Read Part I of this article here.

By Stockpickr Guest Columnist Glen Bradford

Five-Year Analysis Plays
 
NII Holdings (NIHD): With implied growth at 2.2%, analysts have this company growing faster than 20%. The next quarter is supposed to hurt, but the next year, the next two years and the next five years are "in the zone." Historically, it's been growing at a clipping 38% over the past five. It's 52-week high was $73.29, and it's currently trading at $21.90. The RSI and stochastics currently indicate that it's oversold. I concur. The earnings per share and revenue correlations on this company are really high, so I provided the revenues and my prediction curve. These fit a semi-log curve instead of the linear curve of Kinetic Concepts (just below).

 
 
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Kinetic Concepts (KCI): Kinetic Concepts, an already growing and profitable company, is filling its niche and bought LifeCell. It's P/E is currently less than 9. Sad. As far as predictable growth goes, this one is like Johnson & Johnson (JNJ), except Kinetic is growing at a clipping pace, while J&J is growing at a predictably slower pace. So there's a discrepancy here. If I were James Altucher, I'd recommend shorting J&J to buy Kinetic, but I'll save you the trouble of that nonsense and tell you to just own Kinetic instead.

 
 
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VSE (VSEC): For this company, I chose to put in a 10-year chart because it was available, but I'd like to point out that it's not a 10-year analysis play. VSE's backlog is growing as fast as its revenues, and earnings have also been growing. If you try and figure out why it is trading so cheap to begin with, the consensus is that it has to do with recent free-cash-flow figures.

There's good and bad here. The good is that VSE's No. 1 source of income is the government. The bad is that that's pretty much all it's got. It's an election year, and I don't know what the new president is going to do, but if he likes to surprise voters and go to war, you'll see this become my largest holding. Either way, VSE is growing at an alarming rate of 47% in the past five and is priced to grow at 2.1%. It has a good margin of error.

 
 
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K-Tron International (KTII): This is another company that nobody follows but that I like (along with VSE, Ebix, Xinyuan (XIN) and Gold Horse (GHII.OB)). It's priced to grow at 4.2%. Analysts don't follow it, and it's been growing earnings at 10 times what it's priced to grow them at. With a P/E of 10, it's even priced to grow slower than the average company in the S&P 500. If I were looking for a global company with financial statements that present a textbook example of a "high-growth" company that would probably be assumed to have a P/E of around 30, here it is. Only the price is wrong. But it shouldn't be for much longer.

 
 
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American Oriental Bioengineering (AOB): I'm supposed to fear the share dilution here. But even with the company diluting earnings to acquire other companies, it's pulling down earnings per share growth rates of 20%. Net incomes are growing at ballpark 50%, but a 20% growth rate is still market-beating. AOB is getting a market-beating return.

I always thought that if you could get a market-beating return on more or less money, it would make sense to make that return on more money. That's a sign of good management. This isn't the American auto industry, which is selling bonds at 30%-plus (which I heard on TV) and getting negative returns (which I knew this from financial statements and forecasts).

Back to AOB. The company is oversold. Analysts expect that this growth will continue. I expect that the overselling will not. That puts a highly predictable company in my spotlight, with a PEG ratio of 0.28.

 

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Vasco Data Security (VDSI): Check out slide 27 from its last investor presentation. Good news! Banking isn't a large part of its forecast. Also, note that it only has 207 employees, and it services "a customer base of more than 7,600 companies in more than 100 countries, including over 1,150 international financial institutions." That's 36:1, which implies its products are easy to use. Looks like they sell well too!

 

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AAR (AIR): AAR has been growing at about 25% and is priced to continue growth at 1%. Analysts have it at 15%. Since it supports the aviation and defense industries, I bet that AAR loves that fuel prices just got cut in half. My friend Chris Fernandez really broke this company down last month. Check out his "ultra-detailed" analysis.

 

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BE Aerospace (BEAV): It's implied to grow negatively at -0.8%. Sounds a lot like Manitowoc.  The last six years look better than the last 10. It's been growing at 40%, and analysts expect anywhere from 20% to 30%. Overreaction? I think so. The technical analysts might point to a triple bottom (bearish), but I'd point to that it's oversold (bullish) and that the entire market has been falling too.

 

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Arena Resources (ARD): Arena Resources has been on top of high-growth lists for a while. Analyst growth rates continue to expect growth. Its Zacks rank is 1, if that's something you follow. It's priced to market-perform. Even with the price of the barrel of oil down by half, I think this company can still beat the market. I'm waiting on quarterly results to indicate otherwise. Until then, it doesn't make sense to sell a company like this. It only fails the Piotroski perfect score because it issued new shares.

 

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Bucyrus (BUCY): Bucyrus is one of my "macroeconomic plays." First, we faced the industrial revolution, then we built cars and revolutionized transportation, and the communication age has brought us TVs and instant messaging. What's the next 10-year play? Drilling and mining more natural resources to fill our growing energy needs as well as proven clean energy companies that are making increasing profits. Bucryus should be able to capitalize on the push toward mining even more resources.

 

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Sohu.com (SOHU): This growing Internet portal in China is one of the companies I'm willing to pay a little extra to get into because it has so much proven potential and is outperforming its peers. Note the market share and that analysts forecast ridiculous growth rates for this powerhouse. Even a part-time stock commentator might like this stock and note that it's price to "fair value" ratio is 0.5. Even by my super-conservative calculations, this company is cheap; don't let the P/E fool you.

 

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Hurco (HURC): It's priced to grow at a negative -0.1%. It's a cyclical company that some claim to have peaked. Look to the 10-year; they might be right. Hurco still has larger competitors in its industry, leaving it opportunity for growth. Technically, it's in the double-bottom breakdown (bearish). Analysts could be lowering their guidance on this company. All things considered, I think it's oversold, and any technical analysis confirms. My opinion: There's enough upside to hold on. Analysts have it growing at around 11%.

 

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Click here for other high-risk plays.
 
I own XIN, NIHD, EBIX, GHII, CEDC, EJ, KCI, MTW, VSEC, KTII, AOB,VDSI, AIR, BEAV, ARD, BUCY, SOHU, NOV, HURC, CBI, PCP.

Posted on Oct. 14, 2008