To the "Thread,"
Just like Andrew Jackson said facing the British at New Orleans...
"Don't fire until you see the whites in their eyes."
Well, I think I have seen some white. Started adding to positions
today, as the stock is clearly oversold. The market loathes a vacuum,
and it still isn't clear what final numbers the third quarter will
bring, though it is obvious that inefficiencies will hurt expected
profit margins. After all, if all of your people are pushing goods out
on overtime, the cost of labor is automatically up 50% from where you
expected it to be.
Most of the problems here are from too much business too fast, and
management planning that clearly was more concerned with building the
top line with the bottom line a secondary consideration. This is
already beginning to change, and there will be solid improvement in
quarter four, and once the facilities are consolidated in quarter one of
1998, better numbers still.
It amazes me that so much stock is in such weak hands, but perhaps this
is the eventual result of the company not hitting expected numbers
several quarters in a row. From my perspective, it represents oppor-
tunity.
Don't let the technicals make you crazy. The fundamentals here are
extremely positive, and as a friend recently told me, most companies
have to worry about two things....increasing the top line, and then
increasing the bottom line. Simula (and we) already know that their
top line doesn't have to be worried about...it will be going straight
up for the next half dozen years at least. What has to be focused on
is profitability, the second half of the equation.
Management clearly sees it, and it shouldn't be too tough to handle.
Keep the faith. |
