FRPT

[TerryG]

Thanks for the analysis and opinion ScottishTrader.

FRPT is being more professional in their public relations. They have announced that the Q4 2006 report will be available after the close of market on Friday, probably at their website www.forceprotection.net I will play this last card on Friday before deciding to go short.

Bullish and long is still fine. But leaving myself without a choice is not.

[TerryG]

Must have been good news. Up two points upon release. 2006 EPS 39 cents.

See attachment.

http://www.forceprotection.net/investors/sec.html

Glad I have the weekend.

TGIF.

[TerryG]

It was better than I thought. They appear to be ahead of their 2007 EPS. The year to year Congressional budget approval of contract funds is still short term, which detracts from a stable business picture.

I was making one mistake that the report did clear up. I assumed that the new construction was a new production facility. It is instead a bigger replacement for a smaller support warehouse. And it was a big mistake on my part.

I assumed that the new construction was for a new production facility to double production. One that they could not afford. Which leaves me asking, how does FRPT increase production from 100 to 200 and 300 vehicles per month? Their present facility has a quoted full capacity of 100 vehicles per month. With subcontract work by GD and AH  brings that up to 100 plus.

A conflict in management estimates but it seems they did not over expand, which is why I was going to short the stock.

[TerryG]

Good news for the year. 2006 and Q4 report with earnings on track. The rally was straight up and straight down. Before the NASDAQ listing the rally would last 3 to 5 days. Is it the NASDAQ, FRPT out of favor, or both?

Next good news for the year will be FRPT reaching production ramped to 100 plus vehicles per month. Or Congress approves Emergency budget for remaining fiscal 2007 which approves additional funds in addition to the 600 vehicles already approved for the remaining 2007.

Next management moves. Second production plant proposal. And Fiscal 2008 budget with funds for vehicles budgeted.

Still thinking of shorting. Not wanting to be contrarian if this stock remains out of favor. Going long looks like a long seven months waiting for Congress to approve funds for vehicles, then DOD dividing the contracts for them.

[TerryG]

Wednesday rally? Probably. One more card to play.


Force Protection will host a conference call to discuss results for the fourth quarter and year ended December 31, 2006 on Wednesday, March 21 at 11:00 am EDT. The call can be heard live by dialing 800-257-1836 (domestic) or 303-262-2211 (international), or via the Internet at http://www.forceprotection.net. For those who cannot listen to the live broadcast, the audio replay will be available until Tuesday, March 27th by dialing 800-405-2236 (domestic) or 303-590-3000 (international) and entering the replay passcode of 11086707.

[TerryG]

Well the bears are definitly here, leaving only trailing bulls looking for room to run.

This is where I think the market reality is:

« Reply #243 on: February 16, 2007, 04:12:55 PM »

Nineteen

"Yesterday's action was pretty rough.  I hink FRPT looks like it needs to close that gap at $16 and play with the 50MA before it will recover, despite todays more positive candle."

ScottishTrader

"Should of played FRPT short at +19.00   . Im sure will get the chance again sometime soon. Its always better to short and be in the money by a good degree after a few days in the trade."

Nullzero


ScottishTrader is right on target it is not only tracking the 50MA sideways the Bollinger Bands have collapsed it into a narrow trading range. Nullzero is right in that the short position is keeping it floating from what I hear along with a possible short squeeze pushing it higher.

Back to the management reality. This narrow trading range and downtrending 50MA are exactly the same as the September, October, and November slide of 2006. Identical maxed out production with a backlog. With the budget still in the air and hoping for additional contracts. It did not break upward until the 2007 budget cleared late and contracts came over from DOD.

Meaning they do not expect earnings to increase unless production with matching contracts appear after the budget approval.

With the bad news that most of Q4 earnings was a deferred tax benefit, not earnings on revenues. More bad news is that the 2007 Emergency spending bill with funds for additional production and contracts are likely to be vetoed. There are two versions a House and Senate version and both are likely to be vetoed.

So between whether spare funds being found and a Congressional budget approval this could be a long slide until Fiscal 2008 or 2007 Emergency budget approval. Seven or eight months instead of three.

[ScottishTrader]

Hey Terry,

Lost track of FRPT a little, but I think the chart still doesn't look like its gonna have much upside in the near future.  I think there could be a reasonably low risk short trade here, with clear upside resistance at 17.25 and 17.40.  Next real support is at 15.70-15.80.  Note on the chart how in the pullback since the January highs, we have seen 2 rising wedges develop, which are classic within a downtrend.  The first broke down sharply, while the second only just broke down on Monday.  Since then, FRPT has rallied a bit but failed to get back above the lower rail of that wedge.

If you took the more conservative stop on the short, i.e. above 17.40, the current risk (as of yesterday's close) would be less than 2%, for a potential 7.5% gain on a move to next support at 15.80.  If it does break down from here, I could see it going below $15 though.  The risk:reward profile of the trade is appealing, plus it is going with the current trend.  Also as you mentioned, the BBs are narrowing, suggesting we will likely see a near term move in one direction or another.  Barring a big new contract win or some other information, my guess is that it will be down.

[TerryG]

ScottishTrader,

Thanks for pointing out the second rising wedge. With the narrowing Bollinger bands the likely break downward looks clearer than the break upward in price. About the break upward I heard it mentioned that there may be a large short position which still needs to cover itself which may move the price vertical to 18.50. Now I understand that rumor and why he said the possibility was riskier than normal, it would be against the trends.

The one management reality that scares me the most is the risk/reward of expansion. They have just announced a new 120K sq./ft facility which will move their production from 100 plus to 400 by years end. Backed by 152 M stock issue the risk/reward looks steep.

Especially with the growing budget issue in Congress. Is congress going to fund enough to pay for this expansion? This is a real aerospace feast or famine proposition again.

Good news is that FRPT is still a likely sole source for an additional 180 vehicle contract, plus a short list share of the remaining MRAP contract funds for the year. That will tide them over until the Congressional budget breakthroughs which are dragging right now.

So I  do not worry about the lapse to 15, just the good news that will send it back up again, the bears have been winning these duals for a while.

And being a contrarian, a possible feast/famine, high risk/reward, and seven months to fiscal 2008 in October, where it will all be forced to a conclusion.

[ScottishTrader]

Hey Terry,

reversed my position on FRPT this morning when it broke 17.25 resistance.  Looks like it was a good call.  With tight BBs expanding, I think we may see a leg up here.  Resistance @ 18, 19.

[TerryG]

ScottishTrader,

Be careful it might just be short covering. My target is 18.50.

"About the break upward I heard it mentioned that there may be a large short position which still needs to cover itself which may move the price vertical to 18.50. Now I understand that rumor and why he said the possibility was riskier than normal, it would be against the trends."

[TerryG]

ScottishTrader,

This is where the opinion came from.

http://alphatrends.blogspot.com/2007/03/video-stock-market-trading-ideas-for_25.html

[TerryG]

Partial out at 18.10

[ravenquork]

David thinks it is way over valued. Do a search on FRPT or look at the stocks covered thread. I haven't looked at it recently but you might take a look at what the current margins are. their sales have been good, but If I remember correctly, they did not talk about margins in any of there forward looking announcements.

[ravenquork]

FRPT broke the $18 resistance and the upper trend line today. Is this going to hold?

[ScottishTrader]

Hey Terry,

Yes I follow alphatrends as well from time to time - he's pretty god in his analyses.  As for FRPT, I'm real glad I got on the right side of the trade and reversed my position.  Today was a lot more than I was expecting and we got a solid breakout from the falling wedge consolidation of the last few months on nice volume.  As we have mentioned before, the BBs wers contracting, suggesting an upcoming move, and I anticipate we should (hopefully) see some continuation here.  The expansion of the BBs on both sides makes me think this move could be significant.  Provided FRPT doesn't get smacked at $19, I could see it pushing $21 again, given momentum.  Personally to me this looks like more than a relief rally (I think it was fueled by the senate passing the emergency military funding bill?).

I think I will be conservative and hold my stop just below 17.40 for now, but hopefully $18-18.30 resistance band will now become support.

Have to say, I'm glad I'm wrong - I always prefer to be long a stock rather than short it