Cheap Stocks 21 Net/Net Index Down 3.1% for Week ended 2/29/08
The Cheap Stocks 21 Net/Net Index ended the week at 95.53, down 3.1%. Since inception (2/12/08), the index is down 4.47%. Much of the damage occurred today, as broad markets were hit hard.
Winners for the day included Medicinova (MNVS) up 4.4%, and Nu Horizons Electronics, up 2.2%. Losers outpaced winners by a 17 to 4 margin, and included Ditech Networks (DITC) down 9%, Emerson Radio (MSN) down 7.7% and Parlux Fragrances (PARL) down 7.1%.
The index is off to quite a start--launched less than 3 weeks ago, and already down nearly 4.5%. This is not unexpected given the attributes of index constituents, and volatile markets. Stay tuned for updates.
*The author does not have positions in any of the companies that comprise The Cheap Stocks 21 Net/Net Index. 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.
Friday, February 29, 2008
Friday, February 22, 2008
Cheap Stocks 21 Net/Net Index Flat for Week ended 2/22/08
The Cheap Stocks 21 Net/Net Index closed it's first full week at 98.62, flat versus last week's close. Since inception (2/12/08), the index is down 1.38%.
Winners for the week included Finish Line Inc (FINL), up 18.8%, Renovis (RNVS) up 7.9%, and Medicinova (MNVS) up 5.6%. Losers included Charles and Colvard (CTHR) down 13.8%, Replydyne (RDYN)down 13%, and Handelman (HDL) down 10%.
Price swings are wide in net/net land, and double digit gains or losses are not uncommon given the attributes of the typical net/net.
Selected Index Fundamentals
Average Market Cap: $109.7 million
Average Net Current Asset Value: $86.1 million
Market Cap/NCAV: 1.27
Total Market Cap of Index Members: $1.809 billion
Total Cash of Index Members: $1.303 billion
We've received many comments and inquiries about this index, and will attempt to respond to them all.
*The author does not have positions in any of the companies that comprise The Cheap Stocks 21 Net/Net Index. 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.
The Cheap Stocks 21 Net/Net Index closed it's first full week at 98.62, flat versus last week's close. Since inception (2/12/08), the index is down 1.38%.
Winners for the week included Finish Line Inc (FINL), up 18.8%, Renovis (RNVS) up 7.9%, and Medicinova (MNVS) up 5.6%. Losers included Charles and Colvard (CTHR) down 13.8%, Replydyne (RDYN)down 13%, and Handelman (HDL) down 10%.
Price swings are wide in net/net land, and double digit gains or losses are not uncommon given the attributes of the typical net/net.
Selected Index Fundamentals
Average Market Cap: $109.7 million
Average Net Current Asset Value: $86.1 million
Market Cap/NCAV: 1.27
Total Market Cap of Index Members: $1.809 billion
Total Cash of Index Members: $1.303 billion
We've received many comments and inquiries about this index, and will attempt to respond to them all.
*The author does not have positions in any of the companies that comprise The Cheap Stocks 21 Net/Net Index. 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.
Friday, February 15, 2008
Introducing the Cheap Stocks 21 Net/Net Index: The First Index of Companies Trading Below Net Current Asset Value
We’ve designed what we believe to be the first index of companies trading below their net current asset value. The main purpose of this index will be to track a passive portfolio of net/nets. This index is chock full of small companies many of which have been beaten down, and some of which may not survive. We’ve developed this index primarily as an attempt to gauge net/net performance using a basket approach.
The Cheap Stocks 21 Net/Net Index is a market cap weighted index comprised of companies that met the following criteria at index inception on Tuesday, February 12th, 2008:
•Market Cap is below net current asset value, defined as:
Current Assets – Current Liabilities – all other long term liabilities (including preferred stock, and minority interest where applicable)
•Stock Price above $1.00 per share
•Companies have an operating business; acquisition companies were excluded
•Minimum average 100 day volume of at least 5000 shares (light we know, but welcome to the wonderful world of net/nets)
*Index constituents were selected by market cap. The index is comprised of the “largest” companies meeting the above criteria.
The Index is naïve in construction in that:
•It will be rebalanced annually, and companies no longer meeting the net/net criteria will remain in the index until annual rebalancing.
•Only bankruptcies, de-listings, or acquisitions will result in replacement
•Does not discriminate by industry weighting—some industries may have heavy weights.
Cheap Stocks 21 Net/Net Index Constituents and Weights (%, rounded):
Adaptec Inc(ADPT)18.72%
Computer Systems
Audiovox Corp(VOXX)12.20%
Electronics
Trans World Entertainment(TWMC)7.58%
Retail-Music and Video
Finish Line Inc(FINL)6.30%
Retail-Apparel
Nu Horizons Electronics(NUHC)5.76%
Electronics Wholesale
Richardson Electronics(RELL)5.09%
Electronics Wholesale
Pomeroy IT Solutions(PMRY)4.61%
IT
Ditech Networks(DITC)4.31%
Communication Equip
Parlux Fragrances(PARL)3.92%
Personal Products
InFocus Corp(INFS)3.81%
Computer Peripherals
Renovis Inc(RNVS)3.80%
Biotech
Leadis Technology Inc(LDIS)3.47%
Semiconductor-Integrated Circuits
Replidyne Inc(RDYN)3.31%
Biotech
Tandy Brands Accessories Inc(TBAC)2.94%
Apparel, Footwear, Accessories
FSI International Inc(FSII)2.87%
Semiconductor Equip
Anadys Pharmaceuticals Inc(ANDS)2.49%
Biotech
MediciNova Inc(MNOV)2.33%
Biotech
Emerson Radio Corp(MSN)1.71%
Electronics
Handleman Co(HDL)1.66%
Music- Wholesale
Chromcraft Revington Inc(CRC)1.62%
Furniture
Charles & Colvard Ltd(CTHR)1.50%
Jewel Wholesale
The initial value of the Cheap Stocks Index was 100, as of the close on 2/11/08. Initially, we’ll report the index value on a weekly basis.
*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.
We’ve designed what we believe to be the first index of companies trading below their net current asset value. The main purpose of this index will be to track a passive portfolio of net/nets. This index is chock full of small companies many of which have been beaten down, and some of which may not survive. We’ve developed this index primarily as an attempt to gauge net/net performance using a basket approach.
The Cheap Stocks 21 Net/Net Index is a market cap weighted index comprised of companies that met the following criteria at index inception on Tuesday, February 12th, 2008:
•Market Cap is below net current asset value, defined as:
Current Assets – Current Liabilities – all other long term liabilities (including preferred stock, and minority interest where applicable)
•Stock Price above $1.00 per share
•Companies have an operating business; acquisition companies were excluded
•Minimum average 100 day volume of at least 5000 shares (light we know, but welcome to the wonderful world of net/nets)
*Index constituents were selected by market cap. The index is comprised of the “largest” companies meeting the above criteria.
The Index is naïve in construction in that:
•It will be rebalanced annually, and companies no longer meeting the net/net criteria will remain in the index until annual rebalancing.
•Only bankruptcies, de-listings, or acquisitions will result in replacement
•Does not discriminate by industry weighting—some industries may have heavy weights.
Cheap Stocks 21 Net/Net Index Constituents and Weights (%, rounded):
Adaptec Inc(ADPT)18.72%
Computer Systems
Audiovox Corp(VOXX)12.20%
Electronics
Trans World Entertainment(TWMC)7.58%
Retail-Music and Video
Finish Line Inc(FINL)6.30%
Retail-Apparel
Nu Horizons Electronics(NUHC)5.76%
Electronics Wholesale
Richardson Electronics(RELL)5.09%
Electronics Wholesale
Pomeroy IT Solutions(PMRY)4.61%
IT
Ditech Networks(DITC)4.31%
Communication Equip
Parlux Fragrances(PARL)3.92%
Personal Products
InFocus Corp(INFS)3.81%
Computer Peripherals
Renovis Inc(RNVS)3.80%
Biotech
Leadis Technology Inc(LDIS)3.47%
Semiconductor-Integrated Circuits
Replidyne Inc(RDYN)3.31%
Biotech
Tandy Brands Accessories Inc(TBAC)2.94%
Apparel, Footwear, Accessories
FSI International Inc(FSII)2.87%
Semiconductor Equip
Anadys Pharmaceuticals Inc(ANDS)2.49%
Biotech
MediciNova Inc(MNOV)2.33%
Biotech
Emerson Radio Corp(MSN)1.71%
Electronics
Handleman Co(HDL)1.66%
Music- Wholesale
Chromcraft Revington Inc(CRC)1.62%
Furniture
Charles & Colvard Ltd(CTHR)1.50%
Jewel Wholesale
The initial value of the Cheap Stocks Index was 100, as of the close on 2/11/08. Initially, we’ll report the index value on a weekly basis.
*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.
Wednesday, February 06, 2008
Patience Wears Thin on LKI: Making Room in the Portfolio
Waiting for a net/net story to unfold is often as exciting as watching paint dry, or the grass grow. That was the pretty much the story with diamond company Lazare Kaplan Intl, which we recently unloaded. You may recall our recent research piece on LKI, which was in reaction to the company’s reverse/forward split designed to reduce shareholder roles. In our view, this was a prelude for LKI to go “private”.
Shares were up 31% since, when we closed the position last week. A nice gain, yes, but we originally purchased the shares in March. 2006 at $7.75, so our 26% gain came in 22 months, after several oscillations along the way.
Why did we pull the trigger, you ask? To make room in the portfolio; to free up cash for better opportunities. Lazare Kaplan is actually coming off several consecutive marginally profitable quarters, but we’ve come to believe that this company will always be (or be very close to) a net/net.
Plum Creek Timber
We also closed our position in timber giant Plum Creek Timber, in the $43.50 range. This was another move to free up some cash. Plum Creek performed fairly well for us over the 2+ years we owned it, but we believe it is trading a little rich right now. Perhaps we’ll add back in the future.
*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.
Waiting for a net/net story to unfold is often as exciting as watching paint dry, or the grass grow. That was the pretty much the story with diamond company Lazare Kaplan Intl, which we recently unloaded. You may recall our recent research piece on LKI, which was in reaction to the company’s reverse/forward split designed to reduce shareholder roles. In our view, this was a prelude for LKI to go “private”.
Shares were up 31% since, when we closed the position last week. A nice gain, yes, but we originally purchased the shares in March. 2006 at $7.75, so our 26% gain came in 22 months, after several oscillations along the way.
Why did we pull the trigger, you ask? To make room in the portfolio; to free up cash for better opportunities. Lazare Kaplan is actually coming off several consecutive marginally profitable quarters, but we’ve come to believe that this company will always be (or be very close to) a net/net.
Plum Creek Timber
We also closed our position in timber giant Plum Creek Timber, in the $43.50 range. This was another move to free up some cash. Plum Creek performed fairly well for us over the 2+ years we owned it, but we believe it is trading a little rich right now. Perhaps we’ll add back in the future.
*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.
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