Sunday, December 02, 2007

Potential Bargains in Profitable, Cash-Rich Double Net/Nets

Occasionally, we take liberties with Ben Graham’s original formula used to identify companies trading below their net current asset value, and loosen the criteria a bit. (Truth be told, Ben would not have bought a company unless it traded for less than 2/3 NCAV, and even then, he would have had to be convinced the company had legs.) This week we’ll identify some of the companies trading at less than twice their NCAV, with the following attributes:

*Market Cap Minimum $100 million
*Price/Earnings Ratio less than 20
*Net Cash (cash less LT debt) is at least 20 percent of market cap

The objective is to identify companies that are not just potentially cheap, but also have levels of cash adequate to weather storms that may be on the horizon. As always, this is a working list that requires additional research and scrutiny prior to making investment decisions. Not surprisingly, many on the list are tech companies. Perhaps we’ll dig deeper into a couple of the more compelling names in the coming weeks.

Ticker: ZIGO
Price: $11.29
Mkt Cap: $20
NCAV: $102 million
Cash & ST Inv: $41 million
PE: 19

Rudolph Technologies
Ticker: RTEC
Price: $11.95
Mkt Cap: $349 million
NCAV: $211 million
Cash & ST Inv: $121 million
PE: 17

Integrated Silicon Solution Inc
Ticker: ISSI
Price: $6.52
Mkt Cap: $246 million
NCAV: $161 million
Cash & ST Inv: $134 million
PE: 16

Eagle Test Systems
Ticker: EGLT
Price: $10.95
Mkt Cap: $251 million
NCAV: $141 million
Cash & ST Inv: $112.5 million
PE: 14

Cutera Inc.
Ticker: CUTR
Price: $15.14
Mkt Cap: $192 million
NCAV: $99 milliom
Cash & ST Inv: $100 million
PE: 13

Benchmark Electronics
Ticker: BHE
Price: $17.95
Mkt Cap: $1.28 billion
NCAV: $852 million
Cash & ST Inv: $379 million
PE: 13

Conn's Inc
Ticker: CONN
Price: $18.1
Mkt Cap: $420 million
NCAV: $244 million
Cash & ST Inv: $210 million
PE: 11

*The author does not have positions in any of the companies mentioned. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. The author will not trade any of the securities mentioned (buy, sell, short) for at least two weeks following the date of this post.


Max said...

Thanks for the "double" NCAVs Clyde. One thing to note: Palm had a $9 dividend a few months ago, and that's why it looks like they have a ton of cash relative to market cap. I know because it came up on a screen of mine about a month ago, and I really got interested until I saw the dividend.

clyde said...

Thanks Max, and yes, we goofed by including PALM on this list. The last balance sheet we've seen was prior to the special dividend, and we have removed PALM from this list. Proof positive never to trust data alone: We scrutinize data to avoid these situations, but missed this one