Its hard to believe that less than 3 weeks after our post on specialty craft retailer AC Moore, shares of this net/net are down another 73%. A share can now be had for the change in your pocket. Mr. Market, in his not so subtle way, is telling us that he does not think AC Moore will survive. And its not just AC Moore, by the way, there are a multitude of other companies also being given the scrap heap treatment.
The company recently reported a $7.5 milliom third quarter loss--that's what the headlines say--but this included a deferred tax valuation charge of $4.7 million. That being said, the top line was not pretty, and further evidence of the recession we find ourselves mired in. Sales fell 4.9%, while same store sales fell 9.4% versus the same period last year. This is one of the most challenging environments for retailers in the past 30 years, and will likely to continue to be so until some consumer confidence is restored.
But the market is currently valuing AC Moore at a negative enterprise value (-$1.4 million), theoretically hating the stock to the point that you are being paid to take shares. Now, it's never that simple, but with cash on the books at $46.8 million ($2.30 per share), total debt of $21.6 million, and net cash of $17 million, or $.84 per share, this company's impending demise may be greatly exaggerated.
With a current book value of $9.17, AC Moore trades at just .08 times book. That may not being meaningful given the current environment. But the bigger questions are whether AC Moore has the ability to ride out this storm, and are shares currently worth more than $.77? I voted in the affirmative yesterday, and initiated a small position.
AC Moore
Ticker: ACMR
Price: $.77
Market Cap: $15.6 million
Net Current Asset Value: $85 million
Cash: $46.8 million
Cash/share: $2.3
Total Debt: $29.7 million
Book Value/Share: $9.17
The risks here are indeed great, this stock is liable to be incredibly volatile, and there's always the risk that it could fall to zero. Panic driven markets have driven the price down more than 70% in the past few weeks alone. Stay Tuned.
*The author has a position in AC Moore. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.
Wednesday, November 19, 2008
Tuesday, November 18, 2008
PICO Holdings Update
PICO reported Q3 revenue of $9.1 million, nearly double same quarter last year, and net income of $533K, up 12%. The bulk of Q3 revenue was from a gain on the sale the company's remaining interest in 30,000 acre feet of water storage capacity, which it sold for $11.7 million.
The company completed the Fish Springs Ranch pipeline project in July, and now has 8000 acre feet of water for sale. PICO also sold it's first acre foot (one water credit) of Fish Springs water for $45,750. Although this project offers the only new source of water available to developers in the Reno area, the struggling Nevada real estate market has slowed PICO's progress.
Still, PICO remains well capitalized, and has ample liquidity ($140 million in cash, or nearly $7.50 per share)to weather this storm. Debt also remains low at $28.2 million, and the company is currently trading at just .82 times book value, and 14 times trailing earnings.
PICO shares are now down 35% year to date and 55% from the 52 week high ($48.24) hit in early September. The drop is primarily related to the major asset repricing we've been experiencing in the markets--that's a nice way of referring to the great "panic" of 2008.
We've seen many companies punished beyond belief by the forced selling we are still experiencing, and believe that this will ultimately provide some of the greatest opportunities of this generation. That's if you have the stomach for it. Stay tuned.
*The author has a position in PICO Holdings. 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 company completed the Fish Springs Ranch pipeline project in July, and now has 8000 acre feet of water for sale. PICO also sold it's first acre foot (one water credit) of Fish Springs water for $45,750. Although this project offers the only new source of water available to developers in the Reno area, the struggling Nevada real estate market has slowed PICO's progress.
Still, PICO remains well capitalized, and has ample liquidity ($140 million in cash, or nearly $7.50 per share)to weather this storm. Debt also remains low at $28.2 million, and the company is currently trading at just .82 times book value, and 14 times trailing earnings.
PICO shares are now down 35% year to date and 55% from the 52 week high ($48.24) hit in early September. The drop is primarily related to the major asset repricing we've been experiencing in the markets--that's a nice way of referring to the great "panic" of 2008.
We've seen many companies punished beyond belief by the forced selling we are still experiencing, and believe that this will ultimately provide some of the greatest opportunities of this generation. That's if you have the stomach for it. Stay tuned.
*The author has a position in PICO Holdings. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.
Tuesday, November 11, 2008
Net/Net Indexing: CS21 Net/Net Update; and the Launch of a New Net/Net Index
When we conceived of and constructed the first index of companies trading below net current asset value (NCAV), we did so knowing that the choices at the time were very limited. The quality of companies that met the criteria were not that strong overall. Few of the names were profitable, and the quality of the typical balance sheet was a far cry from what we are seeing in today's terribly negative landscape.
Still, the index has performed relatively well. As of yesterday, the CS21 Index was down 20% since inception 2/12/08, while the Russell Microcap Index, the closest proxy for our little index of misfits, is down about 32% during the same period.
The whole purpose of indexing net/nets is to spread the risk. Many net/nets are at risk of bankruptcy- that's why they appear to be so cheap- but it is often difficult to accurately assess the posibility of success or failure in the individual names. The winners typically win big, which helps to offset those that ride into the sunset.
In this case, there are just four companies that are in positive territory since index launch. The big winner is The Finish Line Inc (FINL,+190%), which is no longer a net/net (that's what you hope for as an investor), followed by Anadys Pharmaceuticals (ANDS, +42.5%), Parlux Fragrances (PARL, +28.06%), and Adaptec (ADPT, +8.93%). All other members of the index are in negative territory, some very deeply. However, the positive performers helped buoy the index as a whole. Still no bankruptcies, though.
The Next Generation
We are currently designing a second net/net index. This one will focus on profitable names, and should be rolled out in the coming months. Stay tuned.
For a list of all CS21 Net/Net Constituents, please search our site.
*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.
Still, the index has performed relatively well. As of yesterday, the CS21 Index was down 20% since inception 2/12/08, while the Russell Microcap Index, the closest proxy for our little index of misfits, is down about 32% during the same period.
The whole purpose of indexing net/nets is to spread the risk. Many net/nets are at risk of bankruptcy- that's why they appear to be so cheap- but it is often difficult to accurately assess the posibility of success or failure in the individual names. The winners typically win big, which helps to offset those that ride into the sunset.
In this case, there are just four companies that are in positive territory since index launch. The big winner is The Finish Line Inc (FINL,+190%), which is no longer a net/net (that's what you hope for as an investor), followed by Anadys Pharmaceuticals (ANDS, +42.5%), Parlux Fragrances (PARL, +28.06%), and Adaptec (ADPT, +8.93%). All other members of the index are in negative territory, some very deeply. However, the positive performers helped buoy the index as a whole. Still no bankruptcies, though.
The Next Generation
We are currently designing a second net/net index. This one will focus on profitable names, and should be rolled out in the coming months. Stay tuned.
For a list of all CS21 Net/Net Constituents, please search our site.
*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.
Thursday, November 06, 2008
Biggest Net/Nets In Years
The markets continue to get crushed, and as the dust settles each day, we've seen a broader array of net/nets. We are used to seeing microcaps here almost exclusively, but these markets are revealing some bigger names, many of which are profitable. Can't remember the last time I saw a net/net in excess of $1 billion in market cap. These are extraordinary times.
Ingram Micro
Ticker: IM
Price: $13.58
Market Cap: $2.3 billion
NCAV: $2.36 billion
Cash:$807 million
P/E: 8.3
Tech Data
Ticker: TECD
Price: 21.47
Market Cap: $1.1 billion
NCAV: $1.64 billion
Cash: $468 million
P/E: 8.5
Benchmark Electonics
Ticker: BHE
Price: $11.77
Market Cap: $788 million
NCAV: $822 million
Cash: $341 million
P/E: 9.1
USEC
Ticker: USU
Price: $3.90
Market Cap: $438 milliom
NCAV: $726.7 million
Cash: $358.6 million
P/E: 6
Furniture Brands Intl
Ticker: FBN
Price: $4.61
Market Cap: $228 million
NCAV: $270.3 milliom
Cash: $109.6 million
P/E: N/A
As always, do your own research before proceeding. Companies are often "cheap" for good reasons, or don't turn out to be cheap afterall.
*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.
Ingram Micro
Ticker: IM
Price: $13.58
Market Cap: $2.3 billion
NCAV: $2.36 billion
Cash:$807 million
P/E: 8.3
Tech Data
Ticker: TECD
Price: 21.47
Market Cap: $1.1 billion
NCAV: $1.64 billion
Cash: $468 million
P/E: 8.5
Benchmark Electonics
Ticker: BHE
Price: $11.77
Market Cap: $788 million
NCAV: $822 million
Cash: $341 million
P/E: 9.1
USEC
Ticker: USU
Price: $3.90
Market Cap: $438 milliom
NCAV: $726.7 million
Cash: $358.6 million
P/E: 6
Furniture Brands Intl
Ticker: FBN
Price: $4.61
Market Cap: $228 million
NCAV: $270.3 milliom
Cash: $109.6 million
P/E: N/A
As always, do your own research before proceeding. Companies are often "cheap" for good reasons, or don't turn out to be cheap afterall.
*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.
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