3SOF

OFI was a stock that I picked yesterday to the 3 Stocks on Fire Portfolio (http://www.3stocksonfire.org/3stocksonfire_3sof.php)

It was up 47% yesterday on what were amazing news:

• Overhill Farms, Inc. Signs New Key National Account (http://biz.yahoo.com/iw/070125/0207307.html)
Market Wire (Thu 9:30am)

Read it all with attention because there's not just one positive development, but several.

I estimate OFI's calendar 2007 revenues at $270 M. The market cap is just $67 M, so the Price to Sales Ratio is 0.25. The Processed & Packaged Goods industry average is 1.09, so, using this measure, OFI should rise another 300% to be valued at average.

Moreover, the company is profitable, fiscal 2006 EPS was $0.34. So the earnings multiple is $4.4/$0.34 = 13. The industry average is 23. But earnings will probably grow by leaps and bounds in fiscal 2007, with this new big costumer and growth with existing costumers.

Here's the company's website: www.overhillfarms.com

I like it, 35 years in the business and 800 employees. It doesn't look like a $67 M market cap company, does it?

Unfortunately I couldn't send you an intraday alert yesterday, because that's against our policy for the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php). The stock was up an additional 5.7% yesterday on after hours. That might mean a breakway gap from the $4.4 resistance level you can see on the chart below, to a new all time high.

I'm undecided between buying at the open, or trying to grab it on a dip to close the gap. Here's how I'm going to do it: I'll add it to the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php) at the open, but if you're afraid of buying so high, try to pick it up between $4.40 - $4.50, when it closes the gap, on your own risk of missing the trade. But please, do not put orders on the pre-market that can inflate the opening price and ruin the short term momentum.

I'll sell the stock at the 3 Stocks on Fire Portfolio (http://www.3stocksonfire.org/3stocksonfire_3sof.php) on its first negative day, but I plan to hold it here on the Main Portfolio for the long term, because I enjoy the business (food will never go away) and the valuation is extremely appealing.

 HIHO   start  moving up but Volume is low. I like this stock

Quote from: stoynalina on January 26, 2007, 12:30:41 PM
HIHO   start  moving up but Volume is low. I like this stock

Hi stoynalina, this isn't the right place to talk about HIHO. This thread is exclusive to posts about OFI.

In fact I covered HIHO a few days back on the 3 Stocks on Fire Portfolio message board (http://www.3stocksonfire.org/trading/index.php?board=38.0)  and rated it with a "Long Term Positive".

I'm sure you can also find info about it on the Stock Picking Board (http://www.3stocksonfire.org/trading/index.php?board=2.0).

Thanks for your 14 days free trial, I hope you enjoy the Premium Service :)

Technical & Fundamental analysis for OFI:

http://video.google.com/googleplayer.swf?docId=-1677365007993484367&hl=en

I'll continue holding OFI.

Hmm, cant seem to load the video...

Quote from: tokyopua on January 29, 2007, 12:33:17 AM
Hmm, cant seem to load the video...

Strange. Anyone with the same problem? It works well on my computer. I may have to upload it again.

The video works fine for me. The only problem I have with OFI is that I am not in the stock, but I might fix that problem today  ;)

I wish I could find picks like this.  Nice job as always, David!  :)

I also can't see the video.  Here are 2 screenshots of what I see before trying to play it and after.  This is the first time I have had problems like this with any of the videos on 3sof.

Thanks for reporting the problem tokyopua and basonista, I'll upload that video again tomorrow before the open.

Thanks basonista, you can, OFI and much better ... but keep away from those DIET's  ;D

Quote from: David Randolph on January 29, 2007, 04:23:10 AM

Quote from: tokyopua on January 29, 2007, 12:33:17 AM
Hmm, cant seem to load the video...

Strange. Anyone with the same problem? It works well on my computer. I may have to upload it again.

It works well too in my computer ;)

Quote from: David Randolph on January 29, 2007, 05:20:19 PM
Thanks for reporting the problem tokyopua and basonista, I'll upload that video again tomorrow before the open.

Thanks basonista, you can, OFI and much better ... but keep away from those DIET's  ;D

I need the diet myself but my portfolio needs to gain some weight.  ;)  I'll buy DIET when I'm sure it will contribute to my waist line. ;D

Got the video to work finally.  Not sure what was wrong before but I kept trying it until it worked for me.

I can see all other videos on this site, but I get the same screens that basonista showed in screen shots for OFI.  Tried many times but still not seeing it.  I have Internet Explorer 7, maybe that is part of the issue?

Quote from: tokyopua on January 29, 2007, 11:10:11 PM
I can see all other videos on this site, but I get the same screens that basonista showed in screen shots for OFI.  Tried many times but still not seeing it.  I have Internet Explorer 7, maybe that is part of the issue?

Just press play...that should work.

Mine looks messed up on the first frame, but comes in clear when in play mode ;)

I've just tested the videos, both with Internet Explorer and FireFox, and they seem to be working with no problems.
Anyway, I would recommend the use of FireFox for better browsing 3SOF (and the rest of the web ;))
http://www.mozilla.com/en-US/firefox/

regards,

I've uploaded OFI's video again, let's see if this time it works on tokyopua's computer:

http://video.google.com/googleplayer.swf?docId=2954073843057775282&hl=en

(now it doesn't work on my computer either, I guess we'll just stay with the other video above and I'll write about what's on the video across the following updates for tokyopua)

I'm still amazed how OFI's market cap is just $79.56 M. But I have no doubts about this number, as I've read the form 10-Q filed with the SEC yesterday, and:

«As of January 29, 2007, there were 15,270,271 shares of the issuer's common
stock, $.01 par value, outstanding.»

Previously there were convertible preferred shares, but they retired or converted all of them in the past, so no problems with convertible preferred shares or dividends.

As I read the news and watch the video analysis again, perhaps it looks like my 2007 revenue estimate is too optimistic, but please consider the difference between fiscal and calendar year. On the video I'm talking about 2007 calendar revenues (my expectation is for $270 M), and on the press releases the company talks about a $200 M plus annual revenue rate, but it's commenting on their 2007 fiscal year, which ends in September 30, 2007.

Anyway, over this latest quarter (calendar 4th quarter, fiscal Q1 2007 for OFI), the company had $40,538,492 in revenues and EPS of $0.10.

With $270 M in revenues expected for the calendar 2007, it will probably earn $0.67 per share. This without any gross or net profit margin expansion, which will probably occur.

This means the forward earnings multiple is 7.78. The industry average is 26.52.

The obvious conclusion is OFI needs to rise to $17.76 to be valued at average by the market.

No doubt I'll continue holding OFI for the long term.

I love your viode overviews, David! Great job with those. I used IE7.0 and had to click the "play" button twice, but the video worked fine.

Your strategy for the intended long-term holding with subsequent reviews and reservations seems to be reasonable. For instance, SYX, OFI, HAUP look good so far whereas in case of MSI there may be something cooking under the water so if it becomes no longer attractive you will sell, right? I guess, that resolves the issue of the short-term vs long term. Buy for the long term and then act according to current situation and the outlooks.

Thank you!
Berloga.

Quote from: berloga on January 30, 2007, 09:26:23 AM
I love your video overviews, David! Great job with those. I used IE7.0 and had to click the "play" button twice, but the video worked fine.

Your strategy for the intended long-term holding with subsequent reviews and reservations seems to be reasonable. For instance, SYX, OFI, HAUP look good so far whereas in case of MSI there may be something cooking under the water so if it becomes no longer attractive you will sell, right? I guess, that resolves the issue of the short-term vs long term. Buy for the long term and then act according to current situation and the outlooks.

Thank you!
Berloga.

Thanks for the comment on the videos berloga, I'm always a bit afraid that my poor English spoils the fun of watching them, but I guess what matters most is the content, not the shape.

You're right, when I buy a stock for the Main Portfolio, it must be with a long term perspective. I'm not looking to do quick trades here. But then I update the analysis everyday with new technical and fundamental information and the technicals, or the fundamentals, or my ideas about the business prospects can change, so I change the trading plan to reflect those changes.

OFI went down a bit yesterday, so I took profits on the 3 Stocks on Fire Portfolio (http://www.3stocksonfire.org/3stocksonfire_3sof.php). But it doesn't cross my mind to sell it on the Main Portfolio (http://www.3stocksonfire.org/3stocksonfire.php), because the business is strong and growing, and it is selling at a very cheap valuation.

Why would I sell now if I see $10 as a possible price in 6 - 12 months?

I'll continue holding OFI as a long term investment.

OFI's two biggest clients are Panda Restaurant Group and Jenny Craig, do you know these chains?

Well, here are their websites:

- http://www.pandarg.com/
- http://www.jennycraig.com/

It's funny, this Jenny Craig is a competitor to DIET. I didn't know that OFI made dieting products ... I wonder if this is the Jenny Craig Inc that OFI talks about in their SEC filings as responsible for 30% of their revenues.

Just these two account for 65% of OFI's sales, that is, $109.2 M. Imagine if they start getting more and more of these clients, just like they did recently, bringing in about $43 M in new sales just in the first year of the contract.

Here's more information about Over Hill Farms (OFI) business: http://www.overhillfarms.com/customers.htm

When I bought OFI for the Main Portfolio, it seemed so high didn't it? Well, I'm 9.37% ahead on the trade, and it doesn't seem so high right now, does it?

The stock is still severely undervalued in my opinion. Trading at 8 times forward earnings compared to the industry average of 22.8, I guess OFI looks like a sure thing.

It feels good to own a food related business, doesn't it? Food will always be needed. And there are no technological advances there to make your product obsolete. The more obsolete, the better :)

Just keep holding OFI.

OFI made $0.39 EPS over the last four quarters, so, not counting with the new contract they just secured that by itself will increase quarterly sales by about 27%, the trailing earnings multiple is $5.30/$0.39 = 13.6.

Competitor's like Conagra Foods and Sysco are trading at 32 and 26 times earnings, respectively, and with not nearly the same growth rates as OFI.

Short term traders are taking profits on OFI, but the stock barely moves down. It is setting itself up for another bull run. Fundamentals support at least a double from the current levels.

Nothing has changed from what I wrote last Thursday:

QuoteShort term traders are taking profits on OFI, but the stock barely moves down. It is setting itself up for another bull run. Fundamentals support at least a double from the current levels.

Volume has remained high, at 338,200 shares on Friday. I expect a new bull run this week and I'll keep holding OFI.

Hoorah!! It does not get better than that ----> The T3ML with good fundamental ;) :D ;D

Nice pick David! what is the fair value of OFI?

David-outstanding pick. This proves once again how adept you are at this game. BRAVO! (uh, not BRVO) ;)

Excellent pick David. Regret I only got in with a small position.

I would also like to know your opinion abt a fair value for this one.

Quote from: jorgegr on February 05, 2007, 09:16:07 PM
Excellent pick David. Regret I only got in with a small position.

I would also like to know your opinion abt a fair value for this one.

Thanks Terliso, capricho and jorgegr :)

I expect EPS for the next 12 month period on OFI of $0.67 (it was $0.39 for the past 12 month period), the average earnings multiple of the Processed & Packaged Goods industry is 22.52, so OFI should rise to $0.67*22.52 = $15.08 to be valued at average.

But, competitors like Conagra Foods and Sysco trade at higher than average earnings multiples, with less growth than OFI, so perhaps the market should warrant an even higher earnings multiple to OFI.

But $15/share sounds fine for now ;)

I'll keep on holding OFI.

OFI had a perfectly normal correction day yesterday, touching the midpoint of the previous day's white marubozu, which was $5.63.

I see OFI reaching a price somewhere between $10 and $15 in 2007, just with the current fundamental information, so I'll keep on holding the stock, ignoring the short term gyrations, in terms of the decision making process.

I had a limit order to buy at 5.6 only one third got filled  :P
I will add some more this week. I like this stock

Thanks for the pick been in since 4.60. I track insider trades at insidercow.com
It appears the CFO has dumped most of his shares over the past 4 days.

Seems odd considering the earnings prospects.

Quote from: styriver on February 07, 2007, 08:53:06 AM
Thanks for the pick been in since 4.60. I track insider trades at insidercow.com
It appears the CFO has dumped most of his shares over the past 4 days.

Seems odd considering the earnings prospects.

You're right styriver, the CFO sold ALL his 315,500 shares the last few days. And another director, which used to hold 2,032,250 shares, sold 200,700 shares between February 1st and February 5th (he's probably still selling, but reports are not out yet).

This is an interesting situation.

My take is, CFO's, CEO's and other insiders know a lot about their companies, but they don't know much about the stock market ! They trade like everybody else, that is, they have problems when they see a stock rising too fast and rush for the exit door. But usually the trend continues ...

On every big gainer in the stock market there were insiders selling big chunks of their positions as the stock kept rising. No one is able to catch a meaningful move if he sells his position every time an insider sells his. Moreover insiders may sell, but they always have more shares, due to stock option compensation plans, stock awards and stuff like that.

I want to thank styriver for bringing up insider sales (applause), but I always play my own game, even if insider's game points in another direction.

It's curious to see how with so many insider sales the stock is holding up so well.

I'll keep holding OFI.

hi,
just my take on insider selling.
if a stock is riising in an uptrend and has had pretty good gains then selling for insiders who got their shares pretty cheaply is not a problem . they want to take profits and spend it, no doubt, for any number of reasons . (i know one insider for a company who cashed in to pay for college for her kids)
f the stock is plummeting in the other direction and everyone including insiders are dumping then there might be a problem. but this is not the case here.
i have been quiet of late, but i have been watching and learning thanks to david.
the trend is your friend . until something fundamentally has changed the trend will continue . fear is your biggest enemy in the market . take a look at yahoo boards, when a stock is rising all the fear mongers come out and tell you the sky will fall any minute now.
jmho
maxi

I fully agree with rickjust (applause).

There was this press release from OFI yesterday:

• Overhill Farms to Present at the Roth Capital Partners 19th Annual OC Conference (http://biz.yahoo.com/iw/070208/0212697.html)
Market Wire (Thu 9:30am)

And a director of the company, Harold Estes, kept on selling his shares. He sold 120,947 shares on Tuesday, Wednesday and Thursday combined.

Even with all this insider selling, OFI closed in the green yesterday, respecting the $5.63 short term support level. I bet that when this insider selling gets out of the way the stock will initiate a new bullish leg towards $7 or $8.

I'll keep holding OFI.

Now it is OFI's CEO filing a form 4 saying he sold 44,000 of his shares over the last three trading days.

But that doesn't change the fact that OFI is still an $85 M market cap company with calendar 2007 revenues expected to come in somewhere between $250 M and $270 M. Calendar 2007 EPS will probably be something like $0.50 - $0.60, or more. I consider OFI to be more than 50% undervalued at this point.

Anyway, you need to remember that, for example, the CEO still holds 234,650 shares. That's more than you do ;D

I'll keep holding OFI.

OFI can represent another personal scream of independence, as I thought differently from insiders (especially the CFO who sold all his shares) and the market, at least yesterday, said: "you're right David, the CFO is wrong".

The CFO probably has some option compensation plan that will give him some more shares at a cheap price, of course I won't cry a tear for him.

I keep seeing OFI between $10 and $15 in 2007 and I'll keep holding for that outcome.

Insiders are still selling and OFI needs some more consolidation around current levels. That's fine by me. I'll keep holding the stock.

Reports yesterday show the CEO selling just 6,100 shares, so perhaps insiders already satisfied all their personal needs, like buying a new house, car and boat, for example.

With insider's sales out of the way, OFI should reflect the fundamental improvement and start a bull run that will take shares towards the $10 - $15 level still in 2007.

This is my expectation, I'll keep holding OFI.

Insiders keep selling and probably institutional investors keep buying, as there was an SEC file out on February 16, 18:57 ET saying Harold Estes, a director, sold 63,403 shares at prices between $5.73 and $6 (http://www.sec.gov/Archives/edgar/data/1101020/000125151107000004/xslF345X02/primary_doc.xml). Don't you feel sorry for him, he still holds 1,532,250 shares, or 10.03% of the company :o

Maybe his plan is to keep 10% ownership and he's done selling.

Anyway, as I wrote previously:

QuoteI expect EPS for the next 12 month period on OFI of $0.67 (it was $0.39 for the past 12 month period), the average earnings multiple of the Processed & Packaged Goods industry is 22.52, so OFI should rise to $0.67*22.52 = $15.08 to be valued at average.

I'll keep holding OFI.

Nothing new on OFI. The company will make a presentation at the Roth Capital Partners 19th Annual OC Conference on February 22, 2007 at The Ritz Carlton in Laguna Niguel, California (http://www.easyir.com/easyir/prssrel.do?easyirid=C34856A8C870E7B2&version=live&prid=212697).

That's tomorrow, it will be nice to hear new things about the company. I'll continue holding OFI.

presentation link:

http://www.overhillfarms.com/PDFs/Overhill%20Farms_07_Roth_2.20.07.pdf

highlights attached

>:D >:D

cheers
O.

Thanks for the link La-Onda :)

The presentation talked mainly about the past and has nothing new. I'll continue holding OFI.

OFI had its $1 correction to touch support, time to move up to new highs now. This is a $96 M market cap company with more than $250 M projected annual sales and a forward earnings multiple of about 10. It should and will probably double throughout 2007.

OFI is still going through a low volume correction, since it was up about 100% in just one month or so. I see the bull trend continuing throughout 2007, because fundamentals still show a stock that is undervalued by more than 50% when compared to its industry peers.

OFI's correction is accelerating on the downside. The market cap is now just $88.8 M. The company had sales of $167 M for the past 4 quarters, and EPS of $0.39 over the same period. The trailing earnings multiple is 14.9, but we already know there will be strong growth throughout 2007, as the company added a big new costumer that will bring in about $43 M in revenues just in the first year of the agreement.

I believe that if I hold the stock through the ups and downs, I'll have a 100% plus profit to show by the end of 2007. I just need strong hands.

I'll continue holding OFI.

Perhaps I shouldn't sell OFI, since it is in the save food sector and is already cheap. But I fear a multiple contraction and general market bearishness will take good and bad stocks down.

However I'll try to sell OFI on a rally today (maybe closer to $6?) and I'll be looking to buy it back somewhere in the future.

If anybody is still holding this it appears that Harold Estes is no longer a 10% owner and (according to Scottrade's SEC filings) had a little over 1 mil shares left at the market open today..However, he had a planned sale of half a million of these and has a planned sale for another .115 mil on March 7th...

Does anybody on this board have any incling as top why all the officers and directors seem to be liquidating (all) their stock (and quickly)? I was under the impression that this was one of the safer picks ???

Well heck, I've got nothing (else) to lose tonight, please indulge me by listening to my evening ramble...

:) Yea...Even the secretary just hawked all 5k of her shares...It's just a little funny that the stock doubles in what about the last 6 weeks and everybody's running for the door... Yea, check it out...It's information that appears in my Scottrade account under "insider" info.

I can think of two scenarios... The first and the scariest one is that THEY KNOW SOMETHING WE DONT KNOW.... Perhaps they know that they will not be successful in refinancing and may have to dilute shareholder value..I have to ask, would any of them care if they did at this point? Maybe they all hate Vernen, CA so much that they just want to cash out and split...That wouldn't be a good thing either.

The second scenario that pops into my mind is that perhaps they all knew that Estes was going to dump the MOTHERLODE in weekly installments as he's been consistently doing, and they all agreed to an organized exit strategy-- I like to call it the "let the shareholders feel the panic --not us-- strategy".

I read somewhere that the parent company named Treecon (an unsavory OTC traded stock that changed it's incarnation everytime the SEC investigated it, always getting the charges dismissed, but still through some sort of smoke and mirror campaign able to instantly increase it's value by 6 fold), which Estes used to be on the board of directors of and which still owns Texas Timberjack Inc that Estes is currently president of, owed Estes a good deal of money on an early contract....Perhaps Estes is finally getting the ability to cash out on this contract from Treecon via the OFI stock that they gave him instead of cash.... I'm pretty sure that he lives in TX and it's my guess that he's more involved with being president of TTI than in being director of OFI--another reason why he may want to liquidate.

I prefer to entertain the latter scenario because once he (they) run out of shares (I think the finance guy was the first to completely liquidate), the stock value will be able to increase and, since I'm still in OFI, I don't want to lose any more money this week :)

Please feel free to tell me to shut up if you're hearing the shrill/shrieking of a conspiracy theorist rather than the canary's song coming up from the coal mine.

And yes, I am a little crazy, losing $$ does that to me :-*

My question is, in spite of all the massive insider sells, who is buying? The stock never really fell that much and why?  I bought and sold it several times and today's action makes me want to get back in.  Maybe I'm the one who is crazy?

I don't know, mbaugh, I think all of these stocks have "issues" if you look deep enough...Bottom line is that OFI seems, by the fundamentals and other measures, to be an awesome buy ??? Like I said, I'm in it now... I'll sell you my shares in a month IF the bottom falls out  ;)

http://www.amex.com/?href=/newsDetails/CmnNewsDet.jsp?id=XpressFeed_NewsDetails_1136997556001.html

OFI down today on not so good earnings.
fyi

Anybody still watching this one?  I'm thinking about buying.  Seems like it has dropped more than it should have. 

I see I was quite enthusiastic about OFI (like in most stocks I buy, of course, or I wouldn't buy them), mainly because of a revenue and earnings multiple comparison to the industry average.

Later I've learned that wasn't the proper way to make fundamental analysis, as other, more important variables had to be considered. I remember of writing about OFI later than this, an analysis not present in this thread, as I was replying a question from realcoolhead.

I'll try to find that analysis and post it in this thread. I'm just catching up with OFI's developments, I want to know what happened to this "safe" food related stock.

QuoteI remember of writing about OFI later than this, an analysis not present in this thread, as I was replying a question from realcoolhead.

I'll try to find that analysis and post it in this thread.

I can't find the analysis anywhere. Basically I believe OFI helped me understand the importance of profit margins. OFI is a very low margin business and those usually carry a below average valuation in terms of revenue and earnings multiples.

As I've read in this thread, insiders were selling heavily into that monstrous rally back in Q1 2007. Recently the CFO resigned:

• Overhill Farms Announces Resignation of Its Chief Financial Officer (http://biz.yahoo.com/iw/070830/0296896.html)
Marketwire (Thu, Aug 30)

I was expecting $250 M - $270 M in revenue for calendar 2007 and $0.50 - $0.60 EPS. Nine months into the year revenue was $152 M, so I figure the 2007 revenue will come in at about $203 M, significantly lower than anticipated, but still in line with what the company promised in the beginning of the year. I was overly optimistic.

EPS in the first three quarters of the year was about half of what I was estimating, just $0.20. I guess the full year number will be about $0.27 EPS, which puts the stock currently trading at about 12.6 times earnings, which isn't particularly cheap, giving the deteriorating EPS.

The news out on the very significant day marked with 1 on the chart below were:

• Overhill Farms Announces Record Revenues for Third Quarter (http://biz.yahoo.com/iw/070808/0287743.html)
Marketwire (Wed, Aug 8)

«Gross profit as a percentage of sales was 10.0% for the quarter, compared to 14.1% a year earlier.»

According to the CEO of the company, mainly three aspects put pressure on margins:

1) A new plant they were building and just have finished;

2) The rise in corn and corn related products, poultry and dairy products.

3) Sarbanes-Oxley compliance.

Points 1 and 3 seem to be one time events. It's interesting to know that OFI's profit margin is affected by corn, poultry and dairy products prices. I wonder where one can find information on these prices ... corn is easy, it doubled in 2007 and has been slowly coming off. The others I'll have to investigate further.

Anyway, it will be hard for me to get interested again in OFI as a long term investment, I'm more interested in higher margin businesses. But it doesn't harm to keep it under the radar :)

:57AM S&P futures vs fair value: +11.3. Nasdaq futures vs fair value: +11.0. : Stocks are looking to start the trading day on a high note.  Crude oil is up 0.4% to $88.77 per barrel.

8:45AM Overhill Farms announces former director expresses interest in acquiring co with proposed price of $4.40/share (OFI) 2.52 : Co announces that Louis Giraudo resigned from the co's Board of Directors after the close of business on Monday, February 4, 2008. Mr. Giraudo is a co-founder and Senior Managing Partner of GESD Capital Partners, a private equity firm based in San Francisco. Mr. Giraudo's firm and Citicorp Venture Capital have on two occasions together expressed a non-binding interest in acquiring all the shares of the Company, with a proposed price most recently of $4.40 per share. The terms of the GESD-CVC letter of interest sent on Friday, February 1, required an exclusive negotiation right, barring all other bidders during the exclusivity period, and acceptance of the terms by February 4, the following Monday. This followed an earlier letter from GESD-CVC, and two letters from another would-be acquirer. The co initially declined to grant the exclusivity requested by GESD-CVC, in order to maintain a competitive environment. It also declined to execute any letter of interest four days prior to the scheduled release of quarterly earnings. Mr. Giraudo said he was resigning "as a result of my disagreement with the failure of the Company and its Board of Directors to respond appropriately" to his group's most recent letter, and that the Board failed to "timely pursue this opportunity." The Company 'strongly disagrees' with this characterization.

OFI has been in a bidding war since gap 1:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44937;image)

Here's an interesting analysis from Roth Capital Partners:

Consumer Non-Durable
Overhill Farms, Inc. | OFI - $4.22 - AMEX | Buy

Strong Q1 Results May Generate Higher Bids

- Q1 revenues rose 40.2% to $56.8 million, significantly above our $47.0 million estimate, while EPS equaled $0.10 vs. $0.10, above our $0.06 estimate.

- New business from Heinz and Safeway, which commenced in Q2 last year, as well as strong growth in airline revenues, the first meaningful increase in this segment since 9/11, accounted for the sharp revenue growth in the period.

- Gross profit margins declined 310 basis points in Q1, as better than expected revenues from two major customers resulted in the company having to procure additional ingredients at inflated market prices.

- With new contracts in place at the end of the calendar year, we look for meaningful sequential improvement in gross margins over the next two quarters.

- We are increasing our revenue estimate for 2008 to $231.8 million from $215.0 million and for 2009 to $255.0 million from $240.0 million, and our EPS estimate to $0.57 from $0.52 in 2008 and to $0.77 from $0.70 for next year.

- While Overhill is being courted by two private equity firms and had a takeover offer of $4.40 per share on the table, we believe it is reasonable to assume that given the favorable operating outlook Overhill's stock price could meaningfully exceed the proposed takeover bid on its own merits within the next 12-18 months.

- While we do not believe that management necessarily is opposed to an acquisition, we now anticipate that investors will demand a significantly greater premium to the current stock price.

- We retain our BUY recommendation.

SUMMARY

Overhill Farms reported Q1 revenues of $56.8 million, a 40.2% y/y increase and well above our estimate of $47.0 million. EPS equaled $0.10 vs. $0.10, also significantly above our $0.06 estimate for the period.

Several factors accounted for the strong revenue growth in Q1. New business from Heinz and Safeway commenced in Q2 last year, and we believe that revenues from Safeway, in particular, exceeded initial expectations. Another driver of revenue growth in Q1 was airline revenues, which increased 21.7%. Airline revenues had been declining since fiscal 2001, as airlines steadily reduced meal service on most domestic flights. However, this process appears to be at an end, and a sharp increase in the amount of passenger travel accounted for the significant revenue gain in the period.

Gross profit margins declined 310 basis points to 10.5% in Q1, slightly better than our 10.0% estimate, as start-up expenses on new products and on new equipment installed earlier last year were largely put behind. The sharp y/y decline in margins resulted from revenues from major customers, specifically Panda Restaurant Group and Safeway, meaningfully exceeding original expectations. This resulted in Overhill having to procure ingredients at market prices following sharp commodity price increases. In the case of Panda, Overhill retained a portion of the business that it had expected would be diverted to another supplier, and consequently had to purchase product following a runup in poultry prices. The company now has renegotiated
prices for calendar 2008, which should result in a significant sequential improvement in gross margins beginning in Q2. Panda reportedly has agreed to a minimum of $39 million in sales for fiscal 2008, which is above original expectations but which still represents a decline from fiscal 2007 revenues. We anticipate that there is a significant chance that this revenue figure will be exceeded as a result of Panda's rapid expansion and possibly through additional products to be supplied by Overhill. On balance we anticipate that gross margins in fiscal 2008 will improve 150 bps to 11.9%, still well below the 12.8% reported in fiscal 2006. We note that any meaningful decline in commodity prices during fiscal 2008 would bolster the company's profit
margins.

On the basis of the strong Q1 results and with margins expected to improve further with new pricing agreements now in place, we are increasing our revenue and EPS estimates for fiscal 2008 and 2009. Our fiscal 2008 revenue estimate is increased to $231.8 million from $215.0 million, a 20.3% increase from $192.6 million in fiscal 2007. Our EPS estimate for the full year is raised to $0.57 from $0.50, versus $0.29 last year. For fiscal 2009, we are increasing our revenue estimate to $255.0 million from $240.0 million, and our EPS estimate to $0.77 from $0.70.

Overhill has been approached for a potential acquisition by two private equity firms. One bid, for $4.40 per share by GESD Capital Partners, required negotiation exclusivity and acceptance of the terms by 2/4. The company has not released the terms of the second bidder. Overhill had refused to negotiate further until it released Q1 results. Management's rational in this respect seems clear. Reported EPS of $0.10 in Q1, above investor expectations, with anticipated significant profit margin expansion commencing in Q2, implies that EPS in fiscal 2008 should be well above $0.50 per share, with additional earnings growth likely next year as well. On this basis, it is reasonable to assume that Overhill's stock price could meaningfully exceed the proposed takeover bid on its own merits within the next 12-18 months. We do not believe that management necessarily is opposed to an acquisition, but we now anticipate that investors will demand a significantly greater premium to the current stock price. Accordingly, we retain our BUY recommendation.

VALUATION

Our price target of $7.00 implies a P/E of 12.2 times on projected fiscal 2008 EPS of $0.57 and a projected Enterprise Value/EBITDA ratio of 7.2x. At its current price of $4.25, Overhill is trading at approximately 7.4 times estimated fiscal 2008 free cash flow. With a projected annual EPS growth rate of 15%-20% over the next several years, we believe that this low valuation is compelling, even given the company's leveraged balanced sheet and recent uneven earnings trend.

RISKS

Overhill's two largest accounts accounted for 53% of total revenues in fiscal 2007. Even given the anticipated loss of a portion of the business from its largest customer, there is no assurance that either of these accounts will be retained over the long term. Any of the company's supply agreements may be ended for a variety of reasons, including a product line being discontinued, price competition, or production being taken in-house by the customer. There is no assurance that such disruptions will be offset by the capture of new business. Also,
as poultry products account for close to 50% of total sales, a pandemic of bird flu in the United States could cause consumers to significantly reduce consumption of poultry products, which would have a negative effect on Overhill's sales and profits.

COMPANY DESCRIPTION

Overhill Farms, Inc. operates as a custom manufacturer of frozen food products. Its products include entrées, plated meals, meal components, soups, sauces, poultry, and meat and fish specialties. The company offers its products through its internal sales force and outside food brokers. It serves retailers, foodservice, and airline industries. Overhill was formed in 1995 and is headquartered in Vernon, California

My words now: OFI's downside risk is the $4.4 given by the takeover offer and the upside seems to be relatively high, given that fundamentals seem to be improving and there's a bidding war for the company. At this moment I find OFI attractive.

(I mentioned it earlier but it was just on a newsletter to subscribers. I thought I wrote something here too, but no).