TPS Position Update – February 10, 2016

| February 10, 2016

TPS Position Update

. . . . Goldfield Corp. (NASD: GV) – Hold 

The Goldfield Corporation is in the construction business.  Its customers are electric utilities and it focuses on work in Texas, the Southeast, and Mid-Atlantic regions.

We recommended Goldfield in April 2015 at $1.67 and now it’s at $1.23.

Through the first three quarters of 2015, Goldfield revenue was up 30.2% to $91.1 million from $69.9 million.

Net income almost doubled to $2.2 million from $1.3 million.

For the past three years, with the most recently reported year 2014, topline revenues have been growing.  But so have expenses.

Here’s what we see ahead… 

Goldfield needs to operate more efficiently.  This is easier said than done, largely because weather is the wild card that determines how long it will take to complete a project. 

If Goldfield can throttle operating expenses, retain existing clients, and expand the scope of projects, it will do well.

So will the price of the stock, which has come through the recent downdrafts in fairly good shape. 

. . . . Pendrell Corp. (NASD: PCO) – Sell   

We recommended Pendrell in May 2015 at $1.02. Now it’s at $0.50.

And it’s time for us to part ways.  We are recommending an immediate sell.

Here’s why… 

The firm has revealed that some of its intellectual property assets are “impaired”.

This is a polite way of saying that they’re not worth what the company previously stated.

In this situation, we don’t see Pendrell’s management as manipulative or deceptive.  The firm lost an intellectual property rights legal battle it clearly believed it could win.

This means a hit on the balance sheet, and for Pendrell, it will be significant.

The firm is projecting an impairment that could reach $110 million.

Since this legal decision was revealed, there has been nothing from Pendrell to lead us to believe better times are ahead.  The company is regularly embroiled in legal battles over intellectual property.

We believe it is time to move on and allocate our capital to more promising opportunities where the influence of the courts on the stock’s fortune is not so extreme. 

Action To Take

  • Hold Goldfield (NASD: GV)
  • Sell Pendrell Corp. (NASD: PCO)

Category: TPS Update

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