There has been questions about which companies are going to be involved in DVD and where is a good place to invest to take advantage of this "revolution". If it truely is coming.
I also have had these questions and have been searching for a good investment opportunity. However, I did not want to go with the obvious. (Sony, Phillips, etc.) I wanted to find a small company that is already a solid performer with existing and new near-term technologies. And, also has the chance to move strongly, solidly and consistantly to the upside if DVD does become as big as some think it will be.
The company I found happens to be a couple of hours north of me in Ruckersville, VA. The company is Nimbus CD International Inc. I have gone through quite a bit of information on Nimbus from brokerage houses, IBD, Balance sheets, etc. They are a strong company already and are positioning themselves to be a strong player in DVD.
The article I have from IBD is an interview with the CEO, Lyndon Faulkner. The main thrust of the article is about a new anti-piracy technology NImbus has come up with for CDs (looks outstanding). As one of the first manufacturers of CDs (NImbus) Faulkner had some interesting things to say about DVD.
Faulkner states that " If you look at the fight between VHS and Beta, Players were competing for the mass market, but they weren't cutting costs. Here, everyone already agrees on the format (Last year). It will be launched as an affordable product."
He says that his expectations are for the players to come out at about $500 and for the content to be as low as $20. Not bad.
As to when this will all happen? Nimbus has already made DVDs on a test basis. Faulkner says that demand will not be to great this year but 96 is very important for positioning.
At this point in time, much of the earnings of Nimbus come from regular CD production. The New anti-piracy technology seems to have been well recieved and was given a lot of attention at the National Assosiation of Recording Musicians convention. The new anti-piracy (hologram) machines have a per machine capacity of 6.2 million cds each, annually.
The company will spend some money in late 96-97 getting ready to manufacture DVDs but the projections I have for earnings take that into account. (what they don't take into account is the potential earnings from DVD as this is unknown now)
DVDs are not the same technology as CDs, they are a bit more sophisticated. Therefore, Nimbus should be ahead of the game given their experience in the field. New companies will take quite a while to catch up. DVD players should begin rolling out late this year and then a lot of attention will be put on companies like Nimbus that supply the media.
DVDs hold four times the data as a conventional CD. What I belive will seal the deal is when REWRITABLE dvds are introduced. Probably in the last half of 97-98.
Here are some numbers I have:
ESTIMATE
eps p/e
1995 $0.38 20.1
1996 $0.51 14.2
1997 $0.69 10.8
More detailed numbers are obviously available on-line.
Do I own the stock? Yes, some. But my plan is to accumulate more with my profits from other, shorter term trades. I believe this is a stock that I can buy and not have to worry much about a big downside. At the same time it could offer big gains.
The 52 week low is 6 1/2.
NMBS is trading at about 8 1/4 right now.
Mike |
