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Option1307 (29.70)

Artificial Life (ALIF) is a Solid Buy Right Now!

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December 02, 2010 – Comments (2) | RELATED TICKERS: ALIF

As much as I hate to say it, Apple is the hottest consumer thing out there, still. Don’t get me wrong, I own plenty of their products but the “i-anything” fad has gone to higher levels than I ever could have imagined. They pretty much can place the coveted “i” on any product and it would sell like crazy. Case in point, the i-Pad. (Really Apple, really? Who is buying that garbage, admittedly it is kind of cool but it serves no functional purpose. It’s an oversized i-pod that doesn’t fit in my pocket, no thanks.)

The point being that Apple products are not going out of style anytime soon so the question becomes, “how to take advantage of this trend?”

This is where Artificial Life (ALIF) comes into play. What better way to take advantage of the continued Apple success than by hitching a ride on a company that supplies Apple with a large percent of their applications that run on all those i-Pads, i-Phones, i-Pods, i-whatever.

ALIF has sold 20M apps in the last 2 years and is also aggressively converting its apps to Android and Windows 7 servers which will continue to be released later this year and in 2011. Important to note is that these are not just some random games/apps but rather some of the most desired/highest rated applications. ALIF consistently has apps that are in the “top 10” of their respected categories. They produce some pretty good stuff in regards to i-phone/pod apps.

All this translates into increasing sales for ALIF the last few years with no end in sight. Check these numbers below (Revenue, EPS)

2006: 0.86M, -0.01

2007: 5.8M, 0.03

2008: 22.45M, 0.22

2009 27.45M, 0.15 (they diluted the earnings via share offering)

2010 through Q3: 27.72M, 0.2

(Q3 had record sales and record net profit, times are good for ALIF)

Those are some pretty sweet numbers if you ask me! I strongly believe their sales are going to continue being propelled by strong i-phone/pad/pod sales as well as an overall increase in smart phone usage in the US/World going forward.

Let’s assume ALIF puts in another quarter like last (conservative estimate IMO considering the likely high holiday sales etc.) That would give them another 0.08 EPS this year for a grand total of 2010 EPS of 0.28. That puts LAIF at a current P/E of just under (Yes under!) 4. Wow, cheap cheap cheap!

Honestly, ALIF is hitting the ground running right now and they are perfectly positioned to continue taking advantage of the massive i-pod/phone/smart phone sales that are likely to continue. At the very least, I’d say this company has another good 2-3 years before things may (and that’s a big may) cool off in the overall smart phone arena.

It’s a thinly traded company with very little recognition so the payoff may not come overnight, but good things will come to those who wait.

(Btw I currently own shares of ALIF and may be scooping some more up in the near future because I like them that much.)

2 Comments – Post Your Own

#1) On December 07, 2010 at 9:26 PM, TheDumbMoney (42.83) wrote:

In his current "Ask a Blunt Man" post, TMFUltralong called this company his number one pick, though he also said he doesn't own it.  I have to say, it looks pretty sweet to me.  I do wonder why he hasn't pulled the trigger, but that's why his rating is a gazillion times better than mine is I guess.

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#2) On December 07, 2010 at 11:05 PM, Option1307 (29.70) wrote:

I do wonder why he hasn't pulled the trigger,

He mentioned that he is/was 100% cash because of personal reasons so I wouldn't read too far into his statement.

When it comes down to it, you need to be comfortable investing in the equity yourself, irregardless of what other Caps players do. It's always ok to look for conformation from other people, beit Caps/etc. but ultimately you need to make the decision for yourself.

Judging from your picks and blogs I know this "advice" doesn't really apply to you as you seem to have a strong stock picking personality, but nonetheless it's good to be reminded from time to time.

Best of luck!

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