OVTI Prediction - Write it Down!

Has anyone been following Thomas Ko in the MSN Strategy Lab challenge (Ko Entry)? The kid is uncanny. As I mentioned before, he put 50% of his capital into PFACP (frozen foods). It jumped immediately up about 40%. At the time, he said it had dropped from $20 to $5 (where he bought it) becuase they suspended their dividend. At the time, he said they were likely to begin paying the dividend again. Sure enough, last week they announced a 43 cent dividend starting shortly. They are still cheap at just $8.38. 43 cents quarterly on a $8.38 stock is a 20% annual dividend yield. I have to admit that I am tempted.

Many analysts are saying this is a good time to get defensive... is there anything more defensive than frozen foods? I know I will still want my Swanson Hungry Man dinners, whether I have a job or not! I think under $8.00 I may be a buyer... perhaps make up for some of my MFI losses. If nothing else, PFCAP is on my watchlist.... wait correction!!! PFACP.

I am hopping mad.

The rumors of OVTI's demise are greatly exaggerated. I am getting tired of Herb Greenberg and like bashing OVTI. They are down over 30% since I bought them in May and down 44% from their 52 week high. What is the cause of the demise? "Lower margins".

Here is what gets me. I can understand if you are selling diamonds and your margin drops. That is a bad thing. But if you sell diamonds and then also begin selling opals, which carry a much lower margin, causing your total margin to drop... is that necessarily a bad thing?

I say no! The goal of a company should be to be increasing profits, aka "the bottom line". Even with their margin decrease, due to product shift mix,OVTI made 39 cents per share vs 30 cents from 2005 a year ago. They are projecting revenues to keep increasing with "solid sequential Q o Q growth this upcoming quarter and through 2006 and beyond". They expect to earn between 38 and 43 cents (before FAS 103) vs the 24 cents earned in 2005. This is a company that is doing well.

Yet HG & Company keeping beating their doom and gloom drum, causing another 4%+ drop in stock price today, around $19 as I type. At $19 OVTI is a slam dunk. They will easily be $25 to $30 within a year. I am calling this blog my "OVTI Prediction - Write it Down!" so 52 weeks from now we can see how right I was/am/will be (I hope).

Split Personality: Very strange, Free To Own (aka FTO) split on June 27th, just 9 short trading days ago. Since then with no discernable news, the stock is up about 27%. Other refiners such as HOC and VLO are only up about 10%. Is the rest because of the split? I find a split to be nothing more than just optics... some people (for whatever reason) feel a $30 stock is a better buy than a $60 stock. Not that I am complaining, but perhaps I should find another stock about to split?

Ford Rearview Mirror: I am glad I sold my FORD last week at $6.10 for my quick 5% gain. It is down over 5% today to $5.32. I don't need any more anchors than I currently have.

Well, I think that is enough pixels for the night.