Zachstocks With a Nice Review of One of My Smaller Holdings: Bolt Technology (BTJ)

Fellow blogger Zach from Zachstocks.com has a nice write up of Bolt Technology (BTJ) one of the stocks in the sub 1% category of holdings in the fund. The thesis for both of our views is the same, and I have been trying to identify the parts of the supply chain that could most benefit from what I see as an upcoming crisis over the next decade in oil supply/demand - thus far this has led me to select oil service plays, deep sea oil drillers, and seismic companies of which Bolt Technology could loosely be associated with.

• While not actively involved in the drilling process, Bolt Technology (BTJ) has a key part in the process by selling seismic equipment to used to chart the ocean floor and determine where exploration should take place. The company is fairly small with only a $251m market cap, but it sells products to large exploration companies and has grown earnings at triple digits for the last 4 years.
• Specifically, the company sells giant air guns that are towed behind exploration ships. The guns emit a percussion which sends sound waves off the floor of the ocean and the ship measures the return pattern which gives it a detailed picture of the ocean floor. BTJ sells each gun for a price between $7,000 and 26,000 depending on the specific model.
• While not broken out in its earnings release, sales from replacement parts make up a large portion of sales, giving the company a reliable income stream that is separate from their ability to sell new equipment. The company shipped 1,300 new “seismic energy sources” to 30 vessels last year.
• In July, Bolt acquired a company called Real Time Systems (RTS) which helps customers synchronize up to 96 air guns towed behind a single exploration vessel. The hope is that this acquisition will allow the company to sell even more guns to existing customers who will then be able to make more efficient use of their ships. That would obviously increase the revenue stream from replacement costs from all the additional equipment out there.
• A falling dollar should not be a significant problem for the company. Quite the opposite in fact because the majority of the company’s sales are to non-US customers. That allows the revenue stream to either be denominated in currencies that are stronger than BTJ’s home currency, or it makes its products more attractive to foreign customers who can buy dollars for their purchases at more attractive rates.

Due to the very small size (among the 2 smallest positions the fund holds), and extremely volatile nature of the shares (I've been shaken out of this stock technically more than once at just the wrong time), I have not built a large position in the fund, but if the company continues to prove itself - especially with an ability to be much less cyclical than other 'oil service' plays, this would be a great candidate to build a larger position in. Time will tell.

Long Bolt Technology in fund; no personal position