Two Picks and 29 Years
10/07/2005 12:00 am EST
Congratulations to Jim Oberweis, whose newsletter has reached its 29-year anniversary. Over that period, its Model Portfolio has shown a compound rate of return of 24.4% compared to 8.4% for the Dow and 11.5% for the NASDAQ. Here’s two of his latest ideas.
"We believe that much of our success was achieved by looking in areas where others are not. Historically, we have sought out smaller companies in the US that do not tend to attract as much institutional attention. The lesson from our long-term record is that, although year-by-year results can be volatile, disciplined investors who remain fully invested in a portfolio of high-growth equities selected using our methodology have historically achieved exceptional average rates of return over long periods of time. Here are two of our latest recommendations which we believe are appropriate for risk-oriented investors:
"Bronco Drilling (BRNC NASDAQ) provides contract land drilling services to oil and natural gas exploration and production companies. Recently, Bronco announced that it intends to acquire two privately-held drilling companies for $118 million. Following the closing of these deals (expected to close in the fourth quarter), Bronco will end 2005 with a total rig fleet of 35 operating rigs and 27 additional rigs in inventory slated for refurbishment. Bronco has two refurbishment yards and expects to refurbish at least 10 rigs in 2006. Additionally, the firm is seeing ‘day-rates’ (the rates charged to its customers on a daily basis for drilling services) increase.
"In the company’s latest six month period ended June 30, 2005, sales increased 161% to $20.2 million from $7.8 million in the same period of 2004. Bronco Drilling reported net income of $3.3 million in the six months ended June 30, 2005 versus a loss in the same period of 2004. Bronco completed its initial public offering (IPO) of 5.865 million shares on August 16, 2005, at $17 per share. Clients of Oberweis Asset Management own 615,000 shares.
"Home Solutions of America (HOM ASE) provides restoration and specialty interior services to residential customers in California, Texas, Florida, Mississippi, Alabama, and other southern states. Services include mold and asbestos remediation, indoor air contamination removal, granite and cabinet installation, carpet cleaning, air duct cleaning, and fabric protection services. In July, the company launched the first phase of a program to sell and install granite for a ‘Fortune 50’ national home retailer; the program will expand to additional locations over the next year.
"In September, the company announced that it had acquired Florida Environmental Remediation Services, which is actively involved in disaster recovery activities in Louisiana, Mississippi, and Florida. In the company’s latest reported second quarter, sales increased 116% to $16.1 million. Home Solutions reported earnings per share of $0.04 in the latest reported second quarter versus $.02 in the same quarter of last year. Clients of Oberweis Asset Management own 366,000 shares."
The key risk-on and off drivers today are the same – U.S. politics, global growth, other centr...