Thanks to the addition of the most recently available data, we've now reviewed 8 years of data, crunched a lot of numbers for JG Boswell, and have been able to string together eight years worth of fundamentals. Due to the complexity, and growing size of our spreadsheet, we've decided to share just some of the data that will put BWEL's current valuation in perspective.
JG Boswell (BWEL)
8 Year Averages Based on Annual Data:
P/E: 27.3
Price/Sales: 1.56
Price/Book Value: 1.41
Net Profit Margin: 7.49%
EV/EBITDA: 9.71
Dividend Yield: 2.31%
Market Cap: $596 million
Enterprise Value: $718 million
Current Data (2010 Annual)
Price: $699 (11/30 close)
P/E: 22.5
Price/Sales: 1.72
Price/Book Value: 1.48
Net Margin: 7.7%
EV/EBITDA: 10.06
Dividend Yield: 2.0%
Current Market Cap: $692.7 million
Current Enterprise Value: $857 million
We now have compiled 8 years of JG Boswell as-reported fundamental data (balance sheet, Cash Flow, Income Statements, Summary Valuation Data and ratios) in an excel spreadsheet. If you are interested in obtaining this, please contact us at:cheapstocks@verizon.net for pricing.
*The author has a position in JG Boswell(BWEL). 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, December 01, 2010
Thursday, November 18, 2010
Lazare Kaplan Lives; Still No Balance Sheet, Though
No sooner did we part ways (for the second time) with LKII than the company announced a settlement agreement with ABN AMRO Bank and the Royal Bank of Scotland, which, as we understand it, resulted in $64 million in obligations being deemed "satisfied in full". ABN also agreed to transfer 2,151,103 shares of outstanding LKII stock, more than 25% of outstanding shares, back to the company. Lazare Kaplan forked over $14 million in cash to ABN and RBS as part of the settlement.
Shares jumped on the news, and now "trade" in the $1.41 range. With such a small float, trading volume is extremely light, and the bid ask spread very wide; $1.30/$1.75 at this writing.
Certainly sounds like some positive developments for Lazare, which has suffered in the aftermath of some missing inventory (diamonds), but we still don't know what shape the company is in, and have not seen a balance sheet in ages. We also don't know that status of the company's $640 million lawsuit with it's insurers.
This could get interesting, but there are still many unknowns.
Stay tuned.
*The author has no position in 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.
Shares jumped on the news, and now "trade" in the $1.41 range. With such a small float, trading volume is extremely light, and the bid ask spread very wide; $1.30/$1.75 at this writing.
Certainly sounds like some positive developments for Lazare, which has suffered in the aftermath of some missing inventory (diamonds), but we still don't know what shape the company is in, and have not seen a balance sheet in ages. We also don't know that status of the company's $640 million lawsuit with it's insurers.
This could get interesting, but there are still many unknowns.
Stay tuned.
*The author has no position in 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.
Tuesday, October 19, 2010
Parting Ways with Lazare Kaplan (LKII)
One of the great frustrations with the companies that end up in net/net land, is that you never know what might happen. This comes with the territory. In the case of diamond company Lazare Kaplan, "lost diamonds" led to a 10 month period where shares did not trade. The company was not talking, either. Shareholders were left in limbo with very little information, and no financial statements. The company was suspended from trading, but ultimately listed on the pink sheets, and began "trading" again in July.
We'd all but given up on Lazare; this was the second time we owned it, and thankfully our cost basis this time was $1.18.
But more details of the company's troubles began to emerge over the summer. We've seen some speculation by others that the company's $640 million lawsuit against its insurers, who are refusing to pay claims over the missing diamonds, may end up handsomely rewarding shareholders. We, however, have decided that the risk-reward is not in our favor in this case, and have closed our position.
While a lawsuit victory would be a huge windfall to the company, we believe that the fundamentals continue to deteriorate. The company's most recent 8K suggested that Q1 revenue will be about $33.2 million, down from $74.2 million last year. Meanwhile, we don't know what shape the balance sheet is currently in; it's been ages since we've seen one. In any event, we would rather walk away with $.80 or $.90 per share of our original $1.18 investment than take the chance of total loss.
*The author has no position in 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.
We'd all but given up on Lazare; this was the second time we owned it, and thankfully our cost basis this time was $1.18.
But more details of the company's troubles began to emerge over the summer. We've seen some speculation by others that the company's $640 million lawsuit against its insurers, who are refusing to pay claims over the missing diamonds, may end up handsomely rewarding shareholders. We, however, have decided that the risk-reward is not in our favor in this case, and have closed our position.
While a lawsuit victory would be a huge windfall to the company, we believe that the fundamentals continue to deteriorate. The company's most recent 8K suggested that Q1 revenue will be about $33.2 million, down from $74.2 million last year. Meanwhile, we don't know what shape the balance sheet is currently in; it's been ages since we've seen one. In any event, we would rather walk away with $.80 or $.90 per share of our original $1.18 investment than take the chance of total loss.
*The author has no position in 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.
Wednesday, October 13, 2010
Value Investing Congress: David Einhorn on St. Joes
Today ended the sixth annual New York Value Investing Congress, and the day's action did not disappoint. Once again, John Schwartz and Whitney Tilson put on a great event.
One of the conferences best presentations was this morning from Greenlight Capital's David Einhorn. A well respected colleague of mine joked just yesterday after seeing the title of Einhorn's presentation (If You Build it They Won't Come), that he hoped that Einhorn was not referring to St. Joes (JOE), a name in which my colleague has a small position. Its also a name that I previously owned, and we previously covered here at Cheap Stocks. In fact, a few years back David Einhorn took exception to some of our comments about JOE, and we invited him to write a response, which we ran unaltered.
Indeed, Einhorn's very detailed, very well delivered presentation was about St. Joe's. He left no stone unturned, and weaved together a very compelling case that JOE is overvalued at current levels. In fact, Einhorn suggested that JOE is worth no more than $7 to $10 to an acquirer now, and perhaps less if the company continues to sell property in order to cover operating expenses.
In a similar style used in his book "Fooling Some of the People All of the Time", Einhorn laid out his case. He used photos, and video of some of the current St. Joes developments, some of which appear to be ghost towns. He also used detailed property sales data, to reach the conclusion that St. Joes should probably be writing down the value of some of it's properties. It was indeed a sobering look of a company that we were bullish on in previous years.
While we never quite reached the same devastating conclusion as Einhorn, our patience did ultimately wear thin, when we realized that the company might have difficulty converting its only assets into cash.
Once again we give Einhorn a great deal of credit. His analysis was incredibly well done, and he's probably one of the brightest guys in the business. Time will tell whether he's nailed the St. Joes story the way he did with Allied Capital in "Fooling Some of the People..."
*The author has no positions in any of the securities 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.
One of the conferences best presentations was this morning from Greenlight Capital's David Einhorn. A well respected colleague of mine joked just yesterday after seeing the title of Einhorn's presentation (If You Build it They Won't Come), that he hoped that Einhorn was not referring to St. Joes (JOE), a name in which my colleague has a small position. Its also a name that I previously owned, and we previously covered here at Cheap Stocks. In fact, a few years back David Einhorn took exception to some of our comments about JOE, and we invited him to write a response, which we ran unaltered.
Indeed, Einhorn's very detailed, very well delivered presentation was about St. Joe's. He left no stone unturned, and weaved together a very compelling case that JOE is overvalued at current levels. In fact, Einhorn suggested that JOE is worth no more than $7 to $10 to an acquirer now, and perhaps less if the company continues to sell property in order to cover operating expenses.
In a similar style used in his book "Fooling Some of the People All of the Time", Einhorn laid out his case. He used photos, and video of some of the current St. Joes developments, some of which appear to be ghost towns. He also used detailed property sales data, to reach the conclusion that St. Joes should probably be writing down the value of some of it's properties. It was indeed a sobering look of a company that we were bullish on in previous years.
While we never quite reached the same devastating conclusion as Einhorn, our patience did ultimately wear thin, when we realized that the company might have difficulty converting its only assets into cash.
Once again we give Einhorn a great deal of credit. His analysis was incredibly well done, and he's probably one of the brightest guys in the business. Time will tell whether he's nailed the St. Joes story the way he did with Allied Capital in "Fooling Some of the People..."
*The author has no positions in any of the securities 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, October 07, 2010
Whatever Became of The Cheap Stocks 21 Net/Net Index?
Although we wrapped up our experimental 2 year index of net/nets last February, we still have the ability to track it. While it ended the 2 year run up 5.1%, nearly 1400 bps points ahead of the Russell Microcap Index, and more than 2500 bps ahead of the S&P 500, we'd actually hoped for better performance.
Although we've generally stopped tracking CS 21 since the intended February wind-down, we thought it would be interesting to check performance since then. Since February, the Index is up 14.3%, vs. 5.13% for the S&P 500, and 12.25% for the Russell Microcap Index. Since orignal inception, CS21 is up 20.45% while the S&P 500 is down 16% and the Russell Microcap is down about 9.8%
The primary determinant of the continued decent run by the index has been the performance of former net/net The Finish Line (FINL) which is up more than 500% since the original index launch.
Please search the site for past posts on CS21. Below are the orignal components, and their initial weights.
Adaptec Inc(ADPT)
Weight: 18.72%
Computer Systems
Audiovox Corp(VOXX)
Weight: 12.20%
Electronics
Trans World Entertainment(TWMC)
Weight:7.58%
Retail-Music and Video
Finish Line Inc(FINL)
Weight:6.30%
Retail-Apparel
Nu Horizons Electronics(NUHC)
Weight:5.76%
Electronics Wholesale
Richardson Electronics(RELL)
Weight:5.09%
Electronics Wholesale
Pomeroy IT Solutions(PMRY)
Weight:4.61%
IT
Acquired
Ditech Networks(DITC)
Weight:4.31%
Parlux Fragrances(PARL)
Weight:3.92%
Personal Products
InFocus Corp(INFS)
Weight:3.81%
Computer Peripherals
Acquired
Renovis Inc(RNVS)
Weight:3.80%
Biotech
Acquired
Leadis Technology Inc(LDIS)
Weight:3.47%
Semiconductor-Integrated Circuits
Replidyne Inc(RDYN)Became Cardiovascular Systems (CSII)
Weight:3.31%
Biotech
Tandy Brands Accessories Inc(TBAC)
Weight:2.94%
Apparel, Footwear, Accessories
FSI International Inc(FSII)
Weight:2.87%
Anadys Pharmaceuticals Inc(ANDS)
Weight:2.49%
Biotech
MediciNova Inc(MNOV)
Weight:2.33%
Biotech
Emerson Radio Corp(MSN)
Weight:1.71%
Electronics
Handleman Co(HDL)
Weight:1.66%
Music- Wholesale
Chromcraft Revington Inc(CRC)
Weight:1.62%
Furniture
Charles & Colvard Ltd(CTHR)
Weight:1.50%
Jewel Wholesale
We still intend on developing a new Net/Net Index, this time equal weighted. Stay Tuned.
*The author has a position in Chromcraft Revington (CRC). This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.
Although we've generally stopped tracking CS 21 since the intended February wind-down, we thought it would be interesting to check performance since then. Since February, the Index is up 14.3%, vs. 5.13% for the S&P 500, and 12.25% for the Russell Microcap Index. Since orignal inception, CS21 is up 20.45% while the S&P 500 is down 16% and the Russell Microcap is down about 9.8%
The primary determinant of the continued decent run by the index has been the performance of former net/net The Finish Line (FINL) which is up more than 500% since the original index launch.
Please search the site for past posts on CS21. Below are the orignal components, and their initial weights.
Adaptec Inc(ADPT)
Weight: 18.72%
Computer Systems
Audiovox Corp(VOXX)
Weight: 12.20%
Electronics
Trans World Entertainment(TWMC)
Weight:7.58%
Retail-Music and Video
Finish Line Inc(FINL)
Weight:6.30%
Retail-Apparel
Nu Horizons Electronics(NUHC)
Weight:5.76%
Electronics Wholesale
Richardson Electronics(RELL)
Weight:5.09%
Electronics Wholesale
Pomeroy IT Solutions(PMRY)
Weight:4.61%
IT
Acquired
Ditech Networks(DITC)
Weight:4.31%
Parlux Fragrances(PARL)
Weight:3.92%
Personal Products
InFocus Corp(INFS)
Weight:3.81%
Computer Peripherals
Acquired
Renovis Inc(RNVS)
Weight:3.80%
Biotech
Acquired
Leadis Technology Inc(LDIS)
Weight:3.47%
Semiconductor-Integrated Circuits
Replidyne Inc(RDYN)Became Cardiovascular Systems (CSII)
Weight:3.31%
Biotech
Tandy Brands Accessories Inc(TBAC)
Weight:2.94%
Apparel, Footwear, Accessories
FSI International Inc(FSII)
Weight:2.87%
Anadys Pharmaceuticals Inc(ANDS)
Weight:2.49%
Biotech
MediciNova Inc(MNOV)
Weight:2.33%
Biotech
Emerson Radio Corp(MSN)
Weight:1.71%
Electronics
Handleman Co(HDL)
Weight:1.66%
Music- Wholesale
Chromcraft Revington Inc(CRC)
Weight:1.62%
Furniture
Charles & Colvard Ltd(CTHR)
Weight:1.50%
Jewel Wholesale
We still intend on developing a new Net/Net Index, this time equal weighted. Stay Tuned.
*The author has a position in Chromcraft Revington (CRC). This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.
Sunday, September 19, 2010
Slim Pickings
There's just not been a great deal to mention these days in the land of the net/nets. That typically happens as a rising tide lifts all boats, even those with a few holes. At recent count, there are just a handful of net/nets with market caps in excess of $100 million.
There are more names in the $10-$100 million range, and among these are a few retailers. As you may recall our February 2010 recap of net/net retailers, there were a dozen retail net/nets in the dog days of early 2009, and the returns the following year were quite good.
While we are not suggeating that the current crop of retail net/nets, which are very few in number, will have the same outcome, we are nonetheless intrigued.
AC Moore
Ticker: ACMR
Price: $1.78
Market Cap: $44.8
NCAV: $62.4
Mkt Cap/NCAV: .72
Cash: $31.4
PE: NA
This 135 store craft retailer has struggled throughout the recession and has not had a profitable year since fiscal 2007. Company has $31.4 million in cash and $19 million in debt. Currently trades at .3 times book value per share.
Duckwall Alco
Ticker: DUCK
Price: $12.99
Market Cap: $49.9
NCAV: $64.7
Mkt Cap/NCAV: .77
Cash: $3.7
PE: NA
Regional retailer has 258 stores in 23 states; tends to be located in towns too small to support a Wal Mart. Currently trades at .48 times book value per share. Two of past five quarters have been profitable. Company is a perennial net/net with no analyst coverage. Has generated more than $3.00 in free cash flow in trailing 12 months. Ended last quarter with $41 million in debt. Currently trades at just over 5 times EV/EBITDA.
*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.
There are more names in the $10-$100 million range, and among these are a few retailers. As you may recall our February 2010 recap of net/net retailers, there were a dozen retail net/nets in the dog days of early 2009, and the returns the following year were quite good.
While we are not suggeating that the current crop of retail net/nets, which are very few in number, will have the same outcome, we are nonetheless intrigued.
AC Moore
Ticker: ACMR
Price: $1.78
Market Cap: $44.8
NCAV: $62.4
Mkt Cap/NCAV: .72
Cash: $31.4
PE: NA
This 135 store craft retailer has struggled throughout the recession and has not had a profitable year since fiscal 2007. Company has $31.4 million in cash and $19 million in debt. Currently trades at .3 times book value per share.
Duckwall Alco
Ticker: DUCK
Price: $12.99
Market Cap: $49.9
NCAV: $64.7
Mkt Cap/NCAV: .77
Cash: $3.7
PE: NA
Regional retailer has 258 stores in 23 states; tends to be located in towns too small to support a Wal Mart. Currently trades at .48 times book value per share. Two of past five quarters have been profitable. Company is a perennial net/net with no analyst coverage. Has generated more than $3.00 in free cash flow in trailing 12 months. Ended last quarter with $41 million in debt. Currently trades at just over 5 times EV/EBITDA.
*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.
Tuesday, August 31, 2010
Next Value Investing Congress October 12-13 in NYC
I have not missed a session of the Value Investing Congress since my first visit to the VIC West (at that time held in Hollywood and now in Pasadena) back in May of 2007. Its a first class event, and I've never walked away without several actionable ideas.
There have been a few surprises along the way as well. Two years ago at the New York VIC, Carl Icahn gave an unexpected (to me, anyway) presentation.
This is indeed a great opportunity to hear from some of the best value investors of our time, network with other like-minded investors, and rub elbows with value managers.
My friends at the Value Investing Congress have been kind enough to offer Cheap Stocks readers a discount of $1400, the early-bird rate starting today and ending on 9/13. For more information see the ad on our front page.
Hope to see you in NY!
There have been a few surprises along the way as well. Two years ago at the New York VIC, Carl Icahn gave an unexpected (to me, anyway) presentation.
This is indeed a great opportunity to hear from some of the best value investors of our time, network with other like-minded investors, and rub elbows with value managers.
My friends at the Value Investing Congress have been kind enough to offer Cheap Stocks readers a discount of $1400, the early-bird rate starting today and ending on 9/13. For more information see the ad on our front page.
Hope to see you in NY!
Wednesday, August 25, 2010
Top Net/Nets By Market Cap
While the markets continue their rocky road, the ranks of the net/nets have slowly been increasing. There are currently 100 or so with market caps above $5 million. Certainly still somewhat slim pickings, but never boring.
Top 5 Net/Nets By Market Cap
Imation Corp
Ticker: IMN
Price: $8.70
Market Cap: $338 million
NCAV: $413.9 million
Market Cap/NCAV: .82
Cash & ST Investments: $251.3 million
PE: NA
ADPT Corp
Ticker: ADPT
Price: $2.84
Market Cap: $342 million
NCAV: $381.1 million
Market Cap/NCAV: .90
Cash & ST Investments: $389.7 million
PE: NA
PC Connection
Ticker: PCCC
Price: $6.36
Market Cap: $172 million
NCAV: $180.8 million
Market Cap/NCAV: .95
Cash & ST Investments: $49.8 million
PE: 12
Tuesday Morning
Ticker: TUES
Price: $3.6
Market Cap: $152 million
NCAV: $167.8 million
Market Cap/NCAV: .91
Cash & ST Investments: $2.6 million
PE: 19
Audiovoxx
Ticker: VOXX
Price: $6.32
Market Cap: $145 million
NCAV: $209.8 million
Market Cap/NCAV: .69
Cash & ST Investments: $83.6 million
PE: 6
What's a net/net list without Audiovoxx? This company has seemingly been a net/net for as long as I've been researching.
Further down the list in terms of market caps, We are also seeing some interesting names, and will opine on those in our next column.
*The author has no position in 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.
Top 5 Net/Nets By Market Cap
Imation Corp
Ticker: IMN
Price: $8.70
Market Cap: $338 million
NCAV: $413.9 million
Market Cap/NCAV: .82
Cash & ST Investments: $251.3 million
PE: NA
ADPT Corp
Ticker: ADPT
Price: $2.84
Market Cap: $342 million
NCAV: $381.1 million
Market Cap/NCAV: .90
Cash & ST Investments: $389.7 million
PE: NA
PC Connection
Ticker: PCCC
Price: $6.36
Market Cap: $172 million
NCAV: $180.8 million
Market Cap/NCAV: .95
Cash & ST Investments: $49.8 million
PE: 12
Tuesday Morning
Ticker: TUES
Price: $3.6
Market Cap: $152 million
NCAV: $167.8 million
Market Cap/NCAV: .91
Cash & ST Investments: $2.6 million
PE: 19
Audiovoxx
Ticker: VOXX
Price: $6.32
Market Cap: $145 million
NCAV: $209.8 million
Market Cap/NCAV: .69
Cash & ST Investments: $83.6 million
PE: 6
What's a net/net list without Audiovoxx? This company has seemingly been a net/net for as long as I've been researching.
Further down the list in terms of market caps, We are also seeing some interesting names, and will opine on those in our next column.
*The author has no position in 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, July 19, 2010
Cheap Stocks on "Investor Questions Podcast with Geoff Gannon"
Geoff Gannon, formerly of the excellent "Gannon on Investing" site, now has a new venture Investor Questions Podcast with Geoff Gannon. Last week he interviewed me in depth. Geoff asked some great questions about net/nets, the website, and other investment related topics. It's a long interview, so if you are having a sleepless night, this might be the cure. Many thanks to Geoff, and best wishes to him on his new venture.
Monday, July 12, 2010
The "Return" of Lazare Kaplan (LKII)
If you've followed our coverage of perennial net/net Lazare Kaplan over the years, it's been perhaps one of the most bizarre stories since another former net/net, Allou Health and Beauty went up in smoke, literally in 2003.
The latest twist on Lazare Kaplan, which recently announced a $640 million lawsuit against it's insurers who are refusing to pay claims over missing diamonds, is that shares now trade on the pinksheets under the symbol "LKII". Shares are currently changing hands in the $.60 range, less than one fourth of where the stock last traded in September of 2009, before trading was halted.
How this will all end remains to be seen. Financial statements have not been filed for several quarters, and the company's chances of winning the lawsuit remain unclear. Never a dull moment in net/net land.
*The author has a position in Lazare Kaplan (LKII). 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 latest twist on Lazare Kaplan, which recently announced a $640 million lawsuit against it's insurers who are refusing to pay claims over missing diamonds, is that shares now trade on the pinksheets under the symbol "LKII". Shares are currently changing hands in the $.60 range, less than one fourth of where the stock last traded in September of 2009, before trading was halted.
How this will all end remains to be seen. Financial statements have not been filed for several quarters, and the company's chances of winning the lawsuit remain unclear. Never a dull moment in net/net land.
*The author has a position in Lazare Kaplan (LKII). 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, July 07, 2010
Setting the Record Straight on St. Joes (JOE)
A recent post that appeared on Greenbackd.com, which happens to be one of my favorite deep value oriented sites, opened up the great debate on Florida land giant St. Joes Corp, a company we covered fairly frequently in the past, and one that I owned for several years.
For the record, while I believe that there is value in St. Joe's assets, I have not owned the name since 2008. I originally purhased shares in the mid $20's back in the early 2000's, watched it run past $80, and finally had the position closed at around $40.
You may recall the back and forth between David Einhorn and I that appeared on this site nearly 3 years ago. David was short JOE, while I presented the bullish case. Einhorn had a $15 price target on the stock, and JOE bottomed at $16 and change in March of 2009, so David nailed it.
The reason that I don't own St. Joe's now is my skepticism about the company's ability to convert it's land holdings into cash, and how quickly it will be able to do so given the continuing Florida land depression. The oil spill, and how it will effect the Florida panhandle, is another concern.
With 577,000 acres, St. Joes currently trades at $3518 on the Enterprise Value/Acre metric that I typically calculate for companies with vast land holdings. While that may seem very cheap,it's not that far below 2007 ($3956)and 2008 levels ($4016).
Bruce Berkowitz, whose firm Fairholme Capital Management owned nearly 29% of the company as of 3/31, laid out the bullish case for JOE at the recent Value Investing Congress West in Pasadena. While Berkowitz is way smarter than I'll ever be, he used a lot of the same reasoning that I did when I was a shareholder, in order to present his case. I've just grown skeptical.
This may be the epitome of the value investor's dilemna: a company with extremely valuable assets, but the assets need to be converted into cash in order for value to be realized. Can St. Joe's pull it off?
I'd be an aggressive buyer of the stock at $2000 on an EV/acre basis, in order to provide a wider margin of safety. That would put the share price at about $13. That's a long way from current levels, and it's doubtful that we'll get there.
*The author does not 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.
For the record, while I believe that there is value in St. Joe's assets, I have not owned the name since 2008. I originally purhased shares in the mid $20's back in the early 2000's, watched it run past $80, and finally had the position closed at around $40.
You may recall the back and forth between David Einhorn and I that appeared on this site nearly 3 years ago. David was short JOE, while I presented the bullish case. Einhorn had a $15 price target on the stock, and JOE bottomed at $16 and change in March of 2009, so David nailed it.
The reason that I don't own St. Joe's now is my skepticism about the company's ability to convert it's land holdings into cash, and how quickly it will be able to do so given the continuing Florida land depression. The oil spill, and how it will effect the Florida panhandle, is another concern.
With 577,000 acres, St. Joes currently trades at $3518 on the Enterprise Value/Acre metric that I typically calculate for companies with vast land holdings. While that may seem very cheap,it's not that far below 2007 ($3956)and 2008 levels ($4016).
Bruce Berkowitz, whose firm Fairholme Capital Management owned nearly 29% of the company as of 3/31, laid out the bullish case for JOE at the recent Value Investing Congress West in Pasadena. While Berkowitz is way smarter than I'll ever be, he used a lot of the same reasoning that I did when I was a shareholder, in order to present his case. I've just grown skeptical.
This may be the epitome of the value investor's dilemna: a company with extremely valuable assets, but the assets need to be converted into cash in order for value to be realized. Can St. Joe's pull it off?
I'd be an aggressive buyer of the stock at $2000 on an EV/acre basis, in order to provide a wider margin of safety. That would put the share price at about $13. That's a long way from current levels, and it's doubtful that we'll get there.
*The author does not 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, June 10, 2010
The Downside of Net/Net Investing- Lazare Kaplan (LKI)
We've tried to make it clear over the years that there are substantial risks investing in individual net/nets. While some pay off quite handsomely, others can implode, hence the idea of indexing net/nets, as we explored with our Cheap Stocks 21 Net Net Index.
This brings us to Lazare Kaplan International, a company that we have both covered and owned over the years. We closed our position in this perennial net/net in February of 2008 in the $10 range. In July of 2009,we initiated a new position in the $1.15 range. The shares subsequently ran up to $2.50, but in September, trading was halted,and not a share has traded since.
The company has repeatedly delayed filing it's financial reports with the SEC, due to:
The NYSE AMEX granted the company several extensions to regain compliance; the latest on April 26th, which gave the company until May 31st to regain compliance with listing standards.
Here's where the story gets either very interesting, or ridiculous. On May 20th, the company filed a lawsuit suing various insurance companies for $640 million regarding "the disappearance of diamonds that were insured by the defendants". And now, finally, we learn what all of this is about: missing diamonds. The company had reportedly received a $28 million payment in January but the insurers are refusing to pay any more. This is not what a shareholder wants to hear, especially when you are stuck with the shares, and information about what is really happening at the company has been next to impossible to get. As of 3/31/2010, some institutional holders were in the same boat; including Dimensional Fund Advisors, which owned 7.54%,royce & Associates (1.16%), Royal Bank of Canada (1.15%), and CALPERS (.55%). A call to Lazare Kaplan CFO William Moryto placed late last week has not been returned.
This story will probably not have a happy ending for shareholders, and it raises many unanswered questions. What happened to the diamonds? Why isn't the company willing to speak with it's shareholders on the issue? Why are the insurers unwilling to pay? And again, what happened to the diamonds?
*The author has a position in Lazare Kaplan (LKI). This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.
This brings us to Lazare Kaplan International, a company that we have both covered and owned over the years. We closed our position in this perennial net/net in February of 2008 in the $10 range. In July of 2009,we initiated a new position in the $1.15 range. The shares subsequently ran up to $2.50, but in September, trading was halted,and not a share has traded since.
The company has repeatedly delayed filing it's financial reports with the SEC, due to:
a material uncertainty concerning (a) the collectability and recovery of certain assets, and (b) the Company's potential obligations under certain lines of credit and a guaranty (all of which, the "Material Uncertainties").
The NYSE AMEX granted the company several extensions to regain compliance; the latest on April 26th, which gave the company until May 31st to regain compliance with listing standards.
Here's where the story gets either very interesting, or ridiculous. On May 20th, the company filed a lawsuit suing various insurance companies for $640 million regarding "the disappearance of diamonds that were insured by the defendants". And now, finally, we learn what all of this is about: missing diamonds. The company had reportedly received a $28 million payment in January but the insurers are refusing to pay any more. This is not what a shareholder wants to hear, especially when you are stuck with the shares, and information about what is really happening at the company has been next to impossible to get. As of 3/31/2010, some institutional holders were in the same boat; including Dimensional Fund Advisors, which owned 7.54%,royce & Associates (1.16%), Royal Bank of Canada (1.15%), and CALPERS (.55%). A call to Lazare Kaplan CFO William Moryto placed late last week has not been returned.
This story will probably not have a happy ending for shareholders, and it raises many unanswered questions. What happened to the diamonds? Why isn't the company willing to speak with it's shareholders on the issue? Why are the insurers unwilling to pay? And again, what happened to the diamonds?
*The author has a position in Lazare Kaplan (LKI). 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, June 02, 2010
What Happened to Cheap Stocks?
It's been 3 months since we last published, and we've been getting many e-mails wondering whether we have a new site, or have just fallen off the face of the earth. The truth is, we've been taking a break while we decide the future of this site, which was originally started in 2003.
Good content takes time and patience to develop, and we are a little short on both these days, especially when it does not help pay the bills. We've considered making this a paid subscription only site, but are still on the fence.
In any event, stay tuned...
Good content takes time and patience to develop, and we are a little short on both these days, especially when it does not help pay the bills. We've considered making this a paid subscription only site, but are still on the fence.
In any event, stay tuned...
Sunday, February 28, 2010
Value Investing Congress West: May 4th and 5th
I'll be heading back to Pasadena in early May, to attend my sixth session of the Value Investing Congress, and fourth on the left coast. This is the premier forum for value investors; an extremely well-run event that attracts quality speakers, offering compelling insights and investment ideas. What's more, I've found the presenters to be approachable both during and after the Congress.
Last year, I walked away with several actionable ideas. One of them, Huntsman (HUN), has more than doubled since I initially took a position in early May.
The folks at The Value Investing Congress have been kind enough to extend a discount to Cheap Stocks readers, $1300 off the regular rate. If you are intested in attending, please click here and use discount code P10CS3, which will expire on March 16th.
I hope to see you in Pasadena!
*The author has a position in Huntsman (HUN). This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.
Last year, I walked away with several actionable ideas. One of them, Huntsman (HUN), has more than doubled since I initially took a position in early May.
The folks at The Value Investing Congress have been kind enough to extend a discount to Cheap Stocks readers, $1300 off the regular rate. If you are intested in attending, please click here and use discount code P10CS3, which will expire on March 16th.
I hope to see you in Pasadena!
*The author has a position in Huntsman (HUN). 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, February 25, 2010
Winding Down The Cheap Stocks 21 Net Net Index; Outperforms Russell Microcap by 1371 bps, S&P 500 by 2537 bps
Two years ago, we launched the CS 21 Net/Net Index, the first index designed to track net/net performance. The index was cap weighted, and comprised of the 21 largest net/nets by market cap at the time of launch. We had a few restrictions on inclusion in the index, including average daily volume and price, but otherwise, this was a very simply constructed index.
We originally intended to replace companies that were acquired, but thought better of it, instead deciding to keep proceeds from acquistions in cash. We also did not replace any names if they no longer met the net/net criteria. This was simply an experiment in order to see how net/nets at a given time would perform over the subsequent two years.
The results are in, and while it was not what we'd originally hoped for, it does lend credence to the long-held notion that net/nets can outperform the broader markets.
The Cheap Stocks 21 Net Net Index finished the two year period relatively flat, gaining 5.1%. During the same period, The Russell Microcap Index was down 8.61%, while the Russell Microcap Value Index was down 9.9%. During the same period, the S&P 500 was down 20.27%.
Here are the index constituents, their original weights, and performance.
Adaptec Inc(ADPT)
Weight: 18.72%
Computer Systems
+7.86%
Audiovox Corp(VOXX)
Weight: 12.20%
Electronics
-29.28%
Trans World Entertainment(TWMC)
Weight:7.58%
Retail-Music and Video
-69.55%
Finish Line Inc(FINL)
Weight:6.30%
Retail-Apparel
+350.83%
Nu Horizons Electronics(NUHC)
Weight:5.76%
Electronics Wholesale
-25.09%
Richardson Electronics(RELL)
Weight:5.09%
Electronics Wholesale
+43.27%
Pomeroy IT Solutions(PMRY)
Weight:4.61%
IT
Acquired
-3.8%
Ditech Networks(DITC)
Weight:4.31%
Communication Equip
-56.67%
Parlux Fragrances(PARL)
Weight:3.92%
Personal Products
-51.39%
InFocus Corp(INFS)
Weight:3.81%
Computer Peripherals
Acquired
Renovis Inc(RNVS)
Weight:3.80%
Biotech
Acquired
Leadis Technology Inc(LDIS)
Weight:3.47%
Semiconductor-Integrated Circuits
-92.05%
Replidyne Inc(RDYN)Became Cardiovascular Systems (CSII)
Weight:3.31%
Biotech
+126.36%
Tandy Brands Accessories Inc(TBAC)
Weight:2.94%
Apparel, Footwear, Accessories
-57.79%
FSI International Inc(FSII)
Weight:2.87%
Semiconductor Equip
+66.47%
Anadys Pharmaceuticals Inc(ANDS)
Weight:2.49%
Biotech
+43.75%
MediciNova Inc(MNOV)
Weight:2.33%
Biotech
+100%
Emerson Radio Corp(MSN)
Weight:1.71%
Electronics
+118.19%
Handleman Co(HDL)
Weight:1.66%
Music- Wholesale
-88.67%
Chromcraft Revington Inc(CRC)
Weight:1.62%
Furniture
-54.58%
Charles & Colvard Ltd(CTHR)
Weight:1.50%
Jewel Wholesale
-7.41%
Cash Weight: 8.58%
We are in the process of putting together a new net/net index, and still trying to decide whether or not we want to disclose the constituents, or keep them under wraps. Stay Tuned.
*The author has a position in Chromcraft Revington (CRC). This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.
We originally intended to replace companies that were acquired, but thought better of it, instead deciding to keep proceeds from acquistions in cash. We also did not replace any names if they no longer met the net/net criteria. This was simply an experiment in order to see how net/nets at a given time would perform over the subsequent two years.
The results are in, and while it was not what we'd originally hoped for, it does lend credence to the long-held notion that net/nets can outperform the broader markets.
The Cheap Stocks 21 Net Net Index finished the two year period relatively flat, gaining 5.1%. During the same period, The Russell Microcap Index was down 8.61%, while the Russell Microcap Value Index was down 9.9%. During the same period, the S&P 500 was down 20.27%.
Here are the index constituents, their original weights, and performance.
Adaptec Inc(ADPT)
Weight: 18.72%
Computer Systems
+7.86%
Audiovox Corp(VOXX)
Weight: 12.20%
Electronics
-29.28%
Trans World Entertainment(TWMC)
Weight:7.58%
Retail-Music and Video
-69.55%
Finish Line Inc(FINL)
Weight:6.30%
Retail-Apparel
+350.83%
Nu Horizons Electronics(NUHC)
Weight:5.76%
Electronics Wholesale
-25.09%
Richardson Electronics(RELL)
Weight:5.09%
Electronics Wholesale
+43.27%
Pomeroy IT Solutions(PMRY)
Weight:4.61%
IT
Acquired
-3.8%
Ditech Networks(DITC)
Weight:4.31%
Communication Equip
-56.67%
Parlux Fragrances(PARL)
Weight:3.92%
Personal Products
-51.39%
InFocus Corp(INFS)
Weight:3.81%
Computer Peripherals
Acquired
Renovis Inc(RNVS)
Weight:3.80%
Biotech
Acquired
Leadis Technology Inc(LDIS)
Weight:3.47%
Semiconductor-Integrated Circuits
-92.05%
Replidyne Inc(RDYN)Became Cardiovascular Systems (CSII)
Weight:3.31%
Biotech
+126.36%
Tandy Brands Accessories Inc(TBAC)
Weight:2.94%
Apparel, Footwear, Accessories
-57.79%
FSI International Inc(FSII)
Weight:2.87%
Semiconductor Equip
+66.47%
Anadys Pharmaceuticals Inc(ANDS)
Weight:2.49%
Biotech
+43.75%
MediciNova Inc(MNOV)
Weight:2.33%
Biotech
+100%
Emerson Radio Corp(MSN)
Weight:1.71%
Electronics
+118.19%
Handleman Co(HDL)
Weight:1.66%
Music- Wholesale
-88.67%
Chromcraft Revington Inc(CRC)
Weight:1.62%
Furniture
-54.58%
Charles & Colvard Ltd(CTHR)
Weight:1.50%
Jewel Wholesale
-7.41%
Cash Weight: 8.58%
We are in the process of putting together a new net/net index, and still trying to decide whether or not we want to disclose the constituents, or keep them under wraps. Stay Tuned.
*The author has a position in Chromcraft Revington (CRC). This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.
Saturday, February 06, 2010
Retail Net/Nets One Year Later, up an Average of 146%
This time last year we ran a two part series on retailers that were trading below net current asset value. Retail was all but left for dead then, and as we all remember, market conditons got even worse by March.
One year later, the twelve companies are up an average of 146%. There was just one company in negative territory, Zales.
Here are the companies and returns:
A.C. Moore Arts & Crafts
ACMR
Price Then: 1.47
Price Now: $2.72
Return: 85%
MarineMax, Inc.
HZO
Price Then: $2.49
Price Now: $10.22
Return: 310%
Perfumania Holdings, Inc.
PERF
Price Then: $3.78
Price Now: $6.46
Return: 71%
West Marine, Inc.
WMAR
Price Then: $5.69
Price Now: $8.24
Return: 45%
Zale Corporation
ZLC
Price Then: $2.88
Price Now: $2.12
Return: -26%
Signet Jewelers Ltd.
SIG
Price Then: $9.42
Price Now: $27.00
Return: 187%
Duckwall-ALCO Stores, Inc
DUCK
Price Then: $10.50
Price Now: $12.59
Return: 20%
Stein Mart
SMRT
Price Then: $1.28
Price Now: $8.05
Return: 529%
Shoe Carnival
SCVL
Price Then: $8.04
Price Now: $18.08
Return: 125%
Cache
CACH
Price Then: $2.00
Price Now: $4.34
Return: 117%
PC Connection
PCCC
Price Then: $5.25
Price Now: $6.19
Return: 18%
Tuesday Morning
TUES
Price Then: $1.33
Price Now: $4.95
Return: 272%
At this writing, just two of the company's AC Moore, and Duckwall Alco remain in net/net territory.
*The author has a position in Tuesday Morning. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.
One year later, the twelve companies are up an average of 146%. There was just one company in negative territory, Zales.
Here are the companies and returns:
A.C. Moore Arts & Crafts
ACMR
Price Then: 1.47
Price Now: $2.72
Return: 85%
MarineMax, Inc.
HZO
Price Then: $2.49
Price Now: $10.22
Return: 310%
Perfumania Holdings, Inc.
PERF
Price Then: $3.78
Price Now: $6.46
Return: 71%
West Marine, Inc.
WMAR
Price Then: $5.69
Price Now: $8.24
Return: 45%
Zale Corporation
ZLC
Price Then: $2.88
Price Now: $2.12
Return: -26%
Signet Jewelers Ltd.
SIG
Price Then: $9.42
Price Now: $27.00
Return: 187%
Duckwall-ALCO Stores, Inc
DUCK
Price Then: $10.50
Price Now: $12.59
Return: 20%
Stein Mart
SMRT
Price Then: $1.28
Price Now: $8.05
Return: 529%
Shoe Carnival
SCVL
Price Then: $8.04
Price Now: $18.08
Return: 125%
Cache
CACH
Price Then: $2.00
Price Now: $4.34
Return: 117%
PC Connection
PCCC
Price Then: $5.25
Price Now: $6.19
Return: 18%
Tuesday Morning
TUES
Price Then: $1.33
Price Now: $4.95
Return: 272%
At this writing, just two of the company's AC Moore, and Duckwall Alco remain in net/net territory.
*The author has a position in Tuesday Morning. 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, January 19, 2010
Cheap Stocks 21 Net Net Index Update; CS to Launch New Net Net Index
Back in February of 2008,we launched a rather unique experiment, an index of companies trading below their net current asset value. We laid out our selection criteria and premise in our February 15, 2008 post. Truthfully, this was a rather naive approach to creating an index, a fact we were well aware of.
We did make some adjustments along the way; we did not rebalance annually, nor did we use cash that was the result of acquisitions to replace index constituents. It became a set it and forget it portfolio of companies that were net/nets at the inception date of the index.
Our original intent was to wind down the index at the end of two years, and judge performance against the Russel Microcap Index. As of Friday, the CS21 has outperformed the Russel Microcap Index by 1356 bps. While we'd hoped for better absolute returns than the 6.6% since inception that CS 21 has realized, we consider this first attempt to be mildly successful.
We are busy creating a new index of net/nets, which will be tentatively released in early February. Stay tuned; the new index will have an interesting twist.
We did make some adjustments along the way; we did not rebalance annually, nor did we use cash that was the result of acquisitions to replace index constituents. It became a set it and forget it portfolio of companies that were net/nets at the inception date of the index.
Our original intent was to wind down the index at the end of two years, and judge performance against the Russel Microcap Index. As of Friday, the CS21 has outperformed the Russel Microcap Index by 1356 bps. While we'd hoped for better absolute returns than the 6.6% since inception that CS 21 has realized, we consider this first attempt to be mildly successful.
We are busy creating a new index of net/nets, which will be tentatively released in early February. Stay tuned; the new index will have an interesting twist.
Tuesday, January 12, 2010
Former Net/Net Tuesday Morning Soars
Closeout retailer and former net/net Tuesday Morning, that has graced the ranks of companies trading below their net current asset value for much of the past two years, was up 33% yesterday. The company reported better than expected guidance for Q2, suggesting eps of between $.40 and $.43 for the quarter. Same store sales rose, 5.1% versus the same period last year, and sales were up 6.2% to $289.6 million.
Given yesterday's jump, Tuesday morning is no longer a net/net, but still trades at just 1.12 times NCAV. However, that is based on first quarter balance sheet data, and Q2 won't be announced until January 26th.
If you've never been to a Tuesday Morning store, it is an interesting experience. I've referred to it in the past as a "rich man's dollar store", given the interesting mix of closeout inventory, at reduced prices. You never know what you will find at a store.
Founded in 1975, Tuesday Morning currently has about 850 stores in 45 states. With a current market cap of just $172 million, and almost identical enterprise value, these seem rather small for an 850 store chain. On an EV to store basis, that's just $200,000. The company does not, however own it's real estate.
I've owned shares a few times over the past couple of years, and the only reason that I've closed positions is due to trailing stops I've set. With the extreme volatility retail shares have experienced, stops seemed a prudent way to limit damage, but also lock in gains as shares rose.
I've been back in Tuesday Morning shares since mid December, and plan on seeing how events progress with the company (with a trailing stop to protect gains).
Tuesday Morning
Ticker: TUES
Price: $4.02
Market Cap: $172 million
Enterprise Value: $172 million
Net Current Asset Value (as of 9/30/2009):$153.6 million
Market Cap/NCAV: 1.12
*The author has a position in Tuesday Morning(TUES). This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.
Given yesterday's jump, Tuesday morning is no longer a net/net, but still trades at just 1.12 times NCAV. However, that is based on first quarter balance sheet data, and Q2 won't be announced until January 26th.
If you've never been to a Tuesday Morning store, it is an interesting experience. I've referred to it in the past as a "rich man's dollar store", given the interesting mix of closeout inventory, at reduced prices. You never know what you will find at a store.
Founded in 1975, Tuesday Morning currently has about 850 stores in 45 states. With a current market cap of just $172 million, and almost identical enterprise value, these seem rather small for an 850 store chain. On an EV to store basis, that's just $200,000. The company does not, however own it's real estate.
I've owned shares a few times over the past couple of years, and the only reason that I've closed positions is due to trailing stops I've set. With the extreme volatility retail shares have experienced, stops seemed a prudent way to limit damage, but also lock in gains as shares rose.
I've been back in Tuesday Morning shares since mid December, and plan on seeing how events progress with the company (with a trailing stop to protect gains).
Tuesday Morning
Ticker: TUES
Price: $4.02
Market Cap: $172 million
Enterprise Value: $172 million
Net Current Asset Value (as of 9/30/2009):$153.6 million
Market Cap/NCAV: 1.12
*The author has a position in Tuesday Morning(TUES). 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 04, 2010
Mark Boyar: Net/Net Pioneer
Long before I started this site, or even knew what a net/net was, deep value legend Mark Boyar, who currently runs Boyar Asset Management, the Boyar Value Fund and an excellent independent Research Product Focus Asset Analysis, offered a newsletter devoted to the subject. I was still in elementary school at the time, while Boyar was devoting a considerable amount of time identifying net/nets, and building a business during an extremely difficult period. It certainly was not as easy in those days as it is now to identify net/nets. There was no software, no Bloomberg or Factset, or even electronically filed SEC documents to make the task easier. It was all done by hand.
Today, Boyar and his analysts provide an excellent, in depth research product. Their recent report on International Speedway Corporation provides a fascinating look at a company that few other research providers cover.
For more on Mark Boyar Integrity Research just published an interesting piece on his career.
*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.
Today, Boyar and his analysts provide an excellent, in depth research product. Their recent report on International Speedway Corporation provides a fascinating look at a company that few other research providers cover.
For more on Mark Boyar Integrity Research just published an interesting piece on his career.
*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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