TPS Position Update – July 29, 2016
. . . . VALHI, INC. (VHI) – HOLD
We recommended the stock in April at $2.17. Today, it closed at $1.86.
Valhi is primarily in the chemical business, and because of industry-wide pricing pressures, the firm has had a difficult time keeping prices stable.
It focuses on titanium dioxide products. Valhi also operates security product, recreational marine, waste management, and real estate management operations.
In Q1 2016, the company lost $19.5 million, compared to a profit of $11.9 million in 2015. The volume of chemical sales was up, but prices were down.
Valhi is riding out depressed prices for titanium dioxide, which is used as a whitening product for everything from toothpaste to plastic.
. . . . 22ND CENTURY GROUP (XXII) – HOLD
We recommended 22nd Century in July 2015 at $0.74 in May. Today, XXII closed at $0.85.
The more people who try to quit smoking, the better 22nd Century should do.
Recent research from Mintel estimates that the U.S. smoking cessation market is a billion-dollar business. Next year, smoking cessation product sales are projected to top $1.2 billion in the U.S. and $3 billion globally.
22nd Century is a plant-based biotech company that removes nicotine from tobacco through proprietary genetic engineering.
Revenues have been trending up for the past four quarters, but the company still isn’t making money. In fact, losses are growing. 22nd Century lost $3.25 million in the quarter ending March 31st, 2016.
We need to see expenses reined in, additional revenue growth, and more effective marketing and sales. It is noteworthy that the firm does not showcase a CMO, a Chief Marketing Officer or a VP of Marketing, on the management profile section of its website.
The company has solid products in an attractive business. What it appears to lack, and needs to quickly improve to drive revenue, is effective marketing leadership that can set and execute strategy.
Action To Take
- HOLD VALHI, INC. (VHI)
- HOLD 22ND CENTURY GROUP (XXII)
Category: TPS Update
