I started accumulating today at 3. I plan to buy more over the next few months to replace the position I dumped when we broke 7.
I'm accumulating based on core communications revenue. Once we get 4Qs away from the AMSC revenue, we'll begin to see steady revenue growth again. I expect that will happen by 4Q 98 or 1Q 99. I don't really expect spectacular growth, but enough to warrant accumulation here. Neither do I expect to make a quick buck. I suspect this will be dead money for a while, but that will give me time to buy more. I've got a three-year+ time frame.
In addition, margins should stabilize by 3Q or 4Q 1998, bringing us back to profitability. KVH has always had fat margins and impressive marketing/distribution for such a small company. Last Q's missed number doesn't really faze me; KVH is in uncharted waters with this transition, and due to the small number of shares outstanding it's easy to miss by a few cents (three to be exact). I think it's clear that KVH missed the number not because its products stink, but because they were paying a bunch of FOG people who weren't yet generating or selling any products yet. That should change by 3Q 98, or 4Q at the latest.
Also, I find the valuation here difficult to deny. I'd be surprised if it went much lower (although I've been wrong many times before!). PE is irrelevant due to substantial expenses associated with FOG acquisition. PSR is a better gauge, and based on non-AMSC revenue it currently stands about 1. For a tech company that manufactures high-margin products with proprietary technology, I'll take that kind of PSR any day.
From a technical/psychological perspective, it appears that we have total capitulation by investors. The break to 2 1/8 a while back and the quick snap-back to about 3 appears to have marked the bottom. Finally, with the expection of yesterday's unexplained spike, volume has been unusually light, even for this lightly-traded stock. Investors appear to have totally lost interest. Heck, this is the first post on SI since mid-Feb. All the things I look for when I bottom-fish :o)
All MHO, of course. I'm interested in hearing some comment/debate on KVHI.
RK |
