This Stock Could Double...
The Dynamic Wealth Report
June 4, 2010
by Corey Williams, Editor
My Grandfather lost his battle with cancer years ago. I was
still in Junior High School at the time. I still remember all the cool
antique toys he collected.
He had an entire corner of the living room dedicated to showing off his
toys. They were all heavy metal toys, not the cheap plastic things kids
play with today. Nothing was “Made In China”.
There were tractors, fire engines, police cars, and his favorite
airplanes. Floor to ceiling display shelves were stacked with items.
You see my Grandfather loved to attend auctions and estate sales. He
would bid on little items. Often buying boxes full of different items
too small to auction off individually. He would always come away with
little treasures.
It’s how he built his collection of antique toys. But he didn’t keep
everything he bought. On his way home from the sale he would stop by a
few antique stories. He kept anything he wanted for himself and sold
everything else to the antique stores. He turned a little profit almost
every time.
It’s how he made his “coffee shop” money.
He was great at turning one man’s trash into another man’s treasure.
I found a business with the same business model. Just the other day I
came across this company. And I think their stock price could double
from here.
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The name of the company is Industrial Services of America (IDSA).
IDSA recycles stainless steel, ferrous, and non-ferrous metals. They
purchase scrap metal from industrial and commercial companies. Then they
sort, shear, cut, shred and bale it. The bales of recycled goods are
sold to steel mills and other end users.
Their business is booming. Last quarter the company grew revenue by 206%
and earning grew by 127%! That’s some serious growth.
Management has done a remarkable job of positioning the company for
growth.
They’ve added capacity and developed strong relationships with the
companies who sell them scrap metal. With their current operations they
have room for “significantly higher sales with very little if any
capital outlays”.
That means as they grow their business they’ll be able to expand their
margins. They’ll be generating even more earnings and cash flow for
every additional dollar of revenue.
IDSA recently did a 3 for 2 stock split. Their goal was to increase the
size of the float. It was too small for the all of the institutional
investor interest their stock has gotten lately.
Investors have sent IDSA stock price up sharply. Take a look at this
chart.
Despite the impressive run IDSA looks undervalued to me. They have a
forward P/E of just 8.85x. The industry average P/E is closer to 20x.
That’s why I think IDSA’s stock price could double from
here.
If IDSA keeps growing… and their valuation starts looking like the rest
of the industry… The stock could be trading for $20 a share or more in
no time.
Take a look at IDSA. They’re turning one man’s trash into treasure for
their shareholders. And that’s an investment strategy my grandfather
would have loved.
• Cabot Oil and Gas (COG) was upgraded by Stifel
Nicolaus this week. They now have a buy rating and a $45 price target on
the stock. The oil and gas company is up more than 14% in the last week.
• Suntech Power (STP) was downgraded to hold by Argus this
week. The solar company is reeling from continued solar subsidy cuts in
Germany.
• Broadpoint AmTech started coverage on Simon Properties
(SPG) this week with a buy rating. The REIT is well positioned to profit
from a rebound in commercial real estate.
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