Avigilon Corp (AVO.TO)

(A Top Pick Aug 10/15. Down 16.87%.) Hitting their sales targets, but having a discount to pricing a little too much in some of the cameras. He was a little worried about their cash conversion rate and that they had generated cash flow which is not showing up on the balance sheet, but a lot of that was for the new plant and equipment as well as more spending on sales R&D with their new product lines coming out. Ultimately they are integrating the video surveillance market in a way that you are getting a commodity product with a fully integrated product. This company is at the front end of that. However, that and the miss on the EBITDA margins is going to cost them in the short term, so he is going to stay on the sidelines.

(A Top Pick Aug 10/15. Down 19.24%.) He likes where it is positioned. A competitor was taken out at about 20X earnings. What he thinks they do better at than everybody else is integrating their systems more, and giving more security. What has hurt in the last couple of years is that they built a new facility in the US, and it has been ramping up. While they have been doing that they have been spending a lot of money without seeing any results, so margins came under pressure and they missed a little on their earnings.

(A Top Pick Aug 10/15. Down 16.56%.) The issue has been a worry that security cameras and software products are becoming commoditized. He doesn’t think that is completely right. Security cameras are doing so much more than they used to, so people are paying more for them. The problem in the last year is that they have been building a new plant in Texas that has used up a lot of cash. Thinks the market is still positioned to grow aggressively.

(Market Call Minute) They continue to disappoint and just missed their quarter. No consistency in earnings.

The market hates a lot of things about the CEO. Has been a lot of turnover in the executive ranks. The product, high definition security cameras, seems to be good. What do you do when you have a CEO that doesn’t seem to care what everybody thinks? He would probably give this a pass.

A camera company. HiDef surveillance equipment. Some people love the CEO. He is applauded south of the boarder, but not so much here. It is a bet on management. The market wants to see earnings leverage. They have margins that are not falling to the bottom line.

There was a bit of a gap up in Feb-March which puts a floor in at $14.25. This is also above the 200 day which is really good, but it can come back down. He has an upside target of $17.50, but not a lot higher from here. It scores really high on its overall ranking in its peer group.

High-definition video cameras. Ranks fairly strong, both fundamentally and from a technical basis. They are really driving hard to get to $500 million in revenues, and thinks they are going to achieve it. He would be surprised if they come out with a dividend anytime soon. They are probably more likely to do a share buyback versus a dividend. Had owned this in the past.

Still has a small Short on this, but thinks most of the optimistic growth analysts’ projections are out of the stock. There are more realistic projections now.

He looks at seasonality. Sometimes it gets skewed forward or pushed out. We have a recent base. Some of the indicators are turning down right now.

Has gone through a corrective period and has based out over the last 6 months. Technically it is starting to improve. He likes the space in general. Earnings on this are likely to be up about 50% this year, and another 25% the following year. Wouldn’t have a problem owning this.

Chart shows that we have been in a downtrend since early 2014. There was a false breakout in late 2014, but then hit the downward trend line again and failed. Right now the stock is consolidating, which is very positive because you are no longer making lower highs and lower lows. This needs to get through $15. If $15 is broken, wait a couple of weeks, preferably 3, and then you can step in comfortably.

Just came out with quite strong earnings. Beat revenues by a good margin as well as beating earnings expectations. The 2^nd quarter in a row they have done this. They have been in the doghouse for a while. Have always had really good growth and a very strong balance sheet. Lots of cash on the balance sheet. Security systems they offer are said to be better than their competitors. Not very expensive.

(Market Call Minute.) He is watching this from a technical standpoint. He would like to see it improve before getting into it.

Doesn’t really like this story. Have a great product and earnings have been there, but there have been a number of changes in the CFO role over the last few years. That is always a cause for concern. Management has guided sometimes and then missed by quite a bit. Has been very, very volatile. Doesn’t think they have enough visibility. Management bought a building in Vancouver, and thinks they should be sticking with what they do instead. Too many red flags in this story.