I am going to speculate upon Mr. Rykhus' strategy and progress. For the first time, really. I had not felt comfortable doing it until now. I've commented at length about the increase in overhead and staff support at Raven. Now I suggest that it was probably the only real good option Dan had for improving on what Moquist had built. I don't think there was sufficient additional efficiency gains possible for the infrastructure and business plan which Moquist had so successfully implemented.
But the Applied Technology division had begun a number of initiatives which were more Rykhus than Moquist and had done rather well with them. One was the emphasis on overseas sales. Another was a bold step into the world of technology. Also a dangerous step, but really the only really good way to improve the company.
Now, instead of managing production people, Raven is trying to manage engineers.
I visited the new building in Austin housing Raven's staff here. Saw very little except that it is an owned building of 2 stories which could house perhaps 100 engineers. The person at the front desk was also a project manager. Since she was sick last week, no one for sales or operator answered the phone. I did not try marine services, but am quite sure that phone would have been answered.
Raven is trying to be at the forefront of electronic surveillance and positioning technology I would guess. And the hiring of Burkhart was an early step in that direction. Rykhus is not an enginiseer as I recall, but he is capable of manageing a company dominated by them. I hope.
But engineering companies are all the rage. I suspect the numbers of engineers coming out of our universities and colleges are way up and a lot of the great corporate successes recently have been from engineering companies. QCOM, AAPL, GOOG, INTC, etc plus myriad small startups with some creative idea for software or hardware.
If my speculation is right, the question now is, can Mr West and Mr Rykhus and Mr. Burkhart manage these engineers. Or will they just become a drain on the fundamental manufacturing profits which Raven has proven capable of managing so far. I'm betting they pull it off, at least to the extent that I can get out of the stock at a profit if earnings become even more unpredictable than they are so far.
But if Raven is truly able to produce excellent engineered solutions to various problems related to their existing businesses, they may move on to a new level of respect. It's much harder for me to gauge the level of loyalty and talent the new Raven is trying to manage. I'll have to wait for the numbers.
I don't have any fresh insight into that possibility. It seems to me that most of the sales during Katrina and Haiti were through FEMA though I don't really know that. Could have been through the GSA (general services administration) which used to be sort of a negotiating/contracting arm of the government used by many branches to buy supplies of a fairly routine nature. If that was the case, they might keep a stock in a warehouse someplace for any number of bureaus/agencies to order a few each quarter. Those are pretty routine types of contracts which I suspect Raven finds unprofitable.
But a big, sudden requirement would be a chance for Raven; if they had some excess capacity. So the question to me would only be whether or not there is a big need for that type of reinforced temporary tarp all of a sudden. (All of a sudden?? What a strange phrase. I should call that public radio program about it). In any case, engineered films is already producing outsized operating profits and so I don't really expect that such a sale would improve their results that significantly.
I am surprised by a 4% drop in price this morning when nothing else in my portfolio shows that precipitous a decline. Again, we had a large unexplained run-up in price largely due to 8 years of consistent overachievement of goals under Moquist, a period of economy wide retrenchment through which Raven performed very well relative to other manufacturers, and then an assumed resumption of the growth pattern. Two years of excellent reported results while Rykus was CEO/president which could have been the result of released potential energy and which began a period of large spending/expansion and reorganization which we don't yet have a reading on regarding success or failure. Or somewhere in between.
Maybe that large unusually large drop in price this morning has disappeared while I've been writing. But the fact that it happened at all a week before earnings rather suggests that someone is afraid they may be weak. I guess I think that as of my post last night in fact. It almost looks like I'm influencing the market with my thinking on this board--and that would be true insanity on my part. Raven is a big company nowadays and even guys like Piper don't have much influence on the price. IMHO. L.
Think the RAVN stock drop might be related to several items: fiscal cliff, increase in dividend tax in 2013 and people selling in advance of that, not knowing the effect of RAVN sales to government and how that might be affected by senate group of eights mandated automatic cuts if cliff is not avoided. Based on what we have seen these poloticians could not agree what to have for lunch let alone make rationale tax decisions
Yes, that sharp break has moderated and looking at the daily or weekly chart, it does look like there may have been a couple of large sell orders which dominated the market for a few minutes. 20,000 shares followed by quite a few minutes later twice in the last two days. I don't know anybody who would sell at a price so far down from it's recent high, but those mutual funds do some amazingly dumb things sometimes. Or maybe Mr. Moquist just needs a lot of cash for some benevolent project "all of a sudden". Best, L.