 million and $80 million, with full-year revenues coming in between $280 million to $295 million. Since these same analysts were predicting Q3 sales of $76.4 million and full-year sales of $270 million, this obviously came in above expectations. Good news!
In response to all this news, shares of EMKR fell $0.07 on the day. But remember, Wall Street always looks ahead — never behind. That’s why I’m placing more importance on EMKR’s forward forecasts versus their Q2 “misses.” With the shares currently trading for only $7.20, we have the opportunity to pick up the next big solar winner for an attractive price — all while Wall Street struggles to figure out how to properly value the stock.
In fact, if you look closely, you’ll notice that shares of EMKR are beginning to attract some early-stage investors. On Tuesday May 13th, Wednesday May 14th, and Thursday May 15th, Emcore was among the most actively traded companies with market capitalizations under $750 million. In other words, someone is trying to quietly accumulate shares.
And when you look at their stock performance, income statement, and balance sheet, you’ll see why. In terms of their stock price history, shares of EMKR have gained 79.83% over the last 52-weeks compared to a loss of 6.46% on the S&P 500.
Their trailing three month revenues of $194.58 million break down to $3.57 per share. And with quarterly revenue growth of 41.30%, total cash of $23.72 million, and $0 debt, all signs point to a potentially explosive small-cap position. Therefore, let’s go ahead establish a new position in shares of EMKR, calling them the “misunderstood” solar play that could easily emerge as the next big solar winner in the Bottarelli Research Small Cap portfolio. On that note, here’s your newest play…
PLAY: Buy shares of Emore Corporation (EMKR – NASDAQ) at or under $9.00, good for the week.
| SPECIAL ANNIVERSARY OFFER: LAST CHANCE! |
This is your last and final opportunity to take advantage of our special “1-Year Anniversary Offer” that knocks $500 off the cost of a 12-month Bottarelli Research Small Cap renewal. This is the lowest price we’ve ever offered — and we’ve decided to extend this special offer for three (3) more days. That means this offer officially expires on Monday, so please be sure to take advantage of this anniversary special now! Lock in this special rate now by clicking the secure link below.
https://www.bottarelliresearch.com/renew/?service=smcap&offer=3YY37643H9
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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