Armor Holding: Portfolio Defense
04/23/2004 12:00 am EST
"Is the bull run over?" asks Vahan Janjigian, editor of the Forbes Growth Letter . "We think not. Last month's sell off was likely due to factors such as the Madrid terrorist attacks." Meanwhile, his latest buy is involved in military defense and security.
"Armor Holdings (AH NYSE) makes security and protective equipment used primarily by law enforcement agencies and the US military. The products segment is best known for its concealable and tactical body armor such as the bullet-resistant vests, hard armor, belts, handcuffs, less-lethal ammunitions, anti-riot products, and police batons. The security segment provides ballistic and last-protection armor for military and commercial vehicles. Military applications include protections against piercing ammunitions, airbursts, and mine blasts. The company also installs weapon turrets and mounts, door locks, and shock absorbing seats. It manufactures an armored and sealed truck cab capable of launching missiles. It is the sole provider for up-armoring the US Army’s Humvees, currently deployed in Iraq.
"The war on terrorism and the heightened emphasis on upgrading and increasing domestic security have become priorities since the Sept. 11 attacks. In response, Armor Holdings has taken a number of strategic steps which helped boost revenues by 20% in 2003 to $365 million. The company is expecting strong growth in both the top and bottom lines in the current year. It projects revenues to be up more than 75% to $650 million. The US government is the company’s largest single customer, responsible for more than 40% of 2003 revenues. This exposes the company to the risk of material changes in spending patterns due to budgetary constraints. The firm may also be subject to liability issues stemming from a product’s failure to protect an individual as intended. The stock has tripled in the past year, but we expect it to go higher. Given its favorable prospects, strong demand for its product, and a record backlog, this company is on its way to bigger and better things."