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.

Wednesday, July 07, 2010

Setting the Record Straight on St. Joes (JOE)

A recent post that appeared on, 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.