Relm Wireless Corp. (RWC) has retraced to its 20-day moving average at $3.04. This comes following an extended run during which an Atlanta-based hedge fund acquired over 1.1 million shares of the stock from March 11, 2013 to May 16, 2013. The highest price paid by the hedge fund was on May 16, at an average price of just under $3.37. I believe some short-term investors have taken profits given the stock’s large move, but I expect continued, good news from the company in the coming weeks.
Specifically, the CEO commented on the most recent Q1 earnings call that he is very excited about Q2 prospects Seeking Alpha Q1 Call , stating “but the message is when I look at the second quarter, last year second quarter was a great second quarter, our plan is to better that. We want to do better than that and so we are striving for and that we feel really good coming out of the first quarter.” Last year in the second quarter, RWC reported revenue of $9.3 million and EPS of $0.09. If the CEO’s comments do come true, RWC likely will have some very significant press releases in the next five weeks announcing new contract wins. Given my expectation that the stock is still significantly undervalued, a history of strong June seasonality, management’s bullish outlook, the likelihood of contract announcements, a stronger shareholder base, and an approved stock repurchase plan, I like the risk/reward at these prices. I added to my position today at $3.05 but did not get filled on my whole order.
