Penn Wealth Publishing

2018.03.25 Penn Wealth Report Vol 6 Issue 01

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25 Mar 2018 Penn Wealth rePort voluMe 6 issue 01 13 Penn Wealth RePoRt Copyright 2018. All Rights Reserved. investment intelligence under the radar Four companies being ignored—or missed—by the financial press Diana Shipping, Inc. Industrials: Maritime Diana Shipping, Inc. (DSX $3-$4-$6) is an Athens, Greece-based maritime shipping company. When you think of commodities traveling from their source to their destination e.g. iron ore from Australia to China, think Diana Shipping. The company is a cyclical play on the state of the global economy, and the demand for commodities. Diana owns a fleet of 50 dry bulk ves- sels with a combined carrying capacity of 5.8 million dwt (deadweight tonnage), and carries a market cap of just $469 million, giving it tremendous room to grow. The enterprise value of Diana Shipping is $1.054 billion, which means a potential buyer would need to shell out at least double what Diana's market cap would indicate, making it an expensive acquisition for one of the larger industry players. Ultra Clean Holdings Semiconductor Equip. Nordic American Tankers Industrials: Maritime Signet Jewelers Luxury Goods (Update: We sold UCTT at $25.95 after it spiked for a 20% short-term gain) We added Ultra Clean Holdings, Inc. (UCTT $9-$22-$35) to the New Frontier Fund at $21.61 per share for a number of different reasons. First, the California-based semiconductor equipment company is in a red-hot industry, but it should escape the "just dumped by Apple" headline threat held over the heads of direct semiconductor manufacturers (it makes the equipment, not the chips). Secondly, UCTT has a small-cap profile—the market cap is just $780 million—and appears poised for explosive growth. Finally, the company has a strong management team and carries an actual P/E (yes, it turns a profit) of just 12.37—about half that of the industry. On 03 Jan 2018, the company will be added to the S&P SmallCap 600 Index. Nordic American Tankers (NAT $2-$2-$9) is a liquid bulk shipper which operates double-hull, purpose-built vessels worldwide. The Bermuda-based company has a fleet of 33 Suezmax crude tankers—the largest such fleet in the world. The company recently issued a rather upbeat Q4 earnings report, with expectations for a turnaround in the second half of 2018. Nordic American's TCE (time charter equivalent) for Q4 was $13,800 per day per ship, com- pared to a TCE of $10,600 in Q3. NAT's fleet has an aggregate cargo capacity of 33 million barrels of crude, meaning they are well positioned to take advantage of increased demand and higher oil prices. This past January, China's crude imports rose by a whopping 20%, which is a good sign for the liquid bulk segment of the industry. After plummeting nearly 20% on a 5.2% drop in same-store sales and mediocre 2019 guid- ance, Signet Jewelers (SIG $39-$39-$78) hit a new 52-week low. With its industry leadership position and paltry 8 p/e, we believe investors dramatically overreacted during the sell-off. The company truly is a jewelry powerhouse, owning such iconic brands as Zales, Kay, and Jared, not to mention a number of regional, UK, and Canadian brands. Despite having just a $2.4 billion market cap, SIG is the largest specialty player in the industry. Annual revenues have been steadily growing for the past decade, from $3.6 billion in 2008 to $6.4 billion in 2017, and earnings have remained in the black. 3 2 1 4

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