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.

4 comments:

Anonymous said...

I have not seen VOXX on your list. Does it meet your criteria?

Clyde said...

VOXX is almost always on the list of net/nets---has been for years. Please search the site for prior mentions. Regards. CM

Mike Morell said...

I enjoy your blog, your EV/Acre calculation is an interesting way of looking at things. Plum Creek is trading a bit lower than in December. Just curious what made you think it was rich. How do you go about valuing a stock like that? Your insights are always appreciated, I follow that stock too.

clyde said...

Mike, given the market environment, and belief that timber prices will ultimately fall, PCL seemed expensive at 25 times earnings. Still a great company, and one that I'd own again in the future.

CM