GEO Investing

Our decision to add to our long position in Lakeland Industries Inc. (NASDAQ:LAKE) on September 11, 2015 at around $9.50 has paid off.  Shares are up in strong reaction to Q2 2015 results that were released after the market closed yesterday, briefly reaching $12.73 in early market trading, or 35% from our original call. Our GeoInvesting Premium Members will be kept abreast of our latest moves with respect to Lakeland shares.

Out-sized Investment Gains in Lakeland Stock in Just Six Days

This opportunity is a perfect example of  how digging into places that many investors ignore, or are just not aware of, can lead to out-sized investment gains. YouLakeland shares up don’t always have to be a “guru” to make money in the market, sometimes you just have to put the work in and know where to look.  We call this information arbitrage; an opportunity that arises when public information is available that has not been fully or properly digested by market participants.

Seven months after closing our long position in LAKE, where we locked in over 100% returns,  we re-established a long position in LAKE at $10.47 on May 19, 2015, after the company reported strong Q4 2015 results. Shares quickly rose to $12.86 before retracing in the midst of market volatility and there were some comments in the Q1 CC that investors may have interpreted negatively:

“While we are reporting on a quarterly basis, and showed strong growth in revenues and profits for the last two quarters, we need to emphasize the importance of taking a longer-term view when contemplating our prospects.

We saw traditional organic growth as well, as incidental growth from the Ebola outbreak. These incidental catalyst to our business, while not considered to be recurring or traditional in nature, are occurring on a somewhat frequent basis, and are often significantly incremental to our traditional growth.”

On Friday, September 11, 2015 via premium tweet, we stated that we were adding to our long position in LAKE based on the information arbitrage opportunity presented in its NT-10-Q filing.  The company had stated it expected “significant” increases in revenue and income.  Yesterday, after the close, LAKE reported its Q2 2015 results:

  • Sales of $29.5 million vs $22.8 million in the prior year and ahead of analyst estimates of $26.03
  • EPS of $0.50 vs $0.09 in the prior year and crushed analyst estimates of $0.28

Again, the company offered some guidance that can be perceived as cautious:

“Our consecutive quarterly growth rate, while not sustainable at the very high levels achieved during the first half of this fiscal year, demonstrates the leverage in our business and our enhanced presence in a total addressable market valued at nearly $7 billion globally.”

However, LAKE for the first time we can remember, has given a bullish longer term growth outlook:

“This plan is focused on long term growth in sales and profitability.  Supported by the visibility afforded by our recurring customer base, our goal is to deliver an approximate double digit compounded annual revenue growth rate for the foreseeable future, which may further increase with the contributions of emergency events in any given year.”

In related news, Craig-Hallum raised its LAKE target price to $21 from $19.

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