I’m next going to talk about some small positions. These will be comments on five stocks which are all less than 1% positions, which is truly tiny for me They are:
First, PSIX, a maker of alternate fuel engines. I originally got into PSIX at the end of March 2013, buying at prices between $26 and $31, (and that’s when I became notorious for asking why anyone would buy WPRT at $29 when they would get PSIX, in the same business, for the same price. WPRT is now at $3.60, PSIX is at $46.00. I wasn’t a genius: PSIX was solidly profitable, and WPRT, although irrationally and continuously pushed by MF, was solidly losing enormous amounts of money).
I bought some more PSIX in the $40’s in July 2013, and started selling between $60 and $74 (one sale actually at $80, but it was an outlier) in November 2013. I bought and sold a little afterwards, finally selling out completely in July 2014 in the $60’s because growth had really seemed to flatten out, in spite of their increased capacity in their new factory, and although they seemed to be doing good things, and although I really had liked the company. And they also had a very high valuation.
Then in mid-Dec (last month), I bought back the little position I have now at $45.50. The stock had fallen way back because of the fall in the price of oil, but they had gotten their first sale for on-road, which would allow them to diversify from their current market of fork-lifts, generators and stationary engines, etc. They also had had excellent Sept quarter results. In the four weeks since, the price has gotten up to $54 (from my purchase price of $45.50), and closed this week back at $46.
I am reluctant to add to the position for two main reasons. First, the continuing weakness in oil. I have no idea how long it will last, and while Solar City, for instance, is only peripherally related to oil prices, as electricity is not made by burning oil, in this country at least, PSIX’s business is probably very related to being cheaper than oil. The second reason is that this is a stock which is not very liquid and has wide spreads, and I’ve been trying to reduce my exposure to such stocks.
Here are the results of their 3rd quarter from the release. Please note that here the ADJUSTED earnings, which are a lot LESS than Gaap in this case, are still the ones to use (as always). Also note that this company is doing very well, and is now down to more reasonable valuations.
Net sales up 45% year over year, 13% sequentially
Adjusted net income of $4,365,000 or $0.39 per diluted common share
Net income of $8,431,000 or $0.68 per diluted common share
Power Solutions International, a leader in the design, engineering and manufacture of emissions-certified alternative-fuel and conventional power systems, today announced its financial results for the third quarter.
Third Quarter 2014 Results
Net sales for the third quarter of 2014 were $93,972,000, an increase of 45% from $64,628,000 in the third quarter of 2013 and a 13% sequential increase from $83,378,000 in the second quarter of 2014. Contributing to the sales increase was continued growth in the Company’s heavy-duty power generation systems and aftermarket parts sales. Also contributing to net sales in the period were sales of approximately $6.3 million from Professional Power Products, Inc. which was acquired on April 1, 2014.
Operating income was $7,519,000, an increase of 82% from $4,122,000 in the third quarter of 2013, and a sequential increase of 28% from $5,893,000 in the second quarter of 2014. Operating margin of 8.0% in the current quarter compares to 6.4% in the comparable prior year period and 7.1% in the second quarter of 2014.
“Our results this quarter demonstrate the resilience of our business model and market opportunities,” stated Gary Winemaster, Chairman and Chief Executive Officer of Power Solutions. “Solid demand across our end-markets drove strong sales growth and attractive gross margin expansion.”
Winemaster continued, “We reached a critical milestone in our on-road efforts this quarter, with Navistar’s announcement that they will use the PSI 8.8 liter engine for an alternative-fuel option in their ICC school bus product line. We believe this design win is the first of many to come and demonstrates the strength of our products and strategy. By focusing on medium duty fleets and offering a complete drop-in power system solution, we enable OEMs to introduce alternative fuel options inexpensively and quickly.”
Other income for the third quarter includes a non-cash gain of $858,000 resulting from a decrease in the estimated fair value of the liability associated with the warrants issued in the Company’s April 2011 private placement. In addition, other income for the third quarter includes a non-cash gain of $3,208,000 resulting from a decrease in the estimated fair value of the contingent consideration liability recorded in connection with the acquisition of Professional Power Products, Inc.
Net income for the third quarter of 2014, which includes the warrant revaluation adjustment and contingent consideration liability revaluation, was $8,431,000, or $0.68 per diluted common share. This compares to a net loss of $9,981,000 or $0.97 per diluted common share for the third quarter of 2013, which also includes a warrant revaluation adjustment.
Net income for the third quarter of 2014, adjusted to remove the warrant revaluation impact and contingent consideration liability revaluation was $4,365,000, or $0.39 per diluted common share. This compares to adjusted net income for the third quarter of 2013 of $2,624,000 or $0.24 per diluted common share, which has been adjusted to remove the warrant revaluation impact.
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