Diary of a Financier

Quant screen: Low Enterprise Value (September 2013)

In Capital Markets on Thu 12 Sep 2013 at 13:01

As I said last month, my Negative Enterprise Value screen was little changed m/m, so I refrained from refreshing the outputs.  I’ve now transitioned to a Low Enterprise Value screen, which scored the following as the highest ranking outputs on 9/3:

  1. HCI Group ($HCI)
  2. Interactive Brokers ($IBKR)- bought 8/2
  3. Argan Inc ($AGX)- watch list, new to list
  4. FXCM ($FXCM)- bought 6/21

Low EV 2013.08.30

The only new name to highlight is Argan, a heavy construction, engineering, consulting, and maintanance firm for the power industry (electrical utilities and renewable energy) and telecommunications infrastructure.   I am interested in building a position in AGX upon a pullback.  I expect to start buying upon a pullback between the $18.25 first support (-3.1% AGX daily/weekly/monthlyto 23.6% Fibonacci level) and $17.4 second (-7.6%, 38.2% Fibonacci).  Right now, AGX is contending with a Cup & Handle, which already met rim resistance at $19.5.  The weekly chart is threatening 2x bear divergence, but you can see that indicators in the daily have begun reversing that threat, with a golden cross all but assured for next week.  Its primary pattern is still a wide bull channel.

Fundamentally, AGX’s backlog was -24% q/q ($236M to 180M), so there’s pressure on their Gemma Power Systems (GPS) segment to win new, long term contracts (designing & building power plants), which is heavily dependent on the macroeconomic environment.  They have a very liquid balance sheet (85% gross cash/price), but they may require an activist investor to encourage them to unlock shareholder value (buybacks/special dividend).

AGX is a uber-cyclical name that traffics in a lot of the industries synonymous with the secular American economic renaissance.  I’ll disclose any upgrades or new positions on my trade reconciliation.

~~~~

Here’s the performance-to-date of unrealized positions still open from prior screens; buys executed 4/30 & 6/10, as specified previously; data as of intraday 9/12:

$ARII +3.52%
$FL -6.08%
$FXCM +16.98%
$GCO +2.87%
$IBKR +6.25%
$JOSB -3.19%
$SMP -1.72%

I provided a followup on my last Enterprise Value screen from 7/12 when I closed the list last month.

–Romeo

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  1. […] Argan Inc ($AGX)- watch list & Low EV screen […]

  2. […] Here’s a followup on the Low Enterprise Value screen run 9/3: […]

  3. […] – Valmont Industries ($VMI) Infrastructure/telecomm/electrical utility construction – Argan Inc ($AGX) Truck manufacturers – Navistar ($NAV) – Oshkosh […]

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