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Tuesday, February 21, 2006

Epolin Inc. (EPLN) Links

EPLN (sec, website)

2005 10-K
2 cent dividend policy, April 6, 2006
2006 10-K
Q1 results, July 22, 2006
Q2 results, Oct 17, 2006
Chairman's pay cut, Nov 2, 2006
Q3 results, Jan 25, 2007... sold the stock

It's a small investment and a very small company. I spent a while buying shares here and there.


Would you mind pointing out what you see in this investment? From what I see, the stock is cheap but not extremely so - P/E > 10 even after removing the cash; The Chairman (upon whom you note a lot of the company relies) is 80 years old, and the kid of the gang could almost retire.
The new CEO, a marketing guy, will hopefully help increase sales, and some R&D may prove successful (though you don't seem to put much value on this). Is it the new CEO that helped trigger the purchase decision?

It's really a combination of things. First, the business is extremely profitable in terms of margins, return on equity, return on assets. That's very important. Also, I believe that there is a very large potential to increase revenues and profits by allowing a marketing person (who has strong industry knowledge) to run the business at this point. But rather than speculating, it's really showing up in the results. Third, taken overall, I like what I see from management and the dynamics of the business.

As far as the new CEO goes, it's not so much who he is, but rather what direction they've decided to take the company after many years of not even trying. In a situation like this, any reasonably competent marketing person would have a big impact. I'm not betting on a superstar, I'm betting on average or above.

The ages of the people is definitely a factor. But the field isn't "rocket science" and it's not difficult to find people with knowledge of that industry who would enjoy "putting on the lab coat" and tinkering with new projects. It's a real fun type of work. Maybe I'm biased. :-) It's true that I don't want to hear about blue sky ideas they have for the future. I have no way to evaluate that stuff and I know how much can go wrong. I'm not betting on great new innovations, I'm betting on making money with what they currently have.

I agree that it's not terribly cheap. I struggled to get shares cheap, but I didn't get all that many and the price just kept going up. I essentially ran out of cash to invest so I figured I'd just leave it where it was at and post the details up on the blog. I don't think I'll get much of a chance to pick up shares cheap in the future, so I'm giving up and leaving it as a small investment. If everything I own now goes to full value, I'll be quite the happy camper.
Hi Bruce, just wanted to drop a quick note that this looks like a great pick. I think you have identified a great underlying business at an inflection point. I'm still doing some dd and it may be too small for me but if I come across anything that I don't think you have identified I'll post it here. Thanks.
Bubby, thanks. I wasn't able to put much money into it, but some is better than nothing.
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