Orbit International’s operating leverage part 2

An update on my previous post where I explained the significant operating leverage of Orbit International and why I believed that it was more likely than not that Orbit would be able to take advantage of it by growing revenue.

orbt power

I now believe that it is very likely that Orbit will be able to take advantage of it. A 100% subsidiary, Behlman Electronics Inc, was awarded a 22m USD indefinite-delivery/indefinite-quantity contract last week, of which 12m USD already has been obligated. This award has not been communicated via a press release yet.

Behlman Electronics Inc.,* Hauppauge, New York, is being awarded a $21,709,300 firm-fixed-price, indefinite-delivery/indefinite-quantity contract for the production and delivery of up to 180 Common Aircraft Armament Test Sets (CAATS) and 100 Pure Air Generator System Adapter Sets (PAGS PAS) for the Navy and the governments Spain, Italy, Finland, and Kuwait.  These CAATS and PAGS PAS will be used to test various Navy and Marine Corps bomb racks, missile launchers, pylons and rocket launchers at the intermediate maintenance level.  Work will be performed in Hauppauge, New York (53 percent); and Indianapolis, Indiana (47 percent), and is expected to be completed in September 2020.  Fiscal 2016 and 2017 aircraft procurement (Navy) funds in the amount of $11,648,070 will be obligated at time of award, none of which will expire at the end of the current fiscal year.  This contract was competitively procured via an electronic request for proposals as a 100 percent small-business set-aside; three offers were received.  This contract combines purchase for the Navy ($18,452,905; 85 percent); and the governments of Spain ($868,372; 4 percent); Italy ($868,372; 4 percent); Finland ($868,372; 4 percent); and Kuwait ($651,279; 3 percent) under the Foreign Military Sales Program.  The Naval Air Warfare Center Aircraft Division, Lakehurst, New Jersey is the contracting activity (N68335-17-D-0039).

Apart from this contract award, the company also repurchased a tremendous amount of stock, showing their confidence in the future. They repurchased 348,541 shares in the current quarter and 562,473 YTD (13.4% of shares outstanding).

These recent developments, combined with the strong balance sheet make it a very good investment opportunity in my opinion.

 

 

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Please… sell me some more shares

When I invest in a company I want to make sure that I understand the company’s filings properly and that I have a good view on the sources I can use to obtain company information.

My mother tongue is Dutch, however the number of (interesting) companies trading on the Dutch stock exchanges is very limited. As a result I mostly invest in US securities. Which also have the advantage of clear reports which are easily accessible.

The disadvantage here is that my fellow investors, #competitor’s, also know their ways to find all relevant data and are part of probably the largest investment group in the world (investors who understand English). My investing edge has to come from better interpretation of available information rather than investigative work to find more information than the competition.

For US illiquid nano/micro-cap securities the disadvantages are limited from my experience. Hence, this is where I invest a large part my portfolio.

From time to time, when I can’t find anything interesting in the US, I start looking at securities on other exchanges. About two years ago I stumbled upon a very interesting liquidation play where my estimate of proceedings to investors was ~200% higher than the stock price with limited risks. It took me about a month to buy some shares. I think that the shares only trade 1 or 2 days per month. Bid/Ask spreads are often ~100% (Ask two times the Bid).

During the last two years unexpected uncertainties arose. About 50% of the company’s value became at risk. At this point I even tried to sell some shares at 50% of net asset value (NAV). Luckily for me it was impossible to do so. The Bid/Ask spread was 200% and all my sell orders were cancelled because they deviated too much from the Bid price. My broker couldn’t help it. Once you get into this stock, it is impossible to get out.

Recently the story de-risked tremendously. About 50% of the company’s net assets consists of cash at this time, which will be distributed to shareholders. The current bid is approximately 30% of the company’s NAV per share and the current ask is approximately 75% of the company’s NAV per share.

At this time my buy orders are also being cancelled as they deviate too much from the current Ask. Hopefully I will be able to buy more shares soon and share the idea on this blog.

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