Trading Below Net Current Asset Value:
Nu Horizons Electronics
Ticker: NUHC
Price: $7.03
P/E: 37
Market Cap: $119 million
Net Current Asset Value: $120.1 million
Average daily volume: 38000
Nu Horizons Electronics is a small, Melville, New York based electronics distribution company. Products include microprocessors, memory chips, transistors, diodes, fiber optic components, and other semiconductor related items.
We recently identified this as a profitable company trading below NCAV. (Finding a company trading below NCAV that isn’t profitable is relatively easy. Those that are simultaneously generating a profit are few and far between.)
The Numbers
Fiscal year 2004 sales were $346 million, up 15 percent from 2003’s $302 million. Net loss was $850 thousand in 2004, versus a loss of $2.5 million in 2003. However, for the trailing 12 month period (through the third quarter of 2005) the company has managed net income of $3.38 million, on sales of $456 million
The Balance Sheet
As of 11/30/04, the company had $17 million in cash and $40 million in long-term debt. Current ratio stood at a very health 6.56, while quick ratio was also solid at 3.1. All in all, a decent, but not great, balance sheet. (If you’ve read our NCAV reports in the past, you know how much we here at Cheap Stocks love cash, and dislike debt in our NCAV companies)
The NCAV Calculation (in millions)
Current Market Cap: $119
Current Assets: $192
Current Liabilities: $29
Long Term Liabilities (primarily LT debt) $42
Net Current Asset Value: $121
NCAV/Market Cap: 1.02
The Street/Institutional ownership
Currently, just one analyst is covering this company. There is however, a great deal of institutional ownership.
Wasatch Advisors: 9.3 %
Royce & Associates: 8.8 %
Wellington Management: 8.2 %
Dimensional Fund Advisors: 7.8 %
David L Babson & Co: 5.4 %
Fidelity: 3%
Delphi Management: 3%
Conclusion
If anything, this is an interesting story. But then again, anytime you identify a profitable company trading below it NCAV, it’s interesting. Sales for the past three quarters have been picking up nicely versus prior year/same quarter numbers, and the company has been in the black for 5 consecutive quarters. An improving economy and renewed interest in the tech sector should help move this company forward.
*The author does not have a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Wednesday, March 30, 2005
Thursday, March 17, 2005
Trading Below Net Current Asset Value:
Discovery Partners
Ticker: DPII
Price: $3.36
P/E: 20.94
Market Cap: $87.8 million
Net Current Asset Value: $92.7 million
Average daily volume: 80000
It’s been awhile since our report featured a company trading below its NCAV, so this week, it’s back to our roots, back to the original purpose of this site.
Discovery Partners is a small, San Diego based company which specializes in products and services that help pharmaceutical and biopharmaceutical companies in the drug discovery process. For more information, the following is from the companies 10K.
(Ten cents to anyone who can tell me exactly what that means…I’m a numbers guy)
In any event this company was recently identified as a profitable company trading below NCAV. Finding a company trading below NCAV that isn’t profitable is relatively easy. Those that are simultaneously generating a profit are few and far between.
The numbers
Fiscal year 2004 sales were $51.6 million, up 3.5 percent from 2003’s $49.8 million. Net income was $3.9 million in 2004, up 268% to 3.9 million, from $1.06 in 2003. Net profit margin for 2004 was 7.6 percent in 2004. Not too shabby for a sub NCAV company.
The balance sheet
Here’s where the story gets interesting. As of 12/31/04, the company had a rock-solid balance sheet with $80 million in cash and marketable securities, and no debt. That’s $3.23 per share in cash: this at a time when the stock trades at $3.39 per share. Theoretically to a buyer, that’s like getting the business for $.16!
The NCAV Calculation (in millions)
Current Market Cap: $87.8
Current Assets: $99.9
Current Liabilities: $7.1
Long Term Liabilities (deferred rent) .16
Net Current Asset Value: $92.7
NCAV/Market Cap: 1.06 (times)
The Street/Institutional ownership
Currently, just one analyst is covering this company. There is however, a great deal of institutional ownership. Heartland Advisors, Royce & Associates, and William Blair and Co each hold about 12 percent. While Strong Capital Management and Wells Fargo each hold about 10 percent. Dimensional Fund Advisors holds about 6 percent. Several others own 3 percent or less.
Risks
The company has been cautious on 2005 numbers, suggesting a less than stellar year. Also, the contract with Pfizer (which represented more than 50% of revenue in 2004) will be expiring. Will it be renewed?
Conclusion
Yet another one to keep your eye on. Its very hard to ignore the sizable amount of cash and marketable securities on this company’s balance sheet. The big question is, will the profits continue? For the theoretical price of $.16 cents per share, it may be worth a shot.
*The author does not have a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Discovery Partners
Ticker: DPII
Price: $3.36
P/E: 20.94
Market Cap: $87.8 million
Net Current Asset Value: $92.7 million
Average daily volume: 80000
It’s been awhile since our report featured a company trading below its NCAV, so this week, it’s back to our roots, back to the original purpose of this site.
Discovery Partners is a small, San Diego based company which specializes in products and services that help pharmaceutical and biopharmaceutical companies in the drug discovery process. For more information, the following is from the companies 10K.
“Despite numerous technological advances in combinatorial chemistry, high throughput screening, genomics and proteomics, the process of drug discovery remains slow, expensive and often unsuccessful. In order to make the drug discovery process faster, less expensive and more likely to generate a drug candidate, we offer products and services such as assays, synthesis automation, design and synthesis of proprietary libraries of compounds, high throughput screening, lead optimization, drug discovery informatics and toxicology. These products and services can be provided individually or as an integrated solution, depending on our customers’ requirements.”
(Ten cents to anyone who can tell me exactly what that means…I’m a numbers guy)
In any event this company was recently identified as a profitable company trading below NCAV. Finding a company trading below NCAV that isn’t profitable is relatively easy. Those that are simultaneously generating a profit are few and far between.
The numbers
Fiscal year 2004 sales were $51.6 million, up 3.5 percent from 2003’s $49.8 million. Net income was $3.9 million in 2004, up 268% to 3.9 million, from $1.06 in 2003. Net profit margin for 2004 was 7.6 percent in 2004. Not too shabby for a sub NCAV company.
The balance sheet
Here’s where the story gets interesting. As of 12/31/04, the company had a rock-solid balance sheet with $80 million in cash and marketable securities, and no debt. That’s $3.23 per share in cash: this at a time when the stock trades at $3.39 per share. Theoretically to a buyer, that’s like getting the business for $.16!
The NCAV Calculation (in millions)
Current Market Cap: $87.8
Current Assets: $99.9
Current Liabilities: $7.1
Long Term Liabilities (deferred rent) .16
Net Current Asset Value: $92.7
NCAV/Market Cap: 1.06 (times)
The Street/Institutional ownership
Currently, just one analyst is covering this company. There is however, a great deal of institutional ownership. Heartland Advisors, Royce & Associates, and William Blair and Co each hold about 12 percent. While Strong Capital Management and Wells Fargo each hold about 10 percent. Dimensional Fund Advisors holds about 6 percent. Several others own 3 percent or less.
Risks
The company has been cautious on 2005 numbers, suggesting a less than stellar year. Also, the contract with Pfizer (which represented more than 50% of revenue in 2004) will be expiring. Will it be renewed?
Conclusion
Yet another one to keep your eye on. Its very hard to ignore the sizable amount of cash and marketable securities on this company’s balance sheet. The big question is, will the profits continue? For the theoretical price of $.16 cents per share, it may be worth a shot.
*The author does not have a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Thursday, March 10, 2005
Update: Hanover Foods Corp
Ticker: HNFSA
Price: $116
A lot of activity in this stock the past two weeks, that's if you consider volume of 3000 shares significant. (For Hanover, with average daily volume below 100, any volume is significant.) In any event the stock is up nicely since our initial report. Stay tuned. (Your editor does not have a position in Hanover.)
Ticker: HNFSA
Price: $116
A lot of activity in this stock the past two weeks, that's if you consider volume of 3000 shares significant. (For Hanover, with average daily volume below 100, any volume is significant.) In any event the stock is up nicely since our initial report. Stay tuned. (Your editor does not have a position in Hanover.)
Monday, March 07, 2005
Mistakes
“Everybody makes mistakes.” That sentiment extends into our investing lives, and your Cheap Stocks editor is no different. That being said, today I bare my soul to readers with one of the biggest investing miscues I’ve made in recent years. The point is, you too will make mistakes. We all do. Even the great Peter Lynch has admitted to investing faux pas in his books. Lynch once wrote that out of 5 stocks that you buy, odds are one will tank, one will rise significantly, and 3 will go nowhere. And that’s from one of the greatest portfolio managers of our time.
The mistake I’m speaking of involves Hansen Natural Corp(ticker: HANS), the Corona, California based marketer and distributor of natural sodas, fruit juices, and energy drinks. I picked up shares back in 2001 in the 3 5/8 range, with the belief that one of the bigger players would ultimately take over Hansen. At the time, annual sales were in the $80 million dollar range, and the company was profitable. However, there was little excitement about Hansen. It was a $40 million market cap company, which had been around since the 1930’s, and had a nice following in California. But in my mind, the only real driver was that a larger company would want to get their hands on this small, regional player.
The stock traded sideways for a couple of years. Then in January, 2003 Hansen started to take off. When it hit the $10 range in early late 2003, I sold. There was no reason, that I could find, that this stock would go any higher. I’d made 3 times my money, and was happy. It then trended down slightly for the next couple of months, and I was proud of the trade. I know, once you sell a stock, you should not look back. But I felt vindicated…for a while.
After hitting the mid 7’s in January 2004, the stock went on a wild ride, hitting $47.49 in February 2005. Hansen’s sales had exploded with the introduction of new products, and its earnings followed suit. Third quarter 2004 sales, for instance were up 58 percent, from $33.3 million to $52.6 million, while earnings per share jumped 158 percent, from $.19 to $.49. When year end numbers are in, Hansen could well hit $175 million in sales for 2004. This is a far different company then the one I purchased in 2001. Currently trading at 37 times earnings, its current market cap is nearly $470 million. It was a $40 million company when I bought in.
What did I learn from all of this? I’m still not sure. Maybe I should have had a trailing stop on the shares, which could have been raised periodically as the share price climbed toward the stratosphere. Maybe I really don’t have the stomach to be a growth investor. Hey, wait a second. What am I whining about? I did triple my money. And left a brand new 2005 red Mazda Miata on the table.
“Everybody makes mistakes.” That sentiment extends into our investing lives, and your Cheap Stocks editor is no different. That being said, today I bare my soul to readers with one of the biggest investing miscues I’ve made in recent years. The point is, you too will make mistakes. We all do. Even the great Peter Lynch has admitted to investing faux pas in his books. Lynch once wrote that out of 5 stocks that you buy, odds are one will tank, one will rise significantly, and 3 will go nowhere. And that’s from one of the greatest portfolio managers of our time.
The mistake I’m speaking of involves Hansen Natural Corp(ticker: HANS), the Corona, California based marketer and distributor of natural sodas, fruit juices, and energy drinks. I picked up shares back in 2001 in the 3 5/8 range, with the belief that one of the bigger players would ultimately take over Hansen. At the time, annual sales were in the $80 million dollar range, and the company was profitable. However, there was little excitement about Hansen. It was a $40 million market cap company, which had been around since the 1930’s, and had a nice following in California. But in my mind, the only real driver was that a larger company would want to get their hands on this small, regional player.
The stock traded sideways for a couple of years. Then in January, 2003 Hansen started to take off. When it hit the $10 range in early late 2003, I sold. There was no reason, that I could find, that this stock would go any higher. I’d made 3 times my money, and was happy. It then trended down slightly for the next couple of months, and I was proud of the trade. I know, once you sell a stock, you should not look back. But I felt vindicated…for a while.
After hitting the mid 7’s in January 2004, the stock went on a wild ride, hitting $47.49 in February 2005. Hansen’s sales had exploded with the introduction of new products, and its earnings followed suit. Third quarter 2004 sales, for instance were up 58 percent, from $33.3 million to $52.6 million, while earnings per share jumped 158 percent, from $.19 to $.49. When year end numbers are in, Hansen could well hit $175 million in sales for 2004. This is a far different company then the one I purchased in 2001. Currently trading at 37 times earnings, its current market cap is nearly $470 million. It was a $40 million company when I bought in.
What did I learn from all of this? I’m still not sure. Maybe I should have had a trailing stop on the shares, which could have been raised periodically as the share price climbed toward the stratosphere. Maybe I really don’t have the stomach to be a growth investor. Hey, wait a second. What am I whining about? I did triple my money. And left a brand new 2005 red Mazda Miata on the table.
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