The list of net/nets seems to grow longer every day, especially in retail land. This will, in all likelihood, continue as consumers hunker down, retail sales drop further, and market caps suffer as a result. In the end, once the sun comes out again, it's likely that the number of store closing and bankrutpcies will leave the survivors in very good shape. Who on our list of retail net/nets will survive? Very hard to say. We'll leave it at that for now.
Stein Mart
SMRT
Market Cap: $54.2
NCAV: $105.3
Total Debt: $100
Price: $1.28
Cash & Short Term MS: $64.8
Quick Ratio: .6
Shoe Carnival
SCVL
Market Cap: $102.3
NCAV: $133.8
Total Debt: $0
Price: $8.04
Cash & Short Term MS: $9.1
Quick Ratio: .3
Cache
CACH
Market Cap: $26.5
NCAV: $26.8
Total Debt: $4.7
Price: $2.00
Cash & Short Term MS: $25.6
Quick Ratio: 1.6
PC Connection
PCCC
Market Cap: $142.1
NCAV: $153
Total Debt: $4.5
Price: $5.25
Cash & Short Term MS: $46.8
Quick Ratio: 1.6
Tuesday Morning
TUES
Market Cap: $56.6
NCAV: $149.9
Total Debt: $36.5
Price: $1.33
Cash & Short Term MS: $4.9
Quick Ratio: .2
*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.
Friday, January 23, 2009
Tuesday, January 20, 2009
Retail Net/Nets Part I
Given the bad retail numbers we've been seeing- December retail sales were down 2.7% well worse than the -1.2% consensus- it's no wonder investors are shunning retailers these days. The problem is, so are consumers, given the crisis in confidence that is gripping our economy.
It's no surprise that there are now several retail net/nets, in fact, more than we've ever seen. Given the dire retail environment, it's inevitable that there will be a great deal of store closings in the next several months, and perhaps some bankruptcies as well. This certainly does not bode well for the smallest of the small, especially those that lack adequate working capital to bridge the recession, are choked with debt, or just can't weather a major pullback in sales.
In the early days of this site, we featured a couple of retail net/nets, Circuit City, and Duckwall Alco (search for these postings). Both had subsequent substantial run-ups. But times were different, and in Circuit City's case, the company at that time had a lot of cash-unlike the company that recently went under.
The risks here are many. If you do plan on "dumpster diving" in small retail net/nets, do so only with extreme caution. If you take a position, consider having a trailing stop-loss in place, which may help protect some of your capital, but is still no guarantee.
We recently had a position in AC Moore, and as the stock price increased, continued to move our trailing stop upward. But we were ultimately stopped out, on one of the many volatile trading days late in 2008. We still made a profit, but unfortunately left quite a bit on the table.
As always, proceed with caution. This is a toxic environment for retailers. We'll break the list into two parts, and run the other later this week.
Current Retail Net/Nets
A.C. Moore Arts & Crafts
ACMR
Market Cap: $29.8
NCAV: $85.1
Total Debt: $30.7
Price: $1.47
Cash & Short Term MS: $46.8
Quick Ratio: .8
MarineMax, Inc.
HZO
Market Cap: $45.1
NCAV: $130.1
Total Debt: $372
Price: $2.44
Cash & Short Term MS: $30.2
Quick Ratio: .2
Perfumania Holdings, Inc.
PERF
Market Cap: $33.9
NCAV: $42.7
Total Debt: $214
Price: $3.78
Cash & Short Term MS: $2.7
Quick Ratio: .3
West Marine, Inc.
WMAR
Market Cap: $124.2
NCAV: 151.5
Total Debt: $29.3
Price: $5.64
Cash & Short Term MS: $6
Quick Ratio: .4
Zale Corporation
ZLC
Market Cap: $91.8
NCAV: $92.7
Total Debt: $368
Price: $2.88
Cash & Short Term MS: $39.4
Quick Ratio: .3
Signet Jewelers Ltd.
SIG
Market Cap: $803
NCAV: 977.3
Total Debt: $613
Price: $9.42
Cash & Short Term MS: $36
Quick Ratio: 1.1
Duckwall-ALCO Stores, Inc
DUCK
Market Cap: $40
NCAV: 67.8
Total Debt: $56
Price: $10.50
Cash & Short Term MS: $5
Quick Ratio: .4
*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.
It's no surprise that there are now several retail net/nets, in fact, more than we've ever seen. Given the dire retail environment, it's inevitable that there will be a great deal of store closings in the next several months, and perhaps some bankruptcies as well. This certainly does not bode well for the smallest of the small, especially those that lack adequate working capital to bridge the recession, are choked with debt, or just can't weather a major pullback in sales.
In the early days of this site, we featured a couple of retail net/nets, Circuit City, and Duckwall Alco (search for these postings). Both had subsequent substantial run-ups. But times were different, and in Circuit City's case, the company at that time had a lot of cash-unlike the company that recently went under.
The risks here are many. If you do plan on "dumpster diving" in small retail net/nets, do so only with extreme caution. If you take a position, consider having a trailing stop-loss in place, which may help protect some of your capital, but is still no guarantee.
We recently had a position in AC Moore, and as the stock price increased, continued to move our trailing stop upward. But we were ultimately stopped out, on one of the many volatile trading days late in 2008. We still made a profit, but unfortunately left quite a bit on the table.
As always, proceed with caution. This is a toxic environment for retailers. We'll break the list into two parts, and run the other later this week.
Current Retail Net/Nets
A.C. Moore Arts & Crafts
ACMR
Market Cap: $29.8
NCAV: $85.1
Total Debt: $30.7
Price: $1.47
Cash & Short Term MS: $46.8
Quick Ratio: .8
MarineMax, Inc.
HZO
Market Cap: $45.1
NCAV: $130.1
Total Debt: $372
Price: $2.44
Cash & Short Term MS: $30.2
Quick Ratio: .2
Perfumania Holdings, Inc.
PERF
Market Cap: $33.9
NCAV: $42.7
Total Debt: $214
Price: $3.78
Cash & Short Term MS: $2.7
Quick Ratio: .3
West Marine, Inc.
WMAR
Market Cap: $124.2
NCAV: 151.5
Total Debt: $29.3
Price: $5.64
Cash & Short Term MS: $6
Quick Ratio: .4
Zale Corporation
ZLC
Market Cap: $91.8
NCAV: $92.7
Total Debt: $368
Price: $2.88
Cash & Short Term MS: $39.4
Quick Ratio: .3
Signet Jewelers Ltd.
SIG
Market Cap: $803
NCAV: 977.3
Total Debt: $613
Price: $9.42
Cash & Short Term MS: $36
Quick Ratio: 1.1
Duckwall-ALCO Stores, Inc
DUCK
Market Cap: $40
NCAV: 67.8
Total Debt: $56
Price: $10.50
Cash & Short Term MS: $5
Quick Ratio: .4
*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.
Monday, January 19, 2009
Looking Outside Our Narrow World of Deep Value
If you’ve been a long-time Cheap Stocks reader, you no doubt recognize that we focus on a relatively small sliver of the investment universe. Deep Value certainly isn’t the only way to invest, and net nets are not the only relevant deep value investment technique; these just happen to be the areas of the market we find most fascinating. Proper asset allocation is still imperative, something that we both embrace, and practice.
To that end, occasionally we run across a website, newsletter, or book that we see as must-read. We’ve just found such a worthy publication, which happens to focus on proper asset allocation, in a simple, easy to understand, easy to replicate, and inexpensive framework.
Jim Picerno’s (editor of the excellent Capital Spectator website), recently launched newsletter, The Beta Investment Report is perhaps the best of its kind. The inaugural issue is jam packed with practical information about building well diversified portfolios, and the ins and outs of asset allocation. It's refreshing to see that Picerno does not shy away from the great debate brought on by the near crash of most asset classes in 2008, that has shaken many investors confidence in the benefits of diversification.
Picerno, formely a writer for Bloomberg, and Wealth Manager Magazine, is a rarity in the world of journalism these days; a great writer who not only knows his craft, but is also an expert in the subject matter he writes about. His passion is obvious, and it comes through loud and clear in his writing style.
To see for yourself, Picerno is offering the inaugural issue of The Beta Investment Report for free, while a full one year subscription runs $235. Sign us up.
To that end, occasionally we run across a website, newsletter, or book that we see as must-read. We’ve just found such a worthy publication, which happens to focus on proper asset allocation, in a simple, easy to understand, easy to replicate, and inexpensive framework.
Jim Picerno’s (editor of the excellent Capital Spectator website), recently launched newsletter, The Beta Investment Report is perhaps the best of its kind. The inaugural issue is jam packed with practical information about building well diversified portfolios, and the ins and outs of asset allocation. It's refreshing to see that Picerno does not shy away from the great debate brought on by the near crash of most asset classes in 2008, that has shaken many investors confidence in the benefits of diversification.
Picerno, formely a writer for Bloomberg, and Wealth Manager Magazine, is a rarity in the world of journalism these days; a great writer who not only knows his craft, but is also an expert in the subject matter he writes about. His passion is obvious, and it comes through loud and clear in his writing style.
To see for yourself, Picerno is offering the inaugural issue of The Beta Investment Report for free, while a full one year subscription runs $235. Sign us up.
Monday, January 12, 2009
Cheap Stocks 21 Net Net Index Update
Its hard to believe that our index of net/nets is nearly one year old. When we introduced the index in February of 2008, we did so as an experiment. What was designed as a naively constructed cap-weighted index, CS21 has had an interesting ride.
Since inception (February 12th 2008) the CS21 Net Net Index is down 25.3%, versus -35% for the Russell Microcap Index, the closest benchmark that we can find.
While we are somehat pleased with the results, they are inconclusive at this point. Due to the extreme volatility and market performance during 2008, it was not the best time to make judgement. We'll continue to monitor this index through 2009.
Only 3 stocks in the index have performed positively since inception:
Adaptec (ADPT)
Weight: 18.7%
Performance: +19.29%
The Finish Line, Inc (FINL)
Weight: 7.57%
Performance: +119.58%
Anadys Pharmaceuticals (ANDS)
Weight: 2.53%
Performance: +134.38%
All other members were in negative territory, some more than 80%, including Leadis Technology (LDIS, -82%), Handleman (HDLM, -88%), Chromcraft Revington (CRC, -92%) and Charles and Colvard (CTHR,-83%). That's par for the course in net/net land, in fact bankruptcies are to be expected. While no index members have yet declared bankruptcy, Handelman is in liquidation. One member, Renovis, was bought out earlier in the year. Rather than replace Renovis, we opted to keep that allocation (originally 3.8%) in cash.
We are in the process of designing a new net/net index, and with the choices of available net/nets much more compelling than when we designed CS21, we look forward to unveiling it.
For more on the Cheap Stocks 21 Net Net Index, including constituents and weights, please search this 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.
Since inception (February 12th 2008) the CS21 Net Net Index is down 25.3%, versus -35% for the Russell Microcap Index, the closest benchmark that we can find.
While we are somehat pleased with the results, they are inconclusive at this point. Due to the extreme volatility and market performance during 2008, it was not the best time to make judgement. We'll continue to monitor this index through 2009.
Only 3 stocks in the index have performed positively since inception:
Adaptec (ADPT)
Weight: 18.7%
Performance: +19.29%
The Finish Line, Inc (FINL)
Weight: 7.57%
Performance: +119.58%
Anadys Pharmaceuticals (ANDS)
Weight: 2.53%
Performance: +134.38%
All other members were in negative territory, some more than 80%, including Leadis Technology (LDIS, -82%), Handleman (HDLM, -88%), Chromcraft Revington (CRC, -92%) and Charles and Colvard (CTHR,-83%). That's par for the course in net/net land, in fact bankruptcies are to be expected. While no index members have yet declared bankruptcy, Handelman is in liquidation. One member, Renovis, was bought out earlier in the year. Rather than replace Renovis, we opted to keep that allocation (originally 3.8%) in cash.
We are in the process of designing a new net/net index, and with the choices of available net/nets much more compelling than when we designed CS21, we look forward to unveiling it.
For more on the Cheap Stocks 21 Net Net Index, including constituents and weights, please search this 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.
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