The Best Surveillance Stocks

Who Do You Listen To?

The Importance of Surveillance Video

Two Surveillance Stocks

One of the truths of our modern world is that even as we have greater access to information, we also have a greater ability to tune out the information we don’t want. And who we listen to matters—a lot!

Once upon a time, all of America (it seemed) got their news from Walter Cronkite, and they trusted what he said.

Today, as we increasingly gravitate to people who share our own views, some people still get their news from CBS, but others find more comfortable ground on the right with Fox, while their counterparts are happy to tune to the liberal voice of PBS.

But there are far more choices and far more extreme voices on both ends of the political spectrum, as illustrated by this chart released by Pew Research Center last October (which measured the political ideology of viewers rather than the content of the news source.)

You can probably find yourself on here somewhere.

Me, I get my first dose of news from the Boston Globe (not on this chart) as I eat a leisurely breakfast. Since the newspaper was sold by The New York Times and bought by Red Sox owner John Henry, the Globe has become much more local, slightly less liberal and less of a mirror to the Times, and, which is a good thing in my book.

Because when I get to work, I also read The New York Times and The Wall Street Journal.

Online, I scan both Drudge Report and Huffington Post, just to get a taste of what the more rabid voices on both ends of the spectrum are saying.

I also look at for the statistician’s view, for the libertarian view, and for the British view, and LinkedIn and Facebook for my friends’ and acquaintances’ views—plus a handful of friends’ blogs.

But my mainstays are GoogleNews and GoogleFinance, which track the stocks I’m following and shows me the news associated with them. I previously used Yahoo! for that but recently gave it up—the ads were just too irritating. Still, Google is not perfect. Last week, for example, it thought I would care that DirectTV stopped using Rob Lowe in its “ubiquitous” commercials—commercials I have never seen.

Which brings me to television.

My wife and I don’t watch much TV, and we almost never watch it live. For the past 15 years (first using ReplayTV and now using Moxi) we’ve been using a DVR to record content, and to skip ads (not fast-forward, but skip) while we watch shows.

We also never watch TV news. Oh, we turned it on briefly once this winter to check out the weather during one of our epic storms, and after a few minutes of inane and repetitive content I said, “This is really annoying. Where’s the channel for smart people?”

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When you don’t watch ads and don’t watch news, you free up a lot of time during which you can, ideally, formulate your own opinions.

And ideally, to form opinions, you’ve got to have some quiet time—time to actually think.

My father liked to say he got his best ideas while shaving (it’s well known that the mind may wander fruitfully while you’re doing repetitive tasks). I don’t spend much time shaving, but I get some of my best insights while showering. Trouble is, the thrifty Yankee in me is leery of wasting hot water, and sometimes it’s a battle between the hunger for good ideas and the drive to save money.

When it comes to investing ideas, however, there’s no doubt that I get my best ideas from reading everything Cabot publishes, from the high-potential little stocks recommended by Tom Garrity in Cabot Small-Cap Confidential to the low-risk value stocks recommended by Roy Ward in Cabot Benjamin Graham Value Investor.

Which brings me to today’s stock.

Surveillance Video

Last week’s shooting in Charleston, South Carolina, once again highlighted the growing demand for surveillance video systems.

One of the most high profile names in the industry is Taser (TASR), whose stock jumped 9% the day after the South Carolina incident became public.

But Taser gets only 8% of its revenue from police body cameras. The other 92% comes from the company’s electronic discharge weapons, one of which, ironically, seems to have failed to stop Walter Scott before he was shot by officer Slager.

TASR is certainly a stock to consider investing in, especially if you’re a growth-oriented and/or momentum investor.

Today TASR is back up near resistance at 28, a level that has constrained the stock since late last year. If it can break out above that level on good volume soon, it might have a good run.

But a better bet, partly because it’s less well known, might be Avigilon, the stock that was recently recommended by Cabot’s ace value investor, Roy Ward.

Avigilon (AVO.TO) 

Avigilon is Canadian. Its revenues are slightly larger than Taser’s, its stock is substantially more cheaply valued, and its revenues are growing much faster.

Here’s part of what Roy Ward wrote in his latest message to his loyal readers.

“Avigilon is a leading designer, manufacturer and marketer of network-based video surveillance systems, surveillance cameras, video analytics and other security equipment. Customers include schools, hospitals, prisons, airports and public transportation systems.

“The company was formed in 2004 and offered shares to the public in 2011 on the Toronto Stock Exchange. Avigilon shares also trade on the U.S. over-the-counter market with the symbol AIOCF, but volume is very thin. AVO has been on a roller coaster ride since its debut in October 2011; shares soared 583% to year-end 2013, but dropped 45% in 2014.

“Sales increased 72% per year during the past two years, and EPS soared 104% per year. Earnings growth came to a screeching halt in the six months ended September 30, 2014, when the company reported a 50% jump in sales but an EPS increase of only 7%. Management explained that it has significantly increased marketing, research and employee hiring expenditures.

“Avigilon has ample resources at its disposal and no debt. Cash available is over $150 million ($3.59 per share) and current assets dwarf current liabilities at $231 million to $22 million. The ramp-up in expenditures is expected to double sales within two years. Earnings growth is expected to accelerate during the next couple of years, starting with the current quarter.

The company reported exceptional results for the year ended 12/31/14. Sales surged 46% and EPS (earnings per share) soared 62%. I expect sales to surge another 45% and EPS to soar 52% to 1.20 in 2015.

The current 24.0 P/E (price to earnings ratio) is easily justified by Avigilon’s growth prospects.”

Looking at the chart, you can see the stock’s drop in early March after the company’s most recent earnings release, and the recovery since, to the bottom of the gap. From here, the stock is likely to back off a bit, but the short-term really doesn’t matter with this stock.

What does matter is valuation. You see, a key component of Roy’s value investing system involves the stock’s Maximum Buy Price and Minimum Sell Price. You should only buy a stock when it trades under Roy’s Maximum Buy Price and you shouldn’t sell until it gets above his Minimum Sell Price—which might happen in six months and might take two or three years—and to get those prices, you need to be one of his regular readers.

Alternatively, you could just jump in now and buy it on your own—but then you wouldn’t be following a system! My opinion is you’ll be better off with Roy.

For details click here.

Yours in pursuit of wisdom and wealth,

Timothy Lutts
Chief Analyst, Cabot Stock of the Month
and Publisher, Cabot Wealth Advisory

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