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eMagin defense contract, Nokia schedule and more +4

11:09 27-Jul-20

A quick clarification to say that my penultimate sentence below was in a pre-election context...  GMLPP is still VERY buyable for those focused on income, and for those on the opposite end of the spectrum, BGCP remains clearly undervalued.  Eventually, BGC could do VERY well if we see supremacy of European markets over American ones, but that is still probably not a near term event.  Questions on others are always welcome.

eMagin has received a $33.6M defense contract to "increase capacity and sustain operations."  That's a big number for a company with a market cap under $80M, and this is separate from the $5.5M award announced in June.  Dividing the amount over the 33 month term represents about a 50% increase to eMagin's top line.  If you're looking to gamble ahead of the election, eMagin is worth considering on this news, especially as the stock is currently down over 8%.

However, I still like XEBEF better than EMAN for the long term.  Hopefully, Xebec's announcement of $6.3M in orders from BayoTech, for hydrogen purification systems around the world looks like a more reliable trend.  Another data point in the transformation of energy markets is AES making BNDES an offer for its share of Tiete, which signals that it intends to sell to Eneva, thereby finally ending a long negotiation.  However, I have note that AES shares have now appreciated to the point where they are more of a hold than buy for me, XEBEF is merely in buy the dips territory, even after recent declines.

Similarly, I have to acknowledge the danger of missing out on NOK.  I could easily see shares pushing toward $5 surrounding the July 31 quarterly report.  The company has announced a 5G win with U.S. Cellular, but the only quantification is for commercial availability in 2021.  I still think industrial contracts will wind up being more valuable, but again, the unspecified pace and scale of roll out is in question.  Thus, I'm willing to take the risk on missing out above $4.  Average analysts estimates have tripled recently to 3 cents of EPS, but revenue estimates have remained flat at $5.7b and even declined slightly to $6.1b for the current quarter.

The market has resumed its weak-dollar (€/$1.175) powered rise this morning, but all is NOT well, particularly in parts of the U.S.  As I've already written, expect the market to continue chopping higher until the election result looks clear.  Other factors to watch are E.U. financing of its stimulus, and regulation (or lack thereof) of Google and other big tech.  These are the companies that dominate indexes and are the best measures of the Fed propping up the market, yet that is obviously at odds with policing them effectively.  Although Intel is a special case, its earnings reaction is just a small preview of what can happen when perception collides with reality.

Though I may have been overly dour on the vaccine front, I also see no immediate value in would-be emerging economy growth like Ebix, given no progress in international relations, and remittances set for sharp declines.  At this point, the only values that I still see are VIRT, CTL and VOD.  Invest patiently.

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