From the battlefields of Baghdad to your SUV

This US$12.50 company wants to put a satellite
TV in every American car

As a kid, my three favorite movies were “Patton,” “Midway,” and “Kelly’s Heroes.” All war movies… and in that order.

When “First Blood” was released in 1982, that quickly became my favorite movie.

And my favorite television show? Well, do you remember “Rat Patrol”? Set in North Africa during World War II, the show glorified a four-member team of commandos armed with Jeeps equipped with .50-caliber machine guns.

But even though many of my role models were Tommy-gun-toting movie actors, I’ve never owned a gun in my life. I never enlisted in the military and have never been arrested. Heck, I’ve never been hunting. In fact, it may come as a surprise to you that I wasn’t exactly on-board for the war in Iraq.

Even with this impromptu disclaimer, I know that the stock I’m recommending this month will probably enrage the legion of self-proclaimed child experts who have written countless books and articles on how too much television is bad for American kids.

To make matters worse—especially for the Berkeley crowd—the company I’m recommending in this issue of Taipan will not only keep kids connected to the tube 24/7, it also makes the navigation units currently used on the M1A1 Abrams Main Battle Tank and the Bradley Fighting Vehicle.

It’s a double whammy.

Taking the family on a cross-country road trip

If you’ve ever taken your kids on an extended vacation, like I have, you know this scenario all too well. It’s the trip the wife and kids have been begging you for, to Disney World. But instead of dropping the coin to buy five tickets on Southwest for the two-hour flight to Orlando, you decide to drive down.

That’s a 13-hour, 600-mile trip from the Taipan headquarters. You’re about two hours into the trek when it starts from the back seat.

“Mom, Jimmy is staring at me!”

“Dad, I’m bored!”

“Are we there yet?”

“How come dad was too cheap to buy airline tickets?”

You’re not even out of the state, and you’re ready to give your oldest a “flying Melnick” to his sternum. That all changed for me in 2001 when I purchased the modern-day version of the family station wagon, a minivan. And this minivan came weaponized. It came with a TV/VCR unit.

The TV/VCR is a godsend. But unless you want to constantly carry around a suitcase full of tapes, the second generation of automobile entertainment will prove to be more practical: a satellite feed straight into your car.

And that’s exactly what a company called KVH Industries (KVHI:NASDAQ) is doing. They’ve developed something called TracVision that beams the programs right into your van.

Now, I want you to understand something: TracVision isn’t a shot-in-the-dark venture. It’s been selling like hotcakes in the RV market, an industry that has exploded in the past five years.

Though these numbers aren’t entirely attributable to sales of TracVision, the overall growth in sales for KVH Industries is something I definitely look for when investing in a small-cap stock.

Currently, KVH Industries trades at a market cap of just US$143 million.

I believe the stock’s upside is 20% in the near term, as the company is expected to post its first profitable year in five years.

The story behind the numbers

I know you’re probably wondering how you get satellite television (300 channels!) in your car. But it’s fairly simple. If you’re like me and you already have a television in your car, then the process is even simpler.

The only thing needed is the installation of an antenna in your vehicle of choice. The antenna picks up satellite signals from all over the world and delivers them straight to your car’s TV.

The antenna is only 14.5 inches tall and takes up about as much room as a sixpack. And with today’s backseat televisions taking up less space, the TracVision should be completely unobtrusive.

And really, there’s no way to avoid it. More than a million backseat entertainment systems were sold in 2002, and that number is expected to grow dramatically in 2003.

Almost every 2002 model SUV and minivan offered these systems as options—and the uptake has been tremendous, with 96% of Nissan Quests, 31% of Ford Expeditions and 30% of Ford Windstars shipping with video systems.

Summer rental

According to the company, TracVision will be ready for deployment this summer. That’s when I think you’ll see shares of KVH Industries start to rally… big time.

The stock has been in a major uptrend since October 2001, going from a low of US$4.00 a share to a current price of US$12.50.

Since KVHI continues to make new highs, I believe the stock will see US$15 in the short term.

Buy it at current levels. •