It is hard to find any other ideas that are as good as CJES, VIFL, or IMAX right now.

VIFL and CJES both provide compelling values right now. VIFL’s P/E of 18.88 is still too low for its growth rate, and CJES’s P/E of 7.66 is ridiculous.

VIFL is pressed on cobalt prices, but they are loaded up for the next several years (one reason the cash flow was drained last year). They are getting good deals occasionally from Nordion, below market price. One can only hope that their prior relationship allows these sorts of deals to occur. However, even if the capital injections required for the cobalt have a substantial effect on VIFL’s cash generation ability, they have so much buffer on their cash flow that VIFL will still beat the market five years from now.

The natural gas prices have me worried. At these rates, E&P companies are pulling their rigs from shale fields. CJES has an advantage in being located in oily plays, but as other fracking companies start pulling their fleets from gas rigs, they will increase the supply of frackers for oily plays. The extra competition may drive day rates lower.

I am continually worried about a supply glut coming in fracking fleets. That is the major concern with CJES. Like I said earlier, there is no sign of that happening yet, given Q3 margins, but the supply glut in natural gas may eventually trickle back to the frackers.

In order to get clarity on the situation, I will have to wait for the conference call. I am sure analysts will ask about this. I will need to hear what management is saying about possible oversupplies in frackers. If they do not guide down, I am likely to stick with this investment until the 10-Q numbers show some sort of warning sign.

I do not believe that CJES will turn completely down within the three month time period between conference calls. No major shift in a fundamental play like this happens that fast. The entire E&P industry couldn’t shift that fast. Could it?

Where would they shift to?

The obvious answer is that E&P’s are pouring more of their energy into international and deepwater markets. Which makes me lean towards NE or RIG or ESV or SDRL. Wow, I wish I had followed my gut on a RIG speculation at 39. It was trading at book value, with a positive cash flow, share repurchases, and a strong underlying trend. Now I do not feel that my margin of safety is so intact, though I still feel that the stock is going higher.

HAL may be a better play right now. I feel that they are the most innovative in fracking techniques, and they are going to revolutionize fracking before any other company will. There may be some other smaller companies in this space that are being overlooked as well. But HAL is trading at a discount STILL because of its Macondo involvement. This cannot go on forever. Even if there was wrongdoing at HAL, it will not damage the reputation of HAL. Across the industry, it is still trusted. I need to research this more. The perception has been turning positive among some analysts. I need to decide whether or not to get shares before they get expensive.

IMAX may not provide an obvious discount anymore. If we use the income from a previous big year (2010) as a baseline for what they could do in 2012 (since they have many more theaters now, 2010 income should be lower than 2012), then we get a P/E of 28. Not exactly value investment numbers. That P/E was based on earnings that have the tax benefits backed out of them. I don’t think those tax benefits will be recurring, because 2010 was the first time I saw tax assets on the balance sheet, and IMAX used those immediately.

Is the margin of safety on IMAX gone? Where is my protection of downside risk? The stock is hovering near the top of the RSI – around 60.

But I can’t help thinking that the stock will trade up when the obvious big hits start hitting the screens. The market perception would have to get more positive when the major blockbusters hit the screens. Most of the move should be complete by summer.

Is it worth it to sit and wait?

How could I be wrong about IMAX? Will people really start shunning the more expensive IMAX theaters? Or, alternatively, do studios prefer to work with RealD rather than IMAX?

Just occurred to me that RealD might  be a discount at current prices. It is way oversold, and has been for a long time. Star Wars 3D is coming out soon, and I believe it will be very successful. RealD did the 3D technology for this, and it derives its revenue from admissions-based licensing fees. Therefore, I believe that RealD will rake in a nice chunk of change from Star Wars.

RealD is trading SOO low right now. Its 6-month trailing P/E is 25.70. That is insane. And with the Disney movies, and Ghost Protocol, there must have been substantial revenues generated this last quarter.

I will have to come to a decision on this soon. Something will happen to the stock when it announces on Feb 1.


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