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| Symbol | Sector | Return | Exposure | Trades | Last Trade | Status | |
|---|---|---|---|---|---|---|---|
| CRDN | Defense | -50.11% |
|
6 | 10-Jun-08 | Currently Holding |
01-May-08
CERADYNE [CRDN]
Holding Rationale for CRDN.
I'm going to keep this one short.
This is mostly a pure valuation play for me, though I also like the companies main product, ceramic armor.
At ~8x trailing and forward P/E, CRDN trades at a steep discount compared to larger defense companies (GD, LMT, NOC, RTN, etc.) which trade in the 14-16x range. And though CRDN has had a somewhat shaky year and the outlook for 2008 is relatively flat, I believe this company has much more room to grow than it's larger peers. It has it's niche, ceramic armor, which is being used more and more often in protective vests and armored vehicles. Additionally, there is a large potential growth catalyst for the company - it is working with cooperation with Oshkosh Trucks to provide vehicles under the MRAP program. No contracts have been awarded so far, but are a very real possibility and could add $0.50 EPS.
A pull out of Iraq is certainly not a positive for the Company; however, as Motley Fool (actuually not a big fan of that site) point out:
"Rather than let its fate be decided by the Pentagon's whim, however, Ceradyne continues to expand its product offerings on the civilian side. For example, management predicts that its new 200,000-square-foot factory in Tianjin, China, will come on line within the year, and when it does, it will triple Ceradyne's capacity to produce ceramic crucibles used in cooking up polycrystalline silicon for photovoltaic solar cells. These should find a ready market among polysilicon producers such as MEMC Electronic Materials (NYSE: WFR) and Corning (NYSE: GLW) subsidiary Hemlock Semiconductor, who cook up the silica used by Chinese solar-panel makers such as Suntech (NYSE: STP), Sunpower (Nasdaq: SPWR) and Trina (NYSE: TSL)."
I bought in at $29.5 and $34.5, looking to ride it to $50.
Guess that was not such a short post after all.
05/08/08: My stop was hit on CRDN at $38.50, will be looking to re-enter though.
Posted at 13:08 in Holding Rationales | Permalink | Comments () | Top
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