It is taken for granted in today’s world, but back in the early to mid 1980’s, I’m sure the idea of wireless modems was truly revolutionary.

Tom Kirchner, the founder and still-CEO of Electronic Systems Technology (ELST.OB) saw the future of telephone modems and struck out on his own.

Kirchner set up shop with 2 colleagues (Kirchner was the only full-time employee at the start), and joined with a local manufacturer who offered the group free office space.

As with all start-ups, the new company eventually needed more capital to test their prototypes:

“So they had office space and a manufacturer, but they still lacked the capital they needed to test their prototypes as they went through development, which is not inexpensive, Kirchner said.

In addition, at the time Hanford was shuttering N-Reactor, people were being laid off and the outlook in the Tri-Cities was not rosy. That’s when Kelso Gillenwater, who was the Tri-City Herald publisher at the time, contacted the men. Kirchner said Gillenwater was looking for positive stories for the newspaper, and felt that three men striking out on their own fit the bill.

Kirchner said the stories the newspaper did on the trio helped the men attract the attention of a group that would ultimately help them raise the money to make a go of it. The people in charge of the Spokane Stock Exchange, which at the time focused mainly on mining stocks, were looking to diversify their offerings and felt the wireless modem was a good fit.

The two-year-old company went public and was able to raise nearly $1 million through their investors. That money was instantly put into buying test equipment and helped pay for the creation of the company’s prototypes, which took about a year.”

After four long years, in 1986 the company launched their first offering, a wireless modem that retailed for $1,100, a serious chunk of money back in the late 1980s.

Eventually, ELST found a niche market selling to certain large companies, municipalities, and government agencies who need to create their own wireless networks, and continues to offer the ESTeem wireless modem product lines direct from the Kennewick facility.

A great story – read the rest of the article.




Weekend Values – April 24, 2011

Posted April 24th, 2011. Filed under Investing Links

As usual, a few of the best value investing links from the past two weeks:

Alpha Pro-Tech (APT)

Alpha Pro-Tech (APT) stock has been on a tough run over the past several weeks as reported earnings continue to be rough.

These results were somewhat expected, as the company benefited from a one-time spike in revenue in 2009 that was unlikely to be repeated – Mr. Market often overreacts in such situations.

APT’s sales mix has shifted towards the lower-margin Building Supply segment, but as Barel writes, sales in this division have quadrupled since 2007, and management seems bullish on new product lines and future growth.

Assign a 10x multiple to this segment alone (and add back the net cash balance), and the stock price appears to be throwing in the other two high-margin divisions for free!

USA Mobility (USMO)

USMO is a stock that seems to appear on many of quantitative value investing screens – and has for many months – as the stock appears to be cheap based on most valuation metrics.

USMO sells pagers and the market doesn’t seem very keen on the business’s future prospects (hard to blame the market – it’s amazing that a profitable business still exists in this market with all of the other technology available).

Yet this dynamic may provide an opportunity, as the company continues to throw off impressive amounts of cash despite the decline in sales.

However, the recently announced $160m acquisition of Amcon Software completely changes the game, as USMO will lose much of the downside protection built into a solid balance sheet.

Arden Group (ARDNA)

Arden operates a number of Gelson’s supermarkets, a high-end full-service grocery store chain, throughout Southern California.

The business has produced steady profits in the past seven years, and the business model produces extremely high profit margins (ARDNA’s net margins are around 5%, compared to a company like Whole Foods at only 2%).

On the negative side, management has no plans to expand the current store base – meaning the potential for growth is extremely limited – and eventually competition seems poised to put pressure on margins.

Read the comments for a further quality discussion.

CSS Industries (CSS)

An impressive value investing blog that I’ve been following for a few months, Tenoeight makes a case for CSS Industries, a small-cap manufacturer of gift wrap, cards, and other seasonal items.

The stock trades right around net asset value despite earning positive free cash flow in each of the past ten years. At current prices, the average free cash flow per share works out to a FCF yield of more than 20%.

Management seems to be making the right moves in closing down its U.S. manufacturing plants and sourcing many of their products overseas, but the industry is very competitive and two retailers account for 36% of sales.

However, the stock pays a nice dividend and management has shown that it’s willing to repurchase shares, making for an interesting play.


If you have suggestions for detailed analysis examples from other value investors, please drop me a line using the Contact Form.

I’m always open to ideas from other investors, especially for a thoughtful and well-researched investment articles.


No positions.

Gambling has been in the news quite a bit over the past several weeks. It started when the the U.S. government shut down the major online poker sites (including PokerStars and Full Tilt Poker), after revealing a sweeping indictment and charges of bank fraud and illegal gambling.

Recent news shows that the companies have reached an agreement with the DoJ to allow U.S. players to withdraw money that has been frozen in account since the original announcement.

What follows will likely be a long and messy lawsuit, but the fact remains that gambling, at least internationally, is stronger than ever.

Singapore opened two large casinos last year which have already generated $5.1b in the first twelve months of operations, a number that is set to grow more than 25% to $6.4b this year.

That number would pass Las Vegas to become the 2nd largest gaming location in the world, behind Macau.

According to CNBC:

Analysts say the voracious appetite for gambling among Asians and their growing wealth will drive momentum in Singapore’s casino sector for years to come. This is a stark contrast from the Strip, which has seen a slump in revenues for four consecutive months.

The 2,561-room luxury hotel Marina Bay Sands, which has a 200-meter-tall, boat-shaped SkyPark and a lavish casino equipped with 500 gaming tables, attracted more than 11 million visitors over the past year — 885,000 guests walked through its doors over just four days of the Chinese New Year holiday in February.

As a frequent visitor to Las Vegas, it amazes me that any other city could duplicate such a unique place, and yet Singapore pulling in more dollars than the entire Las Vegas Strip with only two open casinos — the growth throughout Asia is absolutely jaw dropping.

Gaming Partners (GPIC) supplies the casino chips that help facilitate all of this growth, and the company recently formed a new subsidiary, GPI Asia, to market all of their product lines to the Asian market.

Read the full article.



Hat tip to TraderMark @ Fund My Mutual Fund for the link