Warren Buffett’s ‘World’s Largest Solar Power Development’ Underway near LA

It’s being billed as the “world’s largest solar power development,” the joint construction effort started in January by Berkshire Hathaway’s MidAmerican Solar and SunPower Corp. north of downtown Los Angeles in Kern and Los Angeles counties. Officially called the Antelope Valley Solar Projects, the 3,230-acre development in two co-located projects are scheduled to generate 579 megawatts, or enough energy to power 400,000 average California homes or about 2 million people.

MidAmerican Solar is a subsidiary of MidAmerican Energy Holdings Co., which is controlled by Berkshire Hathaway. Warren Buffett is the primary investor, chairman and CEO of Berkshire Hathaway.

The two companies calculate that the electricity powered by the project will displace an estimated 775,000 tons of carbon dioxide annually, which they say is equal to taking about 3 million cars off the road over the next 20 years. MidAmerican  owns the development and SunPower is the designer, engineer and contractor for the construction and will operate and maintain the project. Southern California Edison is the customer that will purchase the power when it is completed by year-end 2015.

One of the other big solar power stories  of the week, “The Incredible Shrinking Cost of Solar Energy “(http://www.juancole.com/2013/05/incredible-shrinking-projects.html notes that thanks to the “dramatic fall in the cost of solar power generation” solar is at grid parity in many parts of the world, including Germany, Portugal, Italy and Spain, as well in the southwestern U.S.

Other data points in these stories include:

  • The cost of the best Chinese solar panels fell in cost by 50 percent between 2009-2012. Over the next two years, cost reductions will “slow” to a 30 percent rate.
  • By 2015 solar panels are expected to fall to 42 cents per watt.
  • U.S. solar installations rose 76 percent in 2012.
  • Hybrid plants that include both solar and wind turbines dramatically increase efficiency and help integrate into the electrical grid.

Given some of the interesting developments in solar power, how have some of the solar stocks fared in the past few months?

San Mateo, CA-based SolarCity Corp. (Nasdaq: SCTY, http://www.solarcity.com/ designs, installs and sells or leases solar energy systems to residential and commercial customers, as well as electric vehicle charging products.  It closed March 15 at $16.74 with a market cap of $406.5 million. By April 12 it was trading at $19.97 with a market cap of $1.5 billion. SCTY closed May 8 at $24.16, up 50 cents for the day with a market cap of $1.8 billion. Its 52-week trading range is $9.20-$28.23.

Ontario, Canada-based Canadian Solar (Nasdaq: CSIQ, http://www.canadian-solar.com/ ), which sells a variety of solar products, closed back on March 15 at $3.50 with a market cap of $151 million. It closed April 12 at $4.07 with a market cap of $176 million. CSIQ closed May 8 at $5.29, down 17 cents for the day, with a market cap of $228 million. Its 52-week trading range is $1.95-$6.09.

San Jose, CA-based SunPower Corp. (Nasdaq: SPWR, http://www.sunpowercorp.com/), which makes a wide variety of solar products and systems and is one of the principals in the Antelope Valley Solar Project, closed back on March 15 at $11.80 with a market cap of $1.4 billion. SPWR closed April 12 at $11.06. It closed May 8 at $15.36, down 6 cents for the day, with a market cap of $1.8 billion. Its 52-week trading range is $3.71-$16.04.

China-based Trina Solar Ltd. (NYSE: TSL, http://www.trinasolar.com/) designs, manufactures and sells photovoltaic modules worldwide. Back on March 15, TSL closed at $4.11 with a market cap of $291 million. It closed April 12 at $4.19 with a  market cap of $335 million. TSL closed May 8 at $4.72, down 22 cents for the day. Its 52-week trading range is now $2.04-$7.67.

China-based Yingli Green Energy Holding Co. (NYSE: YGE, http://www.yinglisolar.com/ makes photovoltaic products including cells, modules and systems. YGE closed back on March 15 at $2.47 with a market cap of $387 million. It closed April 12 at $2.12 with a market cap of $324 million. YGE closed May 8 at $2.20, down 7 cents for the day, with a market cap of $356 million. Its 52-week trading range is $1.25-$3.68.

China-based Suntech Power Holdings (NYSE: STP, http://am.suntech-power.com/), the world’s largest producer of solar panels, closed at $0.70 back on March 15 with a market cap of $127 million. It closed May 8 at $0.51, down 7 cents for the day, with a market cap of $92 million. Its 52-week trading range is $0.30-$2.67.

St. Peters, MO-based MEMC Electronic Materials (NYSE:WFR, http://www.memc.com/) manufactures and sells silicon wafers and photovoltaic materials. Through SunEdison, it’s a developer of solar energy products. It closed March 15 at $4.53 with a market cap of $1 billion. WFR closed April 12 at $4.76 with a market cap of $1 billion. WFR closed May 8 at $5.33, down 6 cents for the day, with a market cap of $1.2 billion. Its 52-week trading range is $1.44-$5.70.

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Struggling Solar Stocks at Risk of Being Delisted

The announcement this week that China-based Suntech Power Holdings (NYSE: STP), which bills itself as “the world’s largest producer of solar panels,” is at risk of being delisted by the New York Stock Exchange, cannot be good news for the solar industry. The announcement came about a month after Suntech founder Zhengrong Shi surprised analysts by stepping down as CEO. He remains Chairman and Chief Strategy Officer.

Suntech stock, which was trading for $2 the last time we checked in May, closed Sept. 25 at $0.92, down 9 cents for the

Photo courtesy of nrel.gov

day. Per NYSE rules, Suntech has six months following the NYSE warning (which came Sept. 10) to get its average stock price back up over $1 over a 30-day period.

China-based JA Solar (Nasdaq: JASO), which bills itself as “China’s largest solar-cell maker,” is also being threatened with a delisting. JASO announced Sept. 24 that it is seeking to strengthen its balance sheet by buying back $89.2 million of its debt. It last closed above $1 on Aug. 28. JASO closed Sept. 25 at $0.85, no change for the day.

This gloomy news prompted us to take a look at several other solar stocks we have followed in the past. They include:

 Tempe, AZ-based First Solar (Nasdaq: FSLR, http://www.firstsolar.com/), which specializes in thin-film solar modules, has bounced back from its year-long slide. FSLR traded as high as $142 during the summer of 2011, but fell down to $13.66 when we last checked in May. FSLR closed Sept. 25 at $20.51, 49 cents on the day.

Ontario, Canada-based Canadian Solar (Nasdaq: CSIQ, http://www.canadian-solar.com/ ), which sells a variety of solar products, has seen its stock price stabilize since December. Back in summer 2011 CSIQ traded for more than $12 but by last May it had dropped to $2.70 with a market cap of $117 million. CSIQ closed Sept. 25 at $3.01, up 2 cents on the day. It’s market cap is now $130 million.

San Jose, CA-based SunPower Corp. (Nasdaq: SPWR, http://www.sunpowercorp.com/) makes a wide variety of solar products and systems. SPWR stock in mid-May was trading for about $5. SPWR closed Sept. 25 at $4.60, down 14 cents on the day. Its market cap is now $547 million.

China-based LDK Solar Co. (NYSE: LDK, http://www.ldksolar.com/) manufactures solar products and silicon materials. LDK, which was trading for nearly $5 in late December 2011, dropped down to $2.85 in mid-May with a market cap of $373 million. It closed Sept. 25 at $1.25, down 4 cents on the day. Its market cap is now $167 million.

China-based Trina Solar Ltd. (NYSE: TSL, http://www.trinasolar.com/) designs, manufactures and sells photovoltaic modules worldwide. It has a chart similar to many of the other solar stocks, which reached highs in the summer of 2011. Since we have been watching it carefully, we have seen in close in August 2011 at $15.88, in December 2011 it had dropped to $7.39 and by mid-May 18 it was down to $5.70 with a market cap of $464 million. It closed Sept. 25 at $4.47, up 7 cents for the day. Its market cap is now $316 million.

China-based Yingli Green Energy Holding Co. (NYSE: YGE, http://www.yinglisolar.com/) makes photovoltaic products including cells, modules and systems. YGE closed in mid-May 18 at $2.52. It closed Sept. 25 at $1.74, up 5 cents for the day. Its market cap is now $272 million.

Muddy Waters Makes Big Splash in Chinese Private Education Stocks

Muddy Waters made headlines this month. Not the revered blues guitarist and singer, who died in 1983. We’re talking about Muddy Waters Research, a firm that apparently has “developed the knowledge and contacts to navigate China’s muddy waters,” according to its website.

Muddy Waters made its big splash by taking on Beijing-based New Oriental Education & Technology Group (NYSE: EDU, http://www.english.neworiental.org), the largest provider of private education services in China, according to Forbes.com, which covered this story (http://www.forbes.com/sites/hengshao/2012/07/18/chinese-education-firm-dragged-into-muddy-waters/). In a report issued July 18, Muddy Waters suggested New Oriental was fudging its numbers and its store growth. That report, and the company’s announement of an SEC investigation of its financial statements, caused EDU to crater to $9.50, a drop of 57 percent in only two days, according to Forbes. A week later, EDU had rebounded and closed trading July 27 at $11.96, up 23 cents for the day. Its market cap has ballooned to $1.85 billion.

For investors willing to wade into the perhaps shark-infested waters of Chinese private education stocks, most of them like New Oriental trade as ADRs on the NYSE, there are lots of small caps to choose from. They include:

Beijing-based Xueda Education Group (NYSE: XUE, http://www.xueda.com) is a holding company that provides tutorial services for primary and secondary students in China with an emphasis on personal services and one-on-one tutoring. The company has built a network of 273 learning centers throughout China. XUE has a market cap of about $191 million and a 52-week trading range of $2.41-$9.12. It closed July 27 at $ 2.88, no change for the day.

Beijing-based TAL Education Group (NYSE: XRS, http://www.xueersi.com) provides after-school tutoring of core academic subjects including math, biology, English, physics and chemistry to K-12 students in China. XRS just announced earnings on July 24, beating analysts earnings per share estimates by 1 cent ($0.06). Revenue for the quarter was up 48.5 percent on a year-over-year basis. Market cap is about $594 million and 52-week trading range is $7.15-$13.75). XRS closed July 27 at $7.67, up 11 cents for the day.

Beijing-based Ambow Educational Holdings (NYSE: AMBO, http://www.ambow.com.cn) offers education and career enhancement services through an online and offline delivery model. Its targets include students seeking to be admitted to secondary and post-secondary schools. At recent count, AMBO had 131 centers and schools including 107 tutoring centers, five k-12 schools, 17 career enhancement centers and two colleges. Its market cap is $189 million and 52-week trading range is $2.12-$8.15. It closed July 27 at $2.61, up 21 cents for the day.

That Light at the End of the Recession: Who Is the Levi Strauss of the Recovery?

There are articles this morning with significant news for the economy as a whole and for the investment community in particular.  First of all, the job market improved more than expected, and is back on the curve it was on earlier this spring, with job creation in the private sector at 176,000 jobs, and new applications for unemployment well under the “magical” number of 400,000. 

Early gold miners wearing Levis. Photo courtesy of andrewhennigan.blogspot.com

Second, and possibly more important, the number of business bankruptcies has fallen and is on track to finish the year at its lowest level since prior to the beginning of the “Great Recession.”  The comes chockablock on top of a truly boffo month of June for consumers, especially people buying cars.

There are storm clouds — European and Chinese wobblies specifically, with interest rates dropping, which is likely to push the value of the US dollar up, making our goods more expensive overseas.  Actually though, two of our biggest trading partners are virtually (but not officially) pegged to the US dollar (Mexico & Canada), and many other economies, such as Australia — resource rich and recessionless — are fairly stable with regard to the greenback. 

So the question is, if we are seeing all these lights at the end of the tunnel — what should we be doing as investors?  We at SmallCapWorld have no answers, no recommendations, because we are not financial advisors,  but we are finding some areas more interesting than others.  Infrastructure continues to be a big agenda item, for instance.  For those with a longer horizon and some patience, homebuilders are looking more interesting.  And an intriguing article in the New York Times last weekend theorized that the electric vehicle market, in spite of the highly publicized obituaries of the lithium-ion battery companies,  may not be dead in the water: http://www.nytimes.com/2012/07/01/automobiles/evs-are-merging-into-californias-traffic.html?_r=1&ref=automobiles.

Many investors look at sectors like these when economic reports are positive, hoping to find bargains like four-leaf clovers.  An article this morning in Motley Fool may be a case in point, for instance: http://beta.fool.com/jonathanyates13/2012/07/05/it-time-togo-sir-john-templeton-european-stocks/6140/?source=eogyholnk0000001.  Heck, even Warren Buffett is out in the weeds looking for something special, buying up newspapers (talk about last century!). 

I’d like to suggest that there is a larger pond to splash about in, and it is not sector-specific: cross-border companies, especially those trading in the USA as ADRs (American Depositary Receipts).  It seems as though ADRs tend to trade at a significant discount to the valuations given their peers on US markets.  That is less true of largecap ADRs, a fast-growing group, by the way, but largely controlled in valuation by trading in their home exchanges.   But it seems to be increasingly true across the board in smallcap ADRs.  After all, what was the biggest success story of the California Gold Rush?  I think it was Levi Strauss, which did nothing more than invent blue jeans for the miners.  Facilitators tend to be ignored at times.

Why would this be so?  Well, maybe it is that they are farther away than US-headquartered companies; they use currencies that may be more volatile these days; they tend not to market themselves well to US investors; they seldom trade on Nasdaq or the NYSE.  In fact, most of them trade in the regulatory twilight zone that used to be universally referred to as The Pink Sheets.  However that may be, there are some very big, very prosperous, very well-known companies now trading on the “pinks” after having delisted from the big exchanges when Congress started tightening the regulatory screws a couple of financial bubbles and several Ponzi schemes ago.

If there are bargains in the ADR world, they will be found eventually — at least that is the theory behind the “if you build it they will come” philosophy that used to be called “build a better mousetrap” or “stick to your knitting.”  And for the Sherlock Holmes types among us, there are all kinds of companies worth looking on the upgraded “pink sheets” listings called OTCQX and OTCQB.  With the not-so-slow decline of the Bulletin Board, these listings may look like the Wild West, but they are not the typical old “pennystocks” that many investors remember.  And the JOBS Act is breathing new life into these small newcomers by suspending a lot of the draconian rules that govern fund-raising for larger companies:  http://www.forbes.com/sites/alanhall/2012/06/28/hearings-on-jobs-prepare-the-u-s-for-expanded-crowdfunding-accelerating-startup-activity-creation-of-jobs/

Anyway, the point of this article is not to pick out stocks in the pink sheets, it is to look for stocks that could benefit from a gold rush pointed at the pink sheets.  The first and most obvious is OTC Markets Group itself (OTCQX: OTCM), the proprietor of the Pinks, the OTCQX and OTCQB.  OTCM, headquartered in New York City (http://www.otcmarkets.com/home) , is chugging along at an increasing revenue rate that looks to be in the range of at least $32 million to $35 million this year, and bringing about 15%  (or $0.12 per share) to the bottom line in the most recently reported quarter.  Just to put this in perspective, the market cap is around $73 million and OTCM is handling 10,000 over-the-counter securities.  The volume of trading in OTCM is under 1,000 shares per day, which puts a bit of a technical barrier up for some people — but it is hard to imagine this part of the market NOT growing.

Another you-never-heard-of-it company that stands to benefit is one of the Fortune 500: INTL FCStone Inc (Nasdaq: INTL).  One of the busiest traders in the market, INTL is said to be the largest marketmaker of cross-border stocks in the US, and they are an increasingly prominent advisor to OTCQX and OTCQB companies under the “PAL” or Principal American Liaison designation.  They are also one of the largest buyers of gold in the world.    The shares are trading at $19.61, not far off their lows; the market cap is $375 million, and the average daily trading volume is 84,000 shares.  This article in SeekingAlpha addresses the value that might be there: http://seekingalpha.com/article/667071-4-undervalued-small-cap-financials-with-analyst-love?source=yahoo

There are some very small dark horses, like San Francisco-based Merriman Holdings (OTC: MERR; http://www.merrimanco.com), which claims to be the largest PAL operation with regard to OTCQX companies.  MERR is quite small and has a recent history of management change and financial distress, but their newswires are busy virtually every day with new OTCQX clients. 

And there are some much larger companies that stand to benefit, like the Australian whiz-kid, Computershare Ltd (OTCQX: CMSQY and ASX: CPU).  Their market cap is well out of our ballpark at $4+ billion, but they have come out of the pack like Secretariat at the Derby, recently taking over the stock servicing portfolio at Bank of New York Mellon.

We own none of the securities discussed in this article.

Google Acquisition of Motorola Mobility Could Be Start of Takeover Season

One takeover begets another. That’s our thinking following the announcement May 22 that Google had officially completed its $12.5 billion acquisition of Motorola’s phone business, called Motorola Mobility. Whenever there is a big takeover like this, a jolt rumbles through the rest of the niche as investors look around for other takeover targets.  

Graphic courtesy of topnews.in

This niche would be telecom, which Motley Fool agrees is in an all-out acquisition mode now because of  the “spectrum crunch” (http://beta.fool.com/liveinvestor/2012/05/22/sprint-says-time-isnt-ripe-merger/4730/?source=eogyholnk0000001).

Here are a few randomly chosen small cap companies that operate in the telecom space:

Bellevue, WA-based Clearwire Corp. (Nasdaq: CLWR, http://www.clearwire.com), a subsidiary of Sprint Holding Co., provides fourth generation wireless broadband services across the U.S. While it’s a company remembered for having one of the worst post IPO first weeks (it lost 17 percent of its market value) it remains a very high-profile stock. For whatever reason, CLWR has been experiencing a selloff throughout May without any real news from management (http://seekingalpha.com/article/595911-investigating-the-may-sell-off-in-clearwire-who-or-what-is-responsible?source=yahoo). CLWR was finally up 10 cents to $1.30 on May 22 with a staggering 48 million-plus shares traded, followed by another 10 million shares traded on May 23, closing down 8 cents at $1.22. Its 52-week range is $1.00-$4.77 and market cap is $640 million. It’s certainly a stock that many people are following.

Another high-profile stock is San Diego-based Leap Wireless International (Nasdaq: LEAP, http://www.leapwireless.com), which provides digital wireless services under the Cricket brand name. The talk has focused on how Leap could be the target of an AT&T takeover, although it’s all rumor at the moment. LEAP is trading near the bottom of its 52-week range of $4.68-$17.66 and market cap is $430 million. LEAP closed on May 23 at $5.47, up 4 cents on the day.

Oslo-based Opera Software (http://www.opera.com) is a maker of free browsers for computers, mobile phones and devices and earned international headlines when its Opera Mini Browser was chosen by Apple to be the only non-Apple browser to be used on the iPhone, which means there are millions of users all over the world. Opera Software trades as OPERA.OL on the Oslo exchange, and also trades in London and Frankfurt. Its ADR listing on the OTCQX market in the U.S. is OPESY.PK. It closed May 23 at $12.57, with no change on the day.

One very small company is Plano, TX-based ViewCast (or ViewCast.com) Inc. * (OTCBB: VCST.OB, http://www/viewcast.com). ViewCast develops hardware and software for the capture, management, transformation and delivery of digital media over IP and mobile networks. New CEO John Hammock has announced his intention to target the telcom space, as well as cable and other international markets. The stock has declined in recent months and closed May 23 at $0.14, down 1 cent for the day. Its 52-week range is $0.08-$0.39. Its market cap is $8.7 million.

Bellevue, WA-based Telanetix Inc. (OTCBB: TNIX.OB, http://www.telanetix.com) is an IP communications service company offering business customers an alternative to phone service and a wider range of support options than traditional telecom providers. Its services include hosted IP voice and conferencing products to text and collaboration products. Like ViewCast, TNIX is very small with a market cap of about $7 million. It’s also thinly traded with an average daily volume of about 1,000 shares. Its 52-week range is $0.04-$5.25.

Plano, TX-based Interphase Corp. (Nasdaq: INPH, http://www.interphase.com) sells broadband communications products to telecom equipment manufacturers for telecommunications and networking infrastructure solutions, among other things. Its stock has been on a slow but steady rise for the past few months, and has a 52-week range of $3.27-$7.39. Its market cap is $32 million. INPH closed May 23 at $4.69, down 3 cents on the day.

* Denotes client of Allen & Caron, publisher of this blog

Signs of Progress: Digital Media Stocks on Display

If you want to see the latest forms of digital signage, take a look at  Times Square on New Year’s Eve. Digital displays, in all their electronic glory, are literally everywhere on that night. But thanks to the rapid growth of the digital media industry, digital signage displays showing video or television programming, advertising, even menus and street signs, are popping up everywhere.

LCD or LED signage, as well as plasma displays or projected images, have taken over cities, retail stores, hotels, restaurants, corporate buildings, even bathrooms and elevators. Smartphones, too, use the same digital media technology.

You can use digital media technology for integrating social and location-based interactivity so you can send Twitter messages, SMS and text messages to advertising displays. Digital signage displays can be controlled by personal computers or servers via proprietary software programs.

To date, China has led the world in the number of digital signage displays with the country’s largest digital signage firm, Focus Media Holding (Nasdaq: FMCN), operating thousands of displays. San Antonio, TX-based Clear Channel Outdoor Holdings (NYSE: CCO) is another huge outdoor advertising company with close to 1 million displays in more than 40 countries across five continents. But those are large companies with market capitalizations in the billions of dollars.

Smallcap investors have opportunities to invest in digital media, too, by focusing on such things as the hardware, software or network infrastructure that support

Times Square, New Year's Eve

the industry.

Brookings, SDbased Daktronics (Nasdaq: DAKT, http://www.daktronics.com/) designs, manufactures, and sells various electronic display systems and related products. It offers indoor and outdoor scoreboards, digit displays, scoring and timing controllers, statistics software, and transportation products comprising various light emitting diodes-based displays for road management, parking, mass transit, and aviation applications. The company did pay a dividend in December, even lumping an additional $0.40 on top of the regular payout, which is now twice rather than once per year. DAKT trades about 150,000 shares daily, has a market cap of $340 million and a 52-week range of $8.00 – $12.25. It closed April 20 at $8.08, up 1 cent.

Cincinnati, OH-based LSI Industries (Nasdaq: LYTS, http://www.lsi-industries.com/) provides corporate visual image solutions around the world.  The company offers exterior and interior visual image elements related to graphics for use in graphics displays and visual image programs. Its graphics products include signage and solid state LED video screens for the sports and advertising markets designing and engineering custom designed electronic circuit boards, assemblies, and sub-assemblies used in various applications.  LYTS trades near $7 with a $165 million market cap and an average daily volume of about 600,000 shares.  The 52-week range is $5.45 – $8.91. It closed April 20 at $6.71, no change on the day.

Prague-based Kit Digital (Nasdaq: KITD, http://www.kitd.com/) provides end-to-end video asset management software and related services to enterprise clients. It offers the KIT Video platform for managing Internet protocol (IP)-based video assets across browser environments, mobile and tablet devices, and connected television (TV) sets and Digital Signage. KITD also enables delivery of social video apps to connected TVs, set-top boxes, game consoles, tablets and smart phones.  KITD has had some hiccups lately. Its stock has a 52 week range of $5.93 – $12.73, a market cap of about $360 million and an average daily volume of about 1, 265,000 shares.  In March and April 2011, the company announced delayed their 10-K filing and announced changes in the board of directors and management as well as some indications that the company may be putting itself up for sale.  But it appears there has been some short covering and buying in the past weeks. The stock closed April 20 at $6.99, down 51 cents on the day.

Seattle-based RealNetworks (Nasdaq: RNWK, http://www.realnetworks.com/) makes the RealPlayer media player software on computers, including features and services that enable consumers to discover, play, download, manage, and edit digital video. RNWK develops and markets software products and services that enable the creation, distribution, and consumption of digital media and signage, including audio and video.   RNWK has a 52-week range of $6.81 – $15.08, trades nearly 140,000 shares daily, and has a $326 million market cap. It closed April 20 at $9.43, up 3 cents on the day.

A more vertically and horizontally integrated company is Poland-based ADV Group* (ADV’s ADR is GPVSY, http://www.grupa-adv.pl/) which trades on the OTCQX market in the U.S. (www.otcqx.com.) (ADV shares also trade on the main floor of the Warsaw Stock Exchange under symbol ADV.) A fast-growing internet and digital media advertising company, ADV is the leading new-media agency in Poland operating in digital communications, innovative new technologies, IT outsourcing, dedicated application design, and mobile device applications.  GPVSY has enjoyed revenue and earnings growth for the past few years, including 74 percent revenue growth in 2011.  GPVSY is a relatively unknown stock in the U.S. with very little analyst coverage. Its market cap is just under $50 million and its average daily trading volume is less than 100,000 shares daily.  The Polish ordinary listed ADV stock trades over 14 PLN or zloty – the Polish currency. (1 Polish zloty = 0.31 US dollars as of April 12) and has a 52-week range of 7.10 – 15.59 PLN.

*Client of Allen & Caron, publisher of this blog.

Irish Stocks: Some Are Neglected, Many Offer Value Opportunities

As we dig out our kelly-green ties and sweaters to honor St Patrick, and an astonishing number of people rediscover their Irish-ness, we thought it would be a good time to take a quick look at some truly Irish small caps — all of which can be found on US markets.  You don’t have to drink green beer to buy them — and you may well be impressed with the values that can be found in this Celtic Tiger so often these days categorized as the first “i” in PIIGS.  Ireland has taken a tumble, but it is still a hardworking country with an aggressive government program to lure foreign businesses.  If you look around, you’ll find interesting companies, as we did.

Dublin Street Scene: Ready for a Pub Crawl?

A good place to start is with Leopardstown-based ICON plc (Nasdaq: ICLR; http://www.iconplc.com),  a widely respected CRO (contract research organization) that provides clinical and development services to medical device companies, pharmaceutical companies, biotechnology companies across the British Isles, Europe and the USA, working in FDA Phases I-IV.  Leopardstown has always been known for its famous racetrack, but the horses there have nothing on the fast pace of ICLR activity.  ICLR shares trade at about $21.61, vs a year-high of $26.22 on average daily volume of just under 200,000 shares, and a market cap of about $1.3 billion.

Please do your own diligence.  We do not recommend stocks, nor are we financial advisors.  We do not own the shares in this article, and have no intention of buying them any time soon.

Staying with the healthcare theme for the moment, you might want to have a look at Bray, Ireland-based Trinity Biotech (Nasdaq: TRIB;  http://www.trinitybiotech.com ).  Although this diagnostics company is probably best known for its work in kits to diagnose HIV and sexually transmitted infections, it also works with diagnostics for autoimmune diseases/conditions, diabetes, liver disease and a variety of other diseases.  With strategic partners and distributors in 75 countries, TRIB reported revenue for 2011 of about $78 million, down from about $90 million the year before — but profits were up, which says a bundle about the determination of management to right the ship.  TRIB shares are trading at about $10.18 vs a 52-week high of $11.00, on somewhat anemic average daily volume of about 45,000; that says it could be underpriced vs what it might be if the audience were larger.  Market cap is about $215 million.

St Patrick's Day Parade, NYC (St Patrick's Cathedral)

Dublin-based CPL Resources plc (LSE: CPS or Pink Sheets: CPGLF; http://www.cpl.ie ) is a personnel-oriented company that supplies various kinds of skilled and highly trained temporary personnel, recruitment services, payroll services and a large suite of ancillary human resources services to companies across Europe, with an emphasis on eastern Europe (Poland, Hungary, Bulgaria, Czech Republic, Slovakia, et al), Ireland and Spain.  Revenues for 2011 of this company with women in the CEO and CFO positions were €235 million, substantially higher than 2010, with a profit of €7.2 million, and a rising treasury of cash-on-hand.  EPS were €o.19.  In US trading, CPGLF is changing hands at about $3.26 on negligible trading (not unusual for an unsponsored ADR), but volume in London is very low as well, indicating that either interest is low or the market has a very low float (or both).  Market cap is just under $100 million, which seems low based on blossoming results.

Dublin-based Datalex plc (Irish symbol: DLE; Pink Sheets: DLEXY; http://www.datalex.com ) is in the travel merchandising business, with advisory customers across the globe in the form of major airlines such as United Airlines and Air China (plus many more), and marketers such as Expedia.  The company’s very sexy website is helpful and fun, and lets you know just how much goes on behind the reservations systems you may be looking at online.  Revenues for 2010 were in the range of $27 million, with a loss of around $2.1 million, and 2011 results are due to be announced on March 30, 2012.  DLEXY shares are currently noted online at about $0.82 and in Ireland at about €o.40, but all the volume is on the Irish trading, with about 56,000 shares per day — however, since the ADR is sponsored you can buy the Irish shares, convert them in the wink of an eye to ADRs and put them in your brokerage account, which will store them at DTC, reversing the process if you want to sell (at no cost, btw).  We find that many cool small companies have neglected ADRs, which can present super opportunities for value-sniffing investors.

Finally, have a look at Dublin-based Fyffes plc (LSE: FFY or Pink Sheets: FYFFF; http://www.fyffes.com ), a purveyor of tropical fruits and produce: pineapples, melons, bananas: “Feel Good Fruit” according to the Fyffes colorful website.  2011 revenues were about €850 million with EPS of €0.06 per share, and a dividend of about €o.o2 per share.  Shares of the 1888-founded company are trading for about $0.60 on the Pink Sheets or about £o.36 on the London Stock Exchange, with London volume dominating at about 57,000 shares and a market cap of about $195 million.

Like I said, you don’t need green beer to look at these companies — although it couldn’t hurt, as they say.  Happy Saint Patrick’s Day!