Tuesday, November 10, 2015

JG Boswell (BWEL) Update- 2015 Fundamental Data

It's been a rough year for investors of JG Boswell, one of our favorite all-time high-quality pink sheet names. The dividend was cut in half to $2.25/quarter, and shares are down 29% year to date. The drought has no doubt had an effect on the company. Sales fell 27% year over year, but the company still managed to turn a $19 million profit. We were expecting it to be much worse.

Thanks to the addition of the most recently available year-end data, we've now strung together thirteen years worth of fundamentals for JG Boswell. Below are some of the highlight for 2015:

Current Data (2015 Annual, Year ended 6/30/2015)
Current Price: $675.5
EPS (Fully Diluted): $19.17
P/E: 35
Price/Sales: 1.59
Price/Book: 1.18
Revenue: $430 million 
Net Income: $19.4 million
Net Profit Margin: 4.52%
EV/EBITDA: 12.75
Indicated Dividend Yield:1.33%
Current Market Cap: $685 million
Current Enterprise Value: $873 million
Cash: $3.3 million

Boswell remains one of deep value's greatest mysteries.  What is it truly worth, and will we ever find out?
Stay tuned.

*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.

Tuesday, June 16, 2015

Remembering Clyde: Revisiting One of Our Favorite All-Time Posts

Editor's Note: This post was originally published in 2007, to observe what would have been the 100th birthday of one of this site's original namesakes, my grandfather. Twenty one year's after his death, his influence is still present. His then unborn great granddaughter, whom he missed meeting by three months, is about to turn 21, and enter her senior year in college.

Remembering Clyde 

June 16th marks the 100th birthday of one of this site’s namesakes, my grandfather, friend, mentor, buddy, and the list goes on. The man exerted a great deal of influence on my life, and our time together -including the day he passed away in my presence 13 years ago- is forever etched in my mind.

Today we jettison the typical Cheap Stocks investment related drivel, and instead pay tribute to a great man who left countless people better than he found them. If he were alive today, he’d be puzzled by his grandson’s website. “Value” to him had to do with doing an honest day’s work, keeping your word, and serving others. “Growth” was about the tomatoes and peas in his garden, and “investing” was related to the time you spent serving others needs. The only stock he ever owned was the 20 shares of Ringling Brothers stock one of his sons purchased for him in the 1960’s. The circus was everything to him— at an early age when the circus was in town he’d work all day helping them to set up just for a ticket to that evening’s show--and his canceled Ringling Brothers stock certificate (Ringling was acquired by Mattel in the early 70’s) is proudly displayed in my home in tribute.

He never made it much past the eighth grade. That’s what happens when you get kicked out of school for knocking your school’s principal on his rear-end. Oh, and by the way the principal happened to be his Uncle Ed. As the story goes, young Clyde was accused of something he did not do, and good old Uncle Ed took a switch to him in the school office. Clyde wasn’t standing for that, and you know the rest—down went Uncle Ed. The incident stood with my grandfather—I recall him telling me on one of our frequent weekend ventures to his old stomping ground in Easton, PA about the dream he’d had the night before; here he was in his late 70’s and he’d dreamt of urinating on Uncle Ed’s grave. The past died hard for him. Being kicked out of school in many ways shaped his future—fueling a success story not measured in dollars, because there weren’t many of those, but measured instead by service to others, hard work, pride in all that he did, and sons and grandchildren who revered him.

He was part of the greatest generation. During World War II the GM plant, where he served as Master Heat Treater, made the conversion from autos to airplanes, and his ingenuity-not learned in any classroom- earned him awards, and helped GM build Grumman Avengers more quickly and efficiently.

After moving to Ewing NJ in the late 1930’s, he and a few buddies realized that this growing area needed a rescue squad. They became educated about wound care and emergency medicine, bought a used Hearse to serve as an ambulance, and The Pennington Road Rescue Squad was born. Born out of guts, ingenuity, fortitude, and a desire to serve others. 

My grandmother preceeded him in death, and it was then that we found out what “investing” meant in my grandmother's eyes. It meant hiding cash from her husband. The several thousand dollars in cash we found, including bills from the 1930’s through the 1960’s, bore witness to this. Evidently, the combination of living through the Depression, and fear that my grandfather would give it all away to anyone in need prompted my grandmother to keep a secret stash.

You really couldn’t blame her. A great woman in her own right, she’d seen it all. She’d seen my grandfather stop to help a stranger who’d run out of gas during the war, syphon it out of his tank and into the stranger’s, then run out of gas himself a few minutes later. Anything to help someone in need.

My resume' may be a lot longer than his, not that he ever had one. I had the opportunity to graduate from college, grad school, earn other professional designations, etc. But My grandfather, Clyde, was way smarter, way more accomplished, more ingenious and a better "investor" than I will ever be.

Happy 100th birthday, Clyde. I miss you, think of you often, am grateful for the times we had together, and for the lessons you taught me.

Friday, January 30, 2015

Net/Nets You Say?

The net/net cupboard has been bare the past couple of years; the worst we've ever seen in the umpteen years we've been researching and writing about our favorite cubbyhole of the deep value world. That's left us with little to write about.  While this site was originally devoted to net/nets, we've delved into other areas of deep value over the years (by our definition, anyway), including real estate. But value has itself has been difficult to find, there have not been many compelling ideas, and we've done what value investors do in those situations--go into hibernation.

In fact, we've rarely run our favorite stock screen the past several months- the one that identifies companies trading below net current asset value, aka the ever-elusive net/net.

We've been anxious to create our third experimental net/net index (the first two (Cheap Stocks 21   and Cheap Stocks 26) had interesting but inconclusive results; but we've been unable to identify enough candidates, and "Cheap Stocks 4" just won't do the trick..

So it was with a small amount of joy earlier this week  when we begrudginly ran our favorite screen, and found a whopping four net/nets with market caps in excess of $100 million. Granted, two of them are what we refer to as "perennial net/nets",  seemingly always showing up. These are Richardson Electronics (RELL) and Trans World Entertainment (TWMC). We also found an old friend, that has occasionally made the cut, LeapFrog (LF), which recently ran aground on some very bad guidance.  In facts, shares fell 34% last Friday, and are down 50% since December. We plan on digging in to see if there's any meat left on the bone. It gets ugly in net/net land.

Finally, there's a new kid on the block, that being retailer Sears Hometown Outlet Stores (SHOS), which is currently trading at .92 times NCAV. Retailers are often the ugliest of the net/nets, as their current assets are typically chock full of inventory. There have been some great retail net/net success stories over the years, including Finish Line (FINL), and Conns (CONN), but you have to be careful with these.

SHOS shares are down 44% in the past year, and while we are skeptical of retailers, we'll be digging into this one as well, looking for any redeeming qualities, other than the fact that it trades at .62 times book value, and is a net/net.

*The author has a position in Richardson Electronics (RELL). 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, 2015

Tootsie Roll's Mel Gordon Dies at 95: Don't Fall for the Acquisition Hype Just Yet

Tootsie Roll Industries (TR) has been my long-time nemesis. I held a position in the stock for several years, seeing what I believed to be the enormous value in the brand  combined with aging insider-owners Melvin and Ellen Gordon. It seemed ripe for a takeover; a perfect acquisition for Hershey (HSY), or some other larger name seeking to expand their brand portfolio. At least that's what I believed.

The problem, though was two-fold: On the fundamental front, revenues were flattening, once mid-teen net profit margins were falling, and what was a great brand seemed to be lost in the shuffle.  Secondly, the aging owners, the Gordons, were not going anywhere.

I finally realized the latter one day after receiving the 2007 annual report. Inside was a picture of Mel and Ellen Gordon, looking much younger than their years. The Gordon's essentially controlled the Class B voting shares, and called the shots. To me, their compensation seemed excessive, especially given the company's declining results, lack of growth and direction. But, they were not giving up this cash-cow. I, however, finally gave up.

Mel's passing is sad; and it's quite amazing that he stayed engaged as long as he did. The baton now passes to Ellen Gordon, formerly the company's chief operating officer, age 83, whose family acquired the company when it ran into trouble in 1935.

Shares were up 7% after the announcement of Mel's death amid new speculation that the company will be acquired.

Don't hold your breath though. Ellen Gordon is only 83.

We've been to this rodeo before.

*The author has no position in any stocks mentioned in this piece. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only