5/26 Focus Stock – Maxwell Technologies (MXWL)

My focus stock this week is a niche player in green technology – Maxwell Technologies.

Maxwell manufactures ultracapacitors. To cut to the chase, ultracapacitors can store a charge for a longer period than run of the mill capacitors. The benefit is that it makes running on electricity more viable in more situations. Read this article for a good example of how they can be utilized –
http://www.environmentalleader.com/2012/05/17/ultracapacitors-give-power-lift-to-automated-guided-vehicles

Let’s have a review of Maxwell and the recent insider transactions using my research points.

1. How many shares were bought or sold in relation to the amount owned before the transaction(s)?

The insiders who purchased shares over the past few weeks are shown below:

Who Date Shares Price Shares After Purchase
SCHRAMM DAVID 4/30/2012 5000 10.04 135,789
ROSSI MARK 4/30/2012 20,000 9.60 86,664
SCHRAMM DAVID 5/3/2012 2000 9.50 137,789
GOESCHEL BURKHARD 5/3/2012 5000 9.59 27,997
ROSSI MARK 5/4/2012 5000 9.60 91,664
ROSSI MARK 5/14/2012 5000 8.07 96,664

The key point which needs to be made here is that the last time when any insiders purchased shares in the company was December 2008, in the range of $4.50 to $4.90 per share after falling from $12 per share just two months earlier.

Further, in addition to the above purchases, on April 30 Robert Guyett (a director) exercised options for 11,000 shares ranging from $6.20 up to $7.44 per share. Now, understand, he had to pay the roughly $68,000 out of his pocket. This was done on the day the stock was trading at about $10. Normally, we see insiders immediately turn around and sell the shares which were purchased – not here, Guyett bought the shares and is holding them.

View: Very Positive

 

2. Is the stock price near its recent or long-term high or low?

The stock has hit a new 52-week and/or multi-year low almost daily for the past several weeks.

View: Negative

 

3. What do the fundamentals and earnings picture of the company look like?

The fundamentals are very good. Maxwell is a known leader in the ultracapacitor space. There is room for major growth in the market segment as there are many untapped uses in a wide range of industries. Maxwell is profitable, is experiencing good growth, the balance sheet is very clean/strong. The only possible thing which could be viewed negatively is that the stock trades at a very high P/E as profit is not huge at this time. However, revenues are growing nicely, and this is a high-tech company.

Key idea to keep in mind – the company is at the point where it’s just turned the corner from posting losses, to posting profit. With continued growth, earnings/profit will increase, that P/E is going to begin coming down, and many more people are going to be seeing this stock/company on their radar screens.

The recent earnings report showed quarterly sales up 11% from prior year, and for the quarter a profit of 2 cents/share compared to a loss of 3 cents/share in the quarter a year ago.

View: Positive

4. Are there any other items of interest that may raise red or green flags?

a) Insiders do not routinely buy shares in the company. So, the fact that multiple insiders have made purchases, and that they haven’t made any since the last time the stock fell to this level is clearly a positive signal. Should the stock continue lower, it makes the case even stronger.

b) An analyst came out with a downgrade and had negative things to say about the company just yesterday. My understanding is that this analyst did not check his facts and because he went to press with misleading information, it resulted in some havoc in the stock causing it to fall nearly a dollar per share (12%) on very heavy volume.

c) There’s only 29 million shares outstanding with insiders holding about 7.5% and institutions holding about 84% – so there’s not a lot of stock trading in the market. When buying comes back, the stock will move up swiftly.

View: Positive


Overall View: Very Positive

The bottom line here is that this is a great company to invest in. Clearly, the stock price is very turbulent right now, and with the way the market trades these days, that turbulence may well continue. However, if you look at the stock chart over the past 5 years, it’s clear that this stock is comfortable trading in the $15 to $20 range…and that was as the company was posting losses. Now, while posting profits it’s fallen 70% from the 52 week high – how much sense does that make?

I try to stay away from making stock picks and recommendations here, and simply focus on what we can infer from the insider transactions. However, in this case, if your portfolio is looking for some exposure to high tech with excellent potential for growth, this has the lights flashing and the bells ringing as a screaming buy. Maybe the stock trends lower even more from the current price ($6.96/share close on May 25), so, don’t bet the house all at once. Ease into it to accumulate your position.


Do you own MXWL? Have any thoughts on these insider purchases? Other thoughts? Let’s discuss it.


Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: