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: Finance.Yahoo.com

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 Overstock.com. 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.)

Weekly Wrapup: September 10-14

It was a great week for the market; the major indexes all enjoyed gains of at least one percent. Here are weekly charts, courtesy of Marketwatch.com:

Dow Chart 9/10-9/14

NASDAQ Chart 9/10-9/14

S&P 500 9/14-9/14

As the charts show, each index posted gains for the week... and if measured from the bottom of the lows on Monday, the weekly increases are even more impressive.

Moving on:

A few interesting things happened with the stocks I own or watch this week. Syntax-Brillian (BRLC), which I had a small speculative position in, first delayed earnings, then disappointed the street by revising its future outlook downward. It fell from almost $7 on Monday to $4 this Friday.

Obviously, the company should be a little cheaper, because it did revise its future estimates. However, I do not believe that this stock deserved the downfall, or will trade at this price forever. Along with the quarterly results, BRLC reported yearlong earnings of $.48/share. At the current share price, BRLC is an 8 P/E stock, which is utterly unheard-of for such a small, high-growth company. Revenue and income continues to grow quickly (just not as quickly as expected), with demand out pacing the company's ability to supply.

I doubled my tiny position around $4 a share, and I believe that this stock will trade much higher than it does today. Unless there is some massive scandal or other major unforeseen problem, based on the current numbers and market conditions, I feel as though BRLC is beaten-up and undervalued in the long term. I don't know if it's going to "pop" anytime in the near-term, but in a year, I would not be surprised if it was at $8 or $10 per share.

Another interesting happening:
I purchased a tiny position (500 shares at $.56) of an even smaller TV maker, Soyo (SOYO.OB). Other than some news about a very small stock purchase by the CEO, information about sponsorship of a fighting candidate, and a reiteration of earnings guidence (of 7+ cents/share for the year), there wasn't much news; however, the stock shot up to $.92 on Friday, before closing in the 70-cent range.

Generally, I don't invest in "penny" stocks because it's unpredictable and more like gambling than investing. However, whenever I discovered Soyo, I researched it and really liked the company - it started as a company making specialty motherboards for gaming computers, and eventually got into the LCD TV market. Now, they produce a 24" TV that has 50% market share at that size, and signed a long-term contract to distribute products under the widely-respected Honeywell brand name, starting with portable USB drives this year and including big-screen HD LCD TVs next year. I like this little company in the long run; I could care less about the daily volatility and short term gains, becuase if this work out well, this company could be worth much more in the long run.

Along with the rest of the market, most of my other positions were up, including Marathon Oil (MRO), Electronic Arts (ERTS), and Sun Microsystems (JAVA).


For the upcoming week, markets will be focused on the Fed meeting on Tuesday. The decisions concerning interest rates will surely set the tone for the week. One of my positions, Hovnanian (HOV), will definitely be effected; I'm going to have a full-article writeup about it posted later tonight or tomorrow.



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9/13 Wrapup: BRLC, SOYO, and more

The Dow was pleasantly up 130 points today, along with an almost 1% gain in the S&P 500 and a more modest 1/3% gain for the NASDAQ. The Dow was lead by Countrywide Financial, the struggling mortgage company. Today they announced that they secured an additional 12 billion dollars in financing, allowing the company to basically keep its doors open.

McDonalds was also up very strongly, continuing a multiple-session rally. To be honest, I was thinking about buying them a week ago at 48, but felt like waiting because I thought they may be overvalued... now I am uncomfortable buying at the current level. However, they just raised their dividend by 50%, adding valuation to the shares.

In my portfolio, Sun Microsystems continued its rally to close up another 3%. Marathon Oil was also strong today because of higher energy prices. Electronic Arts was up a few percent, as was CIT, a financial company that has nothing to do with subprime lending that was hurt by the financial crash during the early subprime crisis.

Heelys declined, but that's a long term play, so I'm not worried. My tiny position in BRLC, arguably the worst short-term decision I've ever made, fell additionally in the open market today after being down 25% after-hours today. However, I went with my investing instincts and doubled my position today, lowering my cost. Once again, I think this stock is super risky, but for dumb reasons; it's a solid company, but day traders and short sellers really manipulate the price and make it trade irrationally. The earnings for this year were $.48/share; it's now less than a 10 P/E company... and for such a high-growth company, I'm willing to take the risk, because BRLC shouldn't stay at this valuation once it starts behaving rationally again.

Right now, I've got September calls in Harley Davidson (HOG) and Abercrombie (ANF). Abercrombie was up nicely today, and hopefully I'll be able to get out of those profitably (I bought the contracts a few weeks ago, and the stock was marginally down for the time in between the purchase and now). HOG is simply a play on the utter destruction of that stock over the past few sessions; they altered guidance, and shares fell almost 20%. I'm hoping the price stabilizes, and I can make a small short-term gain.

Edit: Almost forgot about my new interesting little company, The Soyo Group (SOYO.OB). Yes, it's traded over the counter, but its an established company; it used to focus on making motherboards for certain gaming computers, but now it makes the most popular LCD at the 24 inch size with a whopping 50% of market share; check out the article here.

They're making money, which is very impressive for such a little company. They have big plans for the future; they're supposed to start making huge-screen HD TV's under the brand name Honeywell for 2008.

I bought a tiny position for $.56 yesterday; it closed at $.71. I was surprised by the huge jump on no news, and I'm sure its going to give up its gains in the next few sessions. But this is going to be on my long-term radar; if they can continue to grow, while producing good product, this could be a great long-term play. Look past the penny-stock assumptions; it's a real, established company that's turning a profit, not some pump-and-dump scheme like other comparably-priced offerings.