Monday, December 10, 2007

My Favorite Way to Spend a Dollar

Though I tend to avoid "penny stocks" (and, generally speaking, I'd advise others to do the same), there's one company with a lowly share price that is better than its label.

The Soyo Group (Soyo.ob) is a tiny electronics company with a bright future.

Soyo.ob Chart:

Soyo makes lots of different types of consumer electronics. They began making high-performance motherboards and other specialized parts for computers, and have since branched out into other products. Currently, they make products like bluetooth headsets, USB flash drives, and other devices that they can sell cheaply and competitively.

However, their current cash cow is LCDs. They began producing LCD monitors for computers, and sales took off - during a particular week in August (and, I'm sure it represents a broader trend), Soyo's 24-inch LCD was the bestseller throughout the country, beating Samsung, LG, HP, and others. (Soyo had 50% market share; the press release can be read here.)

They now sell a wide range of monitors at multiple big-box retailers, including OfficeMax, OfficeDepot, and Fry's, along with multiple other retailers. They also sell products via the internet, including Here is a Soyo monitor at Overstock; check out the great reviews.

The most recent and potentially lucrative development is a partnership with Honeywell to produce large LCD TVs under the Honeywell brand name. This should help Soyo continue to grow sales; attractively-priced TVs and monitors will now be available under a name consumers know and trust, not some mysterious discount brand. They are debuting some Honeywell monitors in early 2008, followed by larger TV's throughout the year.

The LCD market is certainly competitive. However, Soyo's products have been reviewed very well, and as Americans are watching their pocketbooks as the country is becoming economically challenged, they might be more eager to pass on a Sony TV or a LG monitor if a cheaper alternative is available.

Soyo is also growing at a feverish pace. Net revenues increased by 124%, to $24,202,395 in the three months ended June 30, 2007, compared to $10,787,515 in 2006. They reported earnings per share of $.05/share during the three months that ended September 30th. Their earnings during this holiday quarter should be excellent, too. So far this year, they've earned $.06/share, which gives them an 18 trailing P/E. That's already very reasonable for a company with such growth; but if Soyo can earn another nickel in the fourth quarter, or project a dime for next year, the shares will undoubtedly look extremely undervalued.

Soyo is not some pink-sheets scam corporation (at least to my knowledge). The stock is volatile, and volume is low; so beware of manipulation. I have my own money at risk on Soyo, because I believe that it is a legitimate company that's quickly growing. Since it is trading at only $1.12/share (and has a $50 million market cap), there is tremendous potential for growth in such a tiny company. But, the dangers of investing in a company like Soyo are much higher than with a larger, more established company; as always, do not invest money that you cannot lose. However, as long as Soyo's books aren't cooked and they continue to grow their brand as they have thus far, I believe Soyo could be a ten-bagger over the next few years. Who knows - maybe in a decade, a Soyo might be as commonplace as a Sony.

(Full disclosure: Author is long Soyo.ob . Additional note: Trading in over-the-counter securities is very risky. My advice is not meant to be traded on, and I am not a registered investment adviser. Always do your own research, and you are solely responsible for any investment decisions.)

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