Phil Town
Phil Town

**Well folks, Jason Hawkins has just pulled up what might turn out to be a very nice gold nugget.  Read his analysis (from 2 separate emails), then go to the bottom to see what I think.

Email #1:**


Let me give this stock evaluating thing a try.  I would appreciate your feedback.  I ran a Global Search using the InvestTools website and below was the criteria:

Phase 1 :  Minimum 5 green ArrowsPhase 2:  MG/Zacks min. 3.25Price Pattern: min. 2.5Volatility : min. 2.0

I figured a sticker price of $54.01 taking into account the 50% margin of safety.  The current stock price is $22.97.  (Did I do this right???) ASVI... The stock recently got the 3rd green arrow representing a buying signal.

Recent Volume exceed 1.5x average volume and Acc. Dist Curr. is above 60 at 62.  Taking a look at the industry chart it's not much, it's not in a upward or downward trend, pretty much remaining flat.

Here is what I know about the company:

The owner is well know entrepreneur who has received numerous awards. He was the founder of both Polaris and Artic Cat which combined sold over a billion dollars.  ASV ranked 7th on Fortune Magazine's Fastest growing companies.  Caterpillar currently owns 23% of ASV Inc.  The have a remote control machine that was recently used by the military to cover rough terrain and keep soldiers out of danger, this remote control machine covers a 2 mile radius.  They just recently announced record sales and earnings. The also have partnered with Citi Financial to offer financing at the dealers.  This will provide easier methods for purchase and will also allow dealers to make some additional back end dollars on the financing. 

Looks like a good company, with good leadership and product.  They seem to moving in the right direction. What are your thoughts? Thanks in advance, Jason!

Jason H.

Email #2


This company provides rubber track loaders for all types of companies.  Their sales have been in an upward trend for 6 consecutive quarters. ASV just extended there 5 year supply agreement with caterpillar.  ASV is ranked 7th by fortune magazine as the fastest growing company in America, this is up from the 25th spot in 2004.  ASV recently joined forces to supply there rubber tracking to Vermeer a leading manufacturer in the agricultural, construction and industrial equipment industries.  ASV has also joined forces with Citi Group to offer financing options for there customers, this will not only make it easier to purchase through financing but it will also allow ASV opportunities to generate additional income through financing.


ASV offers a wide variety of rubber undercarriages for large manufacturers like Caterpillar and Vermeer.  The also have there own distribution channels of dealers all across the US, Canada, Australia, New Zealand, and United Kingdom.  This rubber tracking design that they have gives them something that is unique in the industry.  It has been said to offer better traction then wheels or steel tracks and also provides far less ground damage.  This is why they have really focused in on golf course superintendents, to provide this rubber track technology to the course with out damaging the surface.


The company was co-founded by Edgar Hetten who is know by the snowmobile industry as the "Grandfather of Snowmobiling".  This tells me that he was one of the pioneers of this industry, snowmobiles run on a similar track. So it seems that he has taken his knowledge of snowmobiles and adapted this knowledge into designing equipment that service many industrial industries. Gary Lemke is the other co-founder he brings a strong entrepreneurial background to the table, his experience is in running an Artic Cat dealership.  He was successful in developing his dealership into one of the largest dealership in the US.  First impression is that Edgar Hetten brought the idea of the rubber tracking to the table and turned to Gary Lemke to figure out how they were going to sell this concept to the public.


I figured a sticker price of $54.01.  I used the investools valuation analysis (Projected Growth Rate:27.5 filled in already, discount rate 15%, and for projected P/E used 50 because you said to never exceed 50). It gave me an estimated target price of 108.02.  The current stock price is $22.97.(Did I do this right???) It seems like a very good value, the fundamentals and technical are there showing strong buy signals.

The one thing that concerns me is that the industry is flat.  What are your thoughts?

My thoughts. OK. How about we go take a look at ASVI.

ASV is a supplier to Cat. They've been doing a good job of making rubber tracks for Cat's big equipment and they've been posting some very impressive numbers for quite a long time.  The business is decent sized - $600 million market cap (what the price is right now for the whole thing) and owned about 60% by the big guys and 30% by insiders.  Those are good number.  Kinda small for the big guys but still they are in there. 

And here's what Jason found: they are best of class in what they do.  You gotta love that.  They are expanding overseas.  They are expanding away from Cat as long as it doesn't compete with their partner.  And their numbers, as I said, are good.  Better than good, really.  Their numbers make the analysts' expectation of 27% growth look positively conservative. Equity is growing at over 35% a year.  Get outta here!

Jason did the right thing and ignored the huge historical PE.  He put on 50 which is less than historical and less than 2X the growth rate because he knows that 50 is all he's going to get as a Rule #1 investor.  And still he got a Sticker of about $100 on a business that is selling for about $20.  WOW!!!!  That big of a margin of safety doesn't come along every day.

So gang, go listent to what these guys say on their latest chat with the big guys.  Here's the web address:

That's right - we get to listen too.  How cool is that!  Gotta LOVE the internet!  Tell me what you think.  Is this thing a buy? 

Jason????  You gonna pull the trigger on this?  Maybe you ought to tell us who competes with these guys?

Now go play!

Phil Town