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American Water
Star (AMEX: AMW) Adds Major New Customer |
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This past Wednesday morning American
Water Star announced a major new edition to their ever expanding customer
base. According to the press release, the Safeway/Vons chain
will be placing the Hawaiian Tropic beverage line on their store
shelves during the month of July in the following locations: California,
Oregon, Washington, Alaska, Colorado, Arizona, Nevada and Texas. The
stores in these states will be served by 11 regional distribution/warehousing
centers. The Vons/Safeway chain includes
1590 stores.
This is great news for yours truly.
I will now be able to buy my personal supply from my local Vons.
No more online orders and subsequent FedX shipping. This beverage line
will be showing up regularly on the shelves of a store in my neighborhood.
No doubt the Vons relationship
will probably expand beyond the four flavors of the Hawaiian Tropic
line into some of the new products. The zero carb, zero sugar drink mixers
about to hit the market come to mind as a product which will probably be
on the shelves. Start looking for mascot "Fling" at your local Safeway
or Vons.
American Water Star is beginning
to prove itself as a real contender in the ever expanding low carb revolution.
The initial shipments to 1204 Wal-Mart Superstores were snapped
up before the stores even knew the beverage was on the shelves. The distribution
within the stores was not well organized. This will change over time as
Wal-Mart
customers see the shelves resupplied at consistent locations. The computerized
automated reorder system will help improve this situation.
In the meantime, the company is expanding
with sales to the largest supermarket chain on the west coast, Vons/Safeway.
I believe American Water Star
will
make the turn to 2005 annualizing in the $100 million range,
which gives us a conservative upside target on the stock of $2.50
to $3 by year's end.
The chart is getting interesting.
Since the May sell off, the stock has made a series of higher lows on a
very shallow slope. This is a bullish sign, and bodes well for a rebound
into the $1.50 range over the short term as more sales and distribution
channels are disclosed. The stock is still absorbing supply from the funding
earlier this year. If the company continues expanding, a breakout is inevitable.
The company is getting the orders.
Ramping up the bottling and distribution are the keys from here.
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Market
Comment: Last Week's Action Calls Summer Rally Into Question |
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Alan Greenspan did not disappoint
this past week. The FED raised interest rates 1/4 point as expected, and
the market rallied the day of the announcement.
The Semi Conductor Index, affectionately
known as the SOX, poked its nose above the multi month downtrend line.
In the June
20th edition I alluded to a breakout in the SOX as a precursor for
a summer rally.
The blue circle on the chart had
me momentarily excited. The SOX index broke its downtrend line the day
of the interest rate increase, and had it breached the 490 level to the
upside on the following day I would have been chilling the champagne for
a celebration.
However, Thursday's action sabotaged
the potential breakout as the markets reversed course on the heels of negative
analysts' comments concerning prospects for the semi conductor industry.
Semi's sold off, albeit on light
volume out of front of the holiday weekend (if a tree falls in the woods?
etc., etc.) Amazingly, the SOX tumbled precisely to the support line, and
bounced, suggesting we're not ready for a big move down either.
As this index grinds into a tightening
range, we get closer to a major trend change in one direction or the other.
On the fundamental bullish side, here are some facts to consider:
-
Negative/Positive earnings revisions
announcements for Q2 of 04 have dropped by 40% over the same period a year
ago. This suggests we will see outstanding corporate results when 2nd quarter
earnings numbers are released later in July.
-
Last quarter, S&P companies soundly
thrashed earnings estimates by 8.9%.
-
Current earnings estimates for S&P
in 2005 stand at 10.1% earnings growth. The compounded operating earnings
growth rate for the S&P 500 since 1960 stands at 7%. 6% if you go back
to 1980. The "decelerating earnings" argument just doesn't hold water.
Conclusion: An easing of tensions
in Iraq will inevitably turn the market's attention back to fundamentals.
If the market can shake off the fears associated with geopolitical tensions,
look for the next major break to be North.
Expect light volume during the the
upcoming holiday shortened week. Over the next two weeks the market could
tip its hand. A summer rally could still be in the cards.
It's a good time to set aside concerns
about the market, and reflect with gratitude on the freedom we have enjoyed
since 56 brave Americans signed the Declaration of Independence on July
4, 1776.
Charts Provided Courtesy
Of TradePortal.com |
