Opinions
Bruce Campbell (2)
Pacific Insight Electronics
PIH-T
COMMENT
Nov 16, 2016
Stock price when the opinion was issued
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Based in British Columbia. They have a high ROE, although they haven’t had a history of it for the length of time that he would like to see. This makes the LED lights that you see in cars. Some of their customers include Ford (F-N), Caterpillar (CAT-N) and Tesla (TSLA-Q). The last earnings report was weak because they had some upfront costs launching a new product for a customer, which reduced margins. Thinks they can get back to their highs of $15, and go beyond that if they can continue to grow their earnings with a high ROE.
This does LED lighting for the auto manufacturing industry. Doesn’t think there is any coverage by the street yet. This has had a phenomenal track record of growing their earnings, and over the past 5 years it has been over 35%, and the stock is trading at less than 10X earnings. There are lots of catalysts for them.
This provides interior lighting solutions for vehicles. People want these things in their vehicles, so the demand for this type of product has really increased nicely over the last several years. They have seen a very strong pipeline for their product. A very profitable company. Just started working with Tesla a couple of quarters ago and are now working on their model 3. They are best in class in terms of the product they provide. A prime take-out candidate, as they keep continuing delivering and given the levels they are trading at.
In the automotive supply business, and focused on LED lighting. A lot of their product goes into the Ford F150 and other Ford products. Announced a couple of quarters ago that they were working with Tesla. Manufacturers are looking for ways to make vehicles lighter, and this is one of those ways. There is massive competition, and this is such a small company that its flies under the radar. It allows them to be really adaptive and to change. He continues to like this. Looking at their numbers, they always grow year-over-year, but not necessarily quarter over quarter. The last 2 quarters have been a little slower than what the market expected, so the stock sold off. This is a great opportunity.
(A Top Pick July 27/16. Down 20.13%.) They continue to execute on an annual basis, but tend to have fairly lumpy quarters. He really likes the business. They continue to get into more vehicles. They are into Ford and Tesla right now. When Tesla rolls out the new models, they’ll probably get more business. Trading at a fairly reasonable valuation.
There is no analysts’ coverage on this, which is why it is so volatile. They tend to grow annually, so if you look at them on a quarter by quarter, they tend to be pretty lumpy. That is the case at any time you are looking at auto sales. Just released earnings a couple of days ago. Two quarters back, investors were expecting they were going to match the number from the previous quarter. They didn’t, and that’s where the stock started to sell off. Their major client on the auto side has been Ford (F-N), but has Tesla (TSLA-Q) as a new client. Tesla prototypes were a little more difficult to get through and get built the way they had hoped, so it cost them a little more money, so they are going to return back to their regular margin profile. In their MD&A report they think they have $100 million revenue run rate over the next several years, which he thinks is pretty conservative on their part. He recently bought more.