Armor Holdings

I first read about Armor Holdings in SmartMoney magazine. I read the magazine on a monthly basis and mark stocks within it that interest me. I'd heard multiple times on the news the complaints about Humvee armor problems in Iraq. One of Armor Holdings main business's is upgrading the armor on Humvee vehicles. Seemed like a pretty logical buy to me. Lets go through the questions.

G, what does this company do?

Quoted from Google Finance...

Armor Holdings, Inc. (Armor Holdings) is a manufacturer and provider of armored military and commercial vehicles, armor kits for the retrofit of military vehicles, protective and security products for military and law enforcement personnel, aircraft armor, aircraft safety products, survivability equipment used by military aviators and other personnel protection technologies. The Company's business consists of three business segments: the Aerospace and Defense Group, which supplies human safety and survival systems to the United States military and aerospace and defense prime contractors; the Products Group, which manufactures and sells a range of equipment to the military and law enforcement communities, and the Mobile Security Division, which manufactures, services, and integrates certified armoring systems into commercial vehicles that are designed to protect against varying degrees of ballistic and blast threats on a global basis.

G, where did you find this company?

As mentioned in the intro of this blog entry, I found them while reading my SmartMoney magazine.

G, why do you like this company?

The company appears to have a product line that is in huge demand. It also happens to be in demand by the largest purchasing power in the world (U.S government). Just browsing the headlines for AH shows a multitude of tens of million dollar contracts between the Army and AH. AH appears to have the potential for huge gains but it really comes down to them executing and delivering the products they've sold. They have had issues with deliveries and production ramp up. I'm keeping a very close watch on this as the current quarter comes to an end.

G, give me the details.

I'm keeping my running company analysis spreadsheet here. It has the last five years of Garmin and AH numbers within it currently. Here's a summary of the AH numbers and my thoughts on them.

Company	Net Sales	Percent Increase in Net Sales
AH (2001)	$197,100,000	0.00%
AH (2002)	$305,117,000	54.80%
AH (2003)	$365,172,000	19.68%
AH (2004)	$979,683,000	168.28%
AH (2005)	$1,636,930,000	67.09%

These numbers aren't as consistent as Garmin (which is something I like to see) but they are very impressive numbers. It shows a very fast growing company that went from 200 million dollars in sales to 1.6 billion dollars in sales within 5 years. Management has continued increasing production and big government contracts continue to pour in so I see no slow down in this growth for the next couple of years.

Company	Net Earnings	Percent Increase in Net Earnings
AH (2001)	14,684,000.00	0
AH (2002)	21,337,000.00	45.31%
AH (2003)	17,006,000.00	-20.30%
AH (2004)	80,577,000.00	373.82%
AH (2005)	132,510,000.00	64.45%

The profit margin obviously isn't is good for AH as it is for Garmin. (~13% vs 35%) so even though they have more sales, their net earnings are significantly lower. AH earnings are also very inconsistent but they still tell the story of a very fast growing company.

There's a lot of speculation that Armor Holdings stock may go big one way or another after president Bush reveals his new Iraq plan. I think that may be true from a short term perspective but in the long run, I think the products provided by AH will continue to be in demand.

G, what did it cost you?

I bought the stock on 9/5/2006 at $53.72 a share. It had a great run initially up to $60 a share (at which point I felt like "The Man" and made sure all of my friend knew about it). The lower profit forecast was then released and all of my gains were lost. Since then the stock has continued to be fairly volatile and as of today (12/29) is trading at 54.85. A very meager 2% return. I continue to hold out hope in this company though.

Money in the Mouth

I decided to put my money where my mouth was and invested some more in Garmin on 12/12/06. My purchase price was $51.04. That plus my initial investment in Garmin at $46.84 on 11/3/06 has now returned 14% so far (with a dividend included in there). It's current trading price today is $55.66. Not a bad return on an investment that's only a couple of months old...hold on...ok, I just knocked on some wood.

Garmin still fluctuates in stock price a bit too much for my nerves but it's still a fairly small company and stock price fluctuation occurs in small fast growing companies. I've also seen quite a few posts that day traders really like it's upward trend mixed with its volatility which tends to induce even more volatility. Overall though, it's had a very nice upwards trend since it's drop. I'll post an update once Garmin releases it's 2006 annual report.

It's time to continue on to my next investment. I actually purchased this next stock in September of this year but didn't perform a very detailed analysis on the company. Time for that to change!