I increased my position in EFJ (EFJI) even though the shares have recently lost 27% in value.
CEO Michael Jalbert lowered the 2006 earnings forecast, mainly due to an order delay with the 800mhz radio system and receivers. This caused a crash in the stock price as short-term investors decided to dump the stock, but I still like EFJ as a long-term play. Shares are now on sale at around $5.60, just pennies away from its 52-week low.
EFJ is a fairly small company with a market capitalization of $165 million, which in turn makes this stock very volatile. We should look at the recent sale as a buying opportunity, as long as you’re holding this security for the long run.
The company continues to land multi-million dollar contracts, but has experienced a bit of turbulence with its recent acquisition of 3eTI. Also, non-cash stock expenses stripped away $1.6 million in profits, another reason for the 3rd quarter EPS decline.
We don’t have to panic because EFJ has been operating for over half a century and continues to book profitable communication contracts.
Now, I am anxiously waiting to read EFJ’s 2006 annual report. This will also help clarify this 3rd quarter stock crash. Until then, I’ll pick up some more shares as long as the stock stays under $6.
What makes this an attractive investment for you?
There’s a growing market for emergency radio communication, and EFJ Inc.(EFJI) has been directly effected by this increase in demand for digital radio communication.
EFJ currently holds communication contracts with domestic government agencies like the Department of Homeland Security and the Department of Defense.
To complement their domestic contracts, EFJ supplies foreign business firms with radio equipment as well. Foreign market share is rapidly growing for EFJ, making a safe claim that positive growth shall be made.
Overall, things look very positive in my opinion.