Anyone For Some Louisiana Swamp Land?
Biloxi Marsh Lands Corp
Ticker: BLMC
Market cap: $83.8 million
Price: $30.00
Average Volume:1700
By now you’ve gotten used to (or are getting tired of) the off the beaten path ideas we often feature here at Cheap Stocks. It’s not that we are trying to be different, we just believe there is a whole other world of investment ideas out there for investors besides the Microsofts, Home Depots, Harleys, and all the other big names institutions own. Not that there’s anything wrong with any of these companies. But they have been researched to death, and there is no new information under the sun. The dead horse has bean beaten, so to speak.
While we try to come up with original ideas, we are the first to admit when they don’t originate from our research alone. Take this week’s company, Biloxi Marsh Lands Corp. Last year we received a few e-mails asking for our opinion, or whether we had any research on this company. Truth be told, at the time, we’d never heard of the company. Fast forward to last week’s e-mail from a reader asking if we covered BLMC, as he’d seen our research on Avoca. Reader, we hear you loud and clear. Thanks for the idea, even if it was not ours. (We are big believers in honesty here at Cheap Stocks).
Biloxi Marsh Lands Corp, which trades on the pink sheets, and is not required to file with the SEC, owns 90,000 acres in St. Benard Parish in Louisiana. The majority of company revenue is from oil and gas exploration and production taking place on company land. 2005 revenue of $22.5 million was up slightly from 2004’s $22.2 million. This was due primarily to an increase in natural gas prices. Net income also rose, to $13.9 million, from $13.8 million.
First quarter 2006 revenue was $8.35 million, up from $6.8 million for the same quarter last year. The increase was due to rising oil and gas prices, and a one time change in revenue recognition. Net income rose to $5.3 million from $4.5 million.
The Land
Sure, we could do our typical Enterprise Value/Acre calculation we are becoming know here at Cheap Stocks, but keep in mind this is marsh land, 90,000 acres of it, which is about 14 square miles. This is not St. Joes, nor JG Boswell quality land. Its value is from the contents that lie beneath. There’s probably little use or value besides. (Ok, we can’t help ourselves. With an enterprise value of $83.8 million, and 90,000 acres, that’s an EV/acre of $931)
The Balance Sheet
As of 3/31/2006, the company had $1.6 million in cash, and $19.5 million in LT marketable securities, to go along with no debt. With 2.85 million shares outstanding, that equates to about $7.00 per share in cash and securities. The land itself is carried at cost, a paltry $234,939, or $2.61 per acre. We don’t know its true value, but granted, the oil and gas beneath are worth significantly more than carrying value.
The Dividend
During 2005, the company paid 3 dividends, for a total of $3.25 per share. In 2006, the company paid a $2.00 dividend in January. BLMC recently stated in its first quarter earnings release that it intends to “equal or exceed the amount of dividends paid in 2005”. That statement got our attention. Assuming the company equals 2005 payout, ($3.25 per share), that equates to an 11% yield at current prices. If that ends up happening, we’d expect some share price adjustment above the current level. Keep in mind, BLMC was a $60 stock just one year ago, and has not yet come close to pre-Katrina levels.
The Risks
In our minds there are two risks or factors that are either weighing on this stock, or could if conditions change. The first is what we’ll call a “Hurricane Discount”. This company’s production was affected by Katrina and Rita, and with another hurricane season approaching, this no doubt weighs on the stock. The second is the price of natural gas. If gas stays relatively high or rises, the expected dividends should follow, they may even rise. If gas falls, so will revenue, and further dividends this year (the company usually pays one dividend per year, last year it paid three) may be at risk.
Conclusion
Once again, some of the most interesting stories are lurking in the pink sheets. This company reminds us of Avoca (in which we have a position), but has much greater liquidity (if you consider 1700 shares/day liquidity). At $30.00 per share, it’s compelling, but not without a degree of risk. If you were interested in Avoca, and its fat yield, but wary of the $5500 price tag and lack of available of shares, this one might be for you. BMLC has 2.8 million shares outstanding, while Avoca has just 8 thousand.
*The author does not have a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Monday, May 29, 2006
Thursday, May 18, 2006
Hats Off to Avoca Inc (AVOA)
A Credit to SarbOx Avoiders
If you read our previous post regarding Scheid Vineyards delisting, and de-SarbOxing primarily to save money, you'll remember that de-listing absolves companies with less than 300 shareholders of filing with the SEC.
Your Cheapstocks editor currently has positions in two companies that don't file, JG Boswell (BWEL) and Avoca Inc. (AVOA). Although Boswell has performed well for us, there are no investor communications provided. We are in this one on faith and gut. The only communication I've ever received from Boswell, was information on a company self tender offer in 2004. Nothing since then.
Avoca, on the other hand, continues to send quarterly and annual financials. Avoca is a small royalty trust that owns 16000 acre Avoca island, which is off the coast of New Orleans. Their primary revenue source is royalties from gas leases on the island. We received a report for Q1 today. For the record, sales tripled to $3.6 million from the same period last year, and net income nearly quadrupled to $2.5 million, oe $309.71 per share.
No, that is not a misprint, they really earned $309.71. Avoca split 1 for 100 in early 2005 in order to delist, which left the company with just 8,057 shares outstanding. You can imagine what that does to liquidity. The stock currently "trades" on the pink sheets, with a current bid of $5000. In 2005, they paid a $400 dividend ($350 the year before), and if Q1 is any indication, that should rise nicely for the next annual dividend (Dec 2006).
If you have any interest in this company, be very cautious. I believe there is tremendous value there, and between our originl purchase price, and two nice dividends, we've doubled our money in just over one year. But there just aren't many shares to go around, and both entry and exit will be difficult. There's a lesson in there...be careful when placing orders, especially when there is little liquidity, and wide spreads. That's what limit orders are for.
In any event, our hats go off to tiny Avoca, a $40 million market cap powerhouse.
*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
A Credit to SarbOx Avoiders
If you read our previous post regarding Scheid Vineyards delisting, and de-SarbOxing primarily to save money, you'll remember that de-listing absolves companies with less than 300 shareholders of filing with the SEC.
Your Cheapstocks editor currently has positions in two companies that don't file, JG Boswell (BWEL) and Avoca Inc. (AVOA). Although Boswell has performed well for us, there are no investor communications provided. We are in this one on faith and gut. The only communication I've ever received from Boswell, was information on a company self tender offer in 2004. Nothing since then.
Avoca, on the other hand, continues to send quarterly and annual financials. Avoca is a small royalty trust that owns 16000 acre Avoca island, which is off the coast of New Orleans. Their primary revenue source is royalties from gas leases on the island. We received a report for Q1 today. For the record, sales tripled to $3.6 million from the same period last year, and net income nearly quadrupled to $2.5 million, oe $309.71 per share.
No, that is not a misprint, they really earned $309.71. Avoca split 1 for 100 in early 2005 in order to delist, which left the company with just 8,057 shares outstanding. You can imagine what that does to liquidity. The stock currently "trades" on the pink sheets, with a current bid of $5000. In 2005, they paid a $400 dividend ($350 the year before), and if Q1 is any indication, that should rise nicely for the next annual dividend (Dec 2006).
If you have any interest in this company, be very cautious. I believe there is tremendous value there, and between our originl purchase price, and two nice dividends, we've doubled our money in just over one year. But there just aren't many shares to go around, and both entry and exit will be difficult. There's a lesson in there...be careful when placing orders, especially when there is little liquidity, and wide spreads. That's what limit orders are for.
In any event, our hats go off to tiny Avoca, a $40 million market cap powerhouse.
*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Saturday, May 13, 2006
Getting Around Sarbanes Oxley
Scheid Vineyards (SVIN)
You may have seen our original post on this issue back in 12/04. We followed up on this interesting issue with another report on 2/22/05.
I'd urge you to read those reports for background, but in summary, some small publicly traded companies have found a way to stay publicly traded, while avoiding filing with the SEC, and costly compliane with Sarbanes Oxley. The way to do this is to reduce registered shareholder roles to 300 or less. Companies have gotten creative in their attempts to make this happen. One way is to effect a reverse split, then buy out very small shareholder positions for cash. For instance, by effecting a 1 for 100 reverse split, any shareholder with less than 100 shares will be left with a fractional share, which is then bought back by the company. Once below 300 shareholders, the company files a from 15-12G with the SEC, which effectively ends their need to file with the SEC, or comply with SarbOx. For some companies, this can drastically cut pre-tax expenses.
The Downsides
While avoiding somewhat prohibitive costs, and freeing up senior staff who spend a lot of their time on SarbOx issues are pluses, there are negatives to be aware of. First, many of these companies go from barely trading to never trading. Their shares outstanding drop proportianate to the reverse split, so often there is little in terms of public float. While these companies continue to trade, they do so on the pink sheets, and bid/ask spreads tend to be very wide. There is little, if any liquidity in these companies. If you find one that is compelling, be prepared to hold for a long time. Finally, once these companies no longer file, it is sometimes very difficult, even for shareholders to get information. Your Cheapstocks editor currently owns positions in two companies which no longer file, Avoca, which still sends out quarterly reports, and JG Boswell, which does not. (Incidentally, JG Boswell has never filed as far as I know, and was not part of the latest wave of companies avoiding filing).
Scheid Vineyards
Ticker: SVIND
Price: $32.10
Market Cap: $25.84 million
Shares Out: 805 thousand
P/E: 8
Enterprise Value: $70 milliom
Scheid Vinyards is a small, California based grape and bulk wine producer. The company grows 17 varieties of grapes, most of which are sold under short and long term purchase agreements. The company also makes bulk wine with a portion of the grapes. Your Cheap Stocks editor has followed this company on and off for the past five years, but to date, has yet to pull the trigger. We first learned of this company when we discovered they were a dividend paying stock, but not in the traditional sense. The dividend in this case was a wine dividend. As we recall, it was good for a 50% discount on a case of Scheid wine.
The Fundamentals
Fiscal Year 2005 sales were up 51 percent from $23.6 million to $31.2 million. Net income rose sharply, from $1.3 million in 2004 to $4.4 million in 2005. Grape growing is a tough industry, dependent not only on weather, but also the ultimate quality and supply. Hence, Scheid's sales and earnings numbers can jump around quite a bit from year to year.
Scheid's balance sheet is not great, with $1.2 million in cash, but $36 million in long term debt. Bolstering this is Scheid's land holdings. Of the 5700 acres the company operates, it owns 1800, or nearly 3 square miles, in Monterey. California. On an Enterprise value/Acre calculation, (one that we are both fond of, and we believe originated) that's $23,333. Does not sound cheap based on the land alone, but we admit that we don't know what a vineyard acre in Monterey is worth.
"Going Private":The Reverse Stock Split
The company's recent 1 for 5 reverse stock split was intended to reduce shareholder roles below the magic 300 shareholder level. This allowed the company to de-list its stock fropm NASDAQ, while still allowing it to trade on the pink sheets. The main purpose for this was to save the company an estimated $485,000 in annual fees, broken down as follows:
Audit and Accounting
$ 100,000
Legal Fees
50,000
Stockholder Expenses
30,000
Nasdaq Fees
18,000
Miscellaneous
37,000
Internal Control Compliance*
250,000
Total
$ 485,000
While $485,000(pretax) may seem like a pittance to many companies, its substantial to a company that earned $4 million last year. The other potential benefit is that management will no longer spend time and energy on SarbOx and SEC related issues, allowing it to focus more on the business. We'll see if they are succesful.
We are interested in Scheid's situation and will follow it closely. For more on the de-listing, please read the companies latest proxy, which goes into great detail about the process and reasoning.
*The author does not have a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Scheid Vineyards (SVIN)
You may have seen our original post on this issue back in 12/04. We followed up on this interesting issue with another report on 2/22/05.
I'd urge you to read those reports for background, but in summary, some small publicly traded companies have found a way to stay publicly traded, while avoiding filing with the SEC, and costly compliane with Sarbanes Oxley. The way to do this is to reduce registered shareholder roles to 300 or less. Companies have gotten creative in their attempts to make this happen. One way is to effect a reverse split, then buy out very small shareholder positions for cash. For instance, by effecting a 1 for 100 reverse split, any shareholder with less than 100 shares will be left with a fractional share, which is then bought back by the company. Once below 300 shareholders, the company files a from 15-12G with the SEC, which effectively ends their need to file with the SEC, or comply with SarbOx. For some companies, this can drastically cut pre-tax expenses.
The Downsides
While avoiding somewhat prohibitive costs, and freeing up senior staff who spend a lot of their time on SarbOx issues are pluses, there are negatives to be aware of. First, many of these companies go from barely trading to never trading. Their shares outstanding drop proportianate to the reverse split, so often there is little in terms of public float. While these companies continue to trade, they do so on the pink sheets, and bid/ask spreads tend to be very wide. There is little, if any liquidity in these companies. If you find one that is compelling, be prepared to hold for a long time. Finally, once these companies no longer file, it is sometimes very difficult, even for shareholders to get information. Your Cheapstocks editor currently owns positions in two companies which no longer file, Avoca, which still sends out quarterly reports, and JG Boswell, which does not. (Incidentally, JG Boswell has never filed as far as I know, and was not part of the latest wave of companies avoiding filing).
Scheid Vineyards
Ticker: SVIND
Price: $32.10
Market Cap: $25.84 million
Shares Out: 805 thousand
P/E: 8
Enterprise Value: $70 milliom
Scheid Vinyards is a small, California based grape and bulk wine producer. The company grows 17 varieties of grapes, most of which are sold under short and long term purchase agreements. The company also makes bulk wine with a portion of the grapes. Your Cheap Stocks editor has followed this company on and off for the past five years, but to date, has yet to pull the trigger. We first learned of this company when we discovered they were a dividend paying stock, but not in the traditional sense. The dividend in this case was a wine dividend. As we recall, it was good for a 50% discount on a case of Scheid wine.
The Fundamentals
Fiscal Year 2005 sales were up 51 percent from $23.6 million to $31.2 million. Net income rose sharply, from $1.3 million in 2004 to $4.4 million in 2005. Grape growing is a tough industry, dependent not only on weather, but also the ultimate quality and supply. Hence, Scheid's sales and earnings numbers can jump around quite a bit from year to year.
Scheid's balance sheet is not great, with $1.2 million in cash, but $36 million in long term debt. Bolstering this is Scheid's land holdings. Of the 5700 acres the company operates, it owns 1800, or nearly 3 square miles, in Monterey. California. On an Enterprise value/Acre calculation, (one that we are both fond of, and we believe originated) that's $23,333. Does not sound cheap based on the land alone, but we admit that we don't know what a vineyard acre in Monterey is worth.
"Going Private":The Reverse Stock Split
The company's recent 1 for 5 reverse stock split was intended to reduce shareholder roles below the magic 300 shareholder level. This allowed the company to de-list its stock fropm NASDAQ, while still allowing it to trade on the pink sheets. The main purpose for this was to save the company an estimated $485,000 in annual fees, broken down as follows:
Audit and Accounting
$ 100,000
Legal Fees
50,000
Stockholder Expenses
30,000
Nasdaq Fees
18,000
Miscellaneous
37,000
Internal Control Compliance*
250,000
Total
$ 485,000
While $485,000(pretax) may seem like a pittance to many companies, its substantial to a company that earned $4 million last year. The other potential benefit is that management will no longer spend time and energy on SarbOx and SEC related issues, allowing it to focus more on the business. We'll see if they are succesful.
We are interested in Scheid's situation and will follow it closely. For more on the de-listing, please read the companies latest proxy, which goes into great detail about the process and reasoning.
*The author does not have a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Friday, May 05, 2006
It's All About The Inventory:
Gallery of History
Ticker: HIST
Price: $1.648
Market Cap: $9.27 million
Avg. Volume: 1000
52 Week price range: $1.00-$6.50
P/E: NA
What could there possibly be to like about a company that loses money quarter after quarter, that is so deep into micro-cap land, that its market cap is south of $10 million? This same company barely trades, has a sizable bid/ask spread, and recently came close to being delisted by the NASDAQ, but was able to work out a deal with its founder and major shareholder in order to maintain listing requirements. It has trouble generating $1 million in annual sales, and even this top line number has been falling from year to year. This truly sounds like a cigar butt, and it may turn out to be just that: a discarded cigar butt with no puffs left in it.
But your Cheap Stocks editor initiated a small position in this stock a couple months back anyway. Would you expect anything less from Cheap Stocks? We venture off the beaten path quite often, and this is no different.
Gallery of History
Galley of History is a Las Vegas based historic documents seller. The company sells letters and documents, and signatures of presidents, political figures, significant physicians, inventors, aviators, scientists, entertainers, authors, artists, musicians, military figures, and sports heros to name a few. If you've ever collected historic documents you know that its a very popular and expensive market. Documents and letters signed by US Pesidents, for instance, can command big bucks. I've dabbled in this market from time to time, and can attest to its strength and allure.
Gallery of History runs periodic auctions, but also sells direct on its History For Sale website. I am impressed by their inventory, especially in the Presidential area. I am not, however, impressed by their pricing. Their documents appear to be very high quality, which should command a premium, but HIST still prices these high. Which is probably why they don't generate much revenue.
So what's to like, and why did your CS editor sink any money into what appears to be a sinking ship? Gallery of History has a vast inventory of 182,000 autographs and documents, which are carried on the books at cost, not in excess of market value. Current inventory as of 12/31/05 was listed at $6.5 million. On a per document basis, that comes out to $35.71 each. We believe that the company's inventory is worth many times that amount, and thats why we hold a position, albeit a small one.
The Risks
The risks are great with this company. The large majority of shares are held by insiders, and Founder and Chairman Todd Axelrod holds about 2.25 million shares. The company was in debt to Axelrod (and his wife Pam, who is also involved in the company), and through a conversion of debt to preferred equity, the company was able to stay listed on NASDAQ.
And then from the most recent 10Q:
Subsequent Event
In a nutshell, this gives Axelrod even greater control, but the upside is the stock is still listed.
Other Assets
Besides the document inventory, the company also owns a 33000+ square foot building in Las Vegas, carried on the books at less than $1 million. Part of this is leased out, and we are not sure of its market value.
Putting All Our Eggs In One Basket?
There's more negative here than positive, we admit. So why do we own it? Our ventures into the historic document arena tell us that HIST's inventory is much more valuable than $6.5 million. We also believe the stock is currently priced according to all the negatives we mentioned int his piece. Proceed with caution. Again, this is a thinly traded issue, with relatively wide bid/ask spreads.
*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Gallery of History
Ticker: HIST
Price: $1.648
Market Cap: $9.27 million
Avg. Volume: 1000
52 Week price range: $1.00-$6.50
P/E: NA
What could there possibly be to like about a company that loses money quarter after quarter, that is so deep into micro-cap land, that its market cap is south of $10 million? This same company barely trades, has a sizable bid/ask spread, and recently came close to being delisted by the NASDAQ, but was able to work out a deal with its founder and major shareholder in order to maintain listing requirements. It has trouble generating $1 million in annual sales, and even this top line number has been falling from year to year. This truly sounds like a cigar butt, and it may turn out to be just that: a discarded cigar butt with no puffs left in it.
But your Cheap Stocks editor initiated a small position in this stock a couple months back anyway. Would you expect anything less from Cheap Stocks? We venture off the beaten path quite often, and this is no different.
Gallery of History
Galley of History is a Las Vegas based historic documents seller. The company sells letters and documents, and signatures of presidents, political figures, significant physicians, inventors, aviators, scientists, entertainers, authors, artists, musicians, military figures, and sports heros to name a few. If you've ever collected historic documents you know that its a very popular and expensive market. Documents and letters signed by US Pesidents, for instance, can command big bucks. I've dabbled in this market from time to time, and can attest to its strength and allure.
Gallery of History runs periodic auctions, but also sells direct on its History For Sale website. I am impressed by their inventory, especially in the Presidential area. I am not, however, impressed by their pricing. Their documents appear to be very high quality, which should command a premium, but HIST still prices these high. Which is probably why they don't generate much revenue.
So what's to like, and why did your CS editor sink any money into what appears to be a sinking ship? Gallery of History has a vast inventory of 182,000 autographs and documents, which are carried on the books at cost, not in excess of market value. Current inventory as of 12/31/05 was listed at $6.5 million. On a per document basis, that comes out to $35.71 each. We believe that the company's inventory is worth many times that amount, and thats why we hold a position, albeit a small one.
The Risks
The risks are great with this company. The large majority of shares are held by insiders, and Founder and Chairman Todd Axelrod holds about 2.25 million shares. The company was in debt to Axelrod (and his wife Pam, who is also involved in the company), and through a conversion of debt to preferred equity, the company was able to stay listed on NASDAQ.
Here's a brief description from the company's most recent 10K 10Q:
On August 18, 2005, The Nasdaq Stock Market informed the Company that the Staff of The Nasdaq Stock Market was reviewing the Company's eligibility for continued listing on The Nasdaq SmallCap Market. The Company did not have a minimum of $2,500,000 in stockholders' equity, $35,000,000 market value of listed securities or $500,000 of net income from continuing operations for the most recently completed fiscal year or two of the three most recently completed fiscal years. In fact, the Company's stockholders equity was $2,361,681 as of the quarter ended June 30, 2005, the market value of its common stock was $9,676,692 as of August 1, 2005 and the Company reported losses from operations for the years ended September 30, 2004, 2003 and 2002. On September 7, 2005 the Company submitted a plan to The Nasdaq Stock Market detailing how the Company would attain and maintain compliance with the listing requirements for The Nasdaq SmallCap Market.
The Nasdaq Stock Market approved the Company's plan on September 20, 2005. Pursuant to the plan, Todd Axelrod, President of the Company, waived $564,000 of accrued but unpaid salary and Pamela Axelrod waived $140,000 of accrued but unpaid salary. Such waivers resulted in an immediate increase in stockholders equity of $704,000. The Company believes that it has regained compliance with the $2,500,000 stockholders equity requirement. Also, the Company intends to call a special meeting in which shareholders will be asked to approve a transaction in which $3,231,722 of indebtedness would be exchanged for a new series of preferred stock, thereby resulting in a further increase in stockholders equity of $3,231,722. The Company has scheduled a shareholders meeting to be held January 20, 2006.
And then from the most recent 10Q:
Subsequent Event
On January 20, 2006, the Company held a special meeting of shareholders for the following purpose: (1) to approve and authorize the amendment of the Company's Articles of Incorporation to authorize the issuance of up to 4,000,000 shares of Series A Preferred stock, par value $0.0005; and (2) to approve and authorize the issuance of 1,615,861 shares of Series A Preferred Stock, par value $0.0005, with an aggregate liquidation preference of $3,231,772, to Todd M. Axelrod, in consideration for cancellation of $3,231,772 in aggregate principal amount of indebtedness of the Company owed to Mr. Axelrod. The preferred stock will be entitled to a semi-annual dividend based on an annual rate of 3%. The remaining amount of this loan due Mr. Axelrod, $232,271 as of January 20, 2006, will continue with the same terms as previous including an interest rate of 3% annually.
In a nutshell, this gives Axelrod even greater control, but the upside is the stock is still listed.
Other Assets
Besides the document inventory, the company also owns a 33000+ square foot building in Las Vegas, carried on the books at less than $1 million. Part of this is leased out, and we are not sure of its market value.
Putting All Our Eggs In One Basket?
There's more negative here than positive, we admit. So why do we own it? Our ventures into the historic document arena tell us that HIST's inventory is much more valuable than $6.5 million. We also believe the stock is currently priced according to all the negatives we mentioned int his piece. Proceed with caution. Again, this is a thinly traded issue, with relatively wide bid/ask spreads.
*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Saturday, April 29, 2006
At top of the List: VOXX: The Biggest of the Small
Trading Below Net Current Asset Value
Audiovox
Ticker: VOXX
Price: $12.14
Share Out: 22.6 million
Market Cap: $271.9 million
Average Daily Volume: 128000
P/E: NA
NCAV: $319.6 million
NCAV/Market Cap: 1.18
Cash/ST investments/share: $7.90
Audioxx, an international distributor of electronics equipment, primarily mobile electronics, and consumer electronics, has the distinction of being the current king of companies trading below net current asset value. With a market cap just south of $280 million, which for all intents and purposes puts it squarely in microcap land, this company still dwarfs its NCAV cousins.
Research references to Audiovoxx in terms of being a net-net are not new. Interestingly, this is not the first time the company has traded below its NCAV, it was also on the list four years ago, when it traded in the $6 range. The company had a subsequent run-up, and now finds itself back on the list few companies would wish to be on.
Audiovoxx's mobile products include:
o mobile multi-media video products, including overhead, headrest and portable mobile video systems,
o autosound products including radios, speakers,amplifiers and CD changers,
o satellite radios including plug and play models and direct connect models,
o automotive security and remote start systems,
o navigation systems,
o rear observation and collision avoidance systems, and
o automotive power accessories, including cruise control systems
Consumer electronics products include:
o LCD and Plasma flat panel televisions,
o home and portable stereos,
o HDTV Antennas,
o Two-way (GMRS) radios, digital multi-media products such as personal video recorders and MP3 products,
o home speaker systems and home theater in a box,
o portable DVD players,
o hand-held portable GPS,
o flat panel TV mounting systems, and
o home electronic accessories such as cabling and performance enhancing electronics.
Obvously, this company operates within a highly competitive industry. It is important, however to keep in mind, that the company is a distributor of products, and not a manufacturer. This company has been very active the past few years discontinuing operations, divesting businesses, and making small acquisitions.
The Fundamentals
Fiscal Year 2005 sales fell 5 percent to $539.7 million from 2004s $567 Net income fell dramatically from $77.2 million in 2004, to a loss of $9.5 million in 2005. The electronics business is highly competitive, and its been an especially rocky road for this company over the years. For the most recent quarter, ended 2/28/06, the company reported net income of $.183 million (including disc ops of -.184 million) on sales of $103 million.
The Balance Sheet
Cash stood at $17.8 million, and short term investments at $160.8 million as of 2/28/06, while long term debt was $11.8 million. The company also listed short term debt (curr portion of long term debt) of $6.7 million. Adding in the debt, and preferred stock and subtracting the cash from market cap gives VOXX an Enterprise Value of $112 million.
The NCAV calculation:
Current Assets:
Cash: $ 17.8 million
S/T Investments: $160.8
Accounts Rec: $106.7
Inventories: $96.1
Prepaid/other: $6
Total: $387.4
Current Liabilities
Accts Payable: $40.1
Curr portion LT Debt: $6.7
Total: $46.9
Long Term Debt: $11.8
Deferred Liab: $6.6
Preferred Stock: $2.5
NCAV: $319.6 million
Institutional Ownership
Total Institutional ownership is about 65 percent. The top 5 holders
Donald Smith & Co: 8.7%
Dimensional Fund Advisors: 7.9 %
Kahn Brothers & Co: 7.7%
Aegis Financial Corp: 5.1%
Barclays Global Inv UK Holdings: 4%
Long Term Investments
The company also lists long term investments of $26.5 million. We don't have much clarity on what these represent. Keep in mind, that we do not include these, or any other non current assets in our NCAV calculation. Thats all part of the "margin of safety".
Conclusion
How many times have you heard us say that we "aren't crazy about the business this company operates in"? We usually say that, and its no different here. NCAV companies are what they are for a reason. We are intrigued, however, by a company trading at $12.00 that has nearly $8.00 in cash, and little debt.
*The author does not have a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Trading Below Net Current Asset Value
Audiovox
Ticker: VOXX
Price: $12.14
Share Out: 22.6 million
Market Cap: $271.9 million
Average Daily Volume: 128000
P/E: NA
NCAV: $319.6 million
NCAV/Market Cap: 1.18
Cash/ST investments/share: $7.90
Audioxx, an international distributor of electronics equipment, primarily mobile electronics, and consumer electronics, has the distinction of being the current king of companies trading below net current asset value. With a market cap just south of $280 million, which for all intents and purposes puts it squarely in microcap land, this company still dwarfs its NCAV cousins.
Research references to Audiovoxx in terms of being a net-net are not new. Interestingly, this is not the first time the company has traded below its NCAV, it was also on the list four years ago, when it traded in the $6 range. The company had a subsequent run-up, and now finds itself back on the list few companies would wish to be on.
Audiovoxx's mobile products include:
o mobile multi-media video products, including overhead, headrest and portable mobile video systems,
o autosound products including radios, speakers,amplifiers and CD changers,
o satellite radios including plug and play models and direct connect models,
o automotive security and remote start systems,
o navigation systems,
o rear observation and collision avoidance systems, and
o automotive power accessories, including cruise control systems
Consumer electronics products include:
o LCD and Plasma flat panel televisions,
o home and portable stereos,
o HDTV Antennas,
o Two-way (GMRS) radios, digital multi-media products such as personal video recorders and MP3 products,
o home speaker systems and home theater in a box,
o portable DVD players,
o hand-held portable GPS,
o flat panel TV mounting systems, and
o home electronic accessories such as cabling and performance enhancing electronics.
Obvously, this company operates within a highly competitive industry. It is important, however to keep in mind, that the company is a distributor of products, and not a manufacturer. This company has been very active the past few years discontinuing operations, divesting businesses, and making small acquisitions.
The Fundamentals
Fiscal Year 2005 sales fell 5 percent to $539.7 million from 2004s $567 Net income fell dramatically from $77.2 million in 2004, to a loss of $9.5 million in 2005. The electronics business is highly competitive, and its been an especially rocky road for this company over the years. For the most recent quarter, ended 2/28/06, the company reported net income of $.183 million (including disc ops of -.184 million) on sales of $103 million.
The Balance Sheet
Cash stood at $17.8 million, and short term investments at $160.8 million as of 2/28/06, while long term debt was $11.8 million. The company also listed short term debt (curr portion of long term debt) of $6.7 million. Adding in the debt, and preferred stock and subtracting the cash from market cap gives VOXX an Enterprise Value of $112 million.
The NCAV calculation:
Current Assets:
Cash: $ 17.8 million
S/T Investments: $160.8
Accounts Rec: $106.7
Inventories: $96.1
Prepaid/other: $6
Total: $387.4
Current Liabilities
Accts Payable: $40.1
Curr portion LT Debt: $6.7
Total: $46.9
Long Term Debt: $11.8
Deferred Liab: $6.6
Preferred Stock: $2.5
NCAV: $319.6 million
Institutional Ownership
Total Institutional ownership is about 65 percent. The top 5 holders
Donald Smith & Co: 8.7%
Dimensional Fund Advisors: 7.9 %
Kahn Brothers & Co: 7.7%
Aegis Financial Corp: 5.1%
Barclays Global Inv UK Holdings: 4%
Long Term Investments
The company also lists long term investments of $26.5 million. We don't have much clarity on what these represent. Keep in mind, that we do not include these, or any other non current assets in our NCAV calculation. Thats all part of the "margin of safety".
Conclusion
How many times have you heard us say that we "aren't crazy about the business this company operates in"? We usually say that, and its no different here. NCAV companies are what they are for a reason. We are intrigued, however, by a company trading at $12.00 that has nearly $8.00 in cash, and little debt.
*The author does not have a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Tuesday, April 25, 2006
Discovey Partners: DPII
A Reader's Take on the Merger
A well informed reader emailed his take on the Discovery Partners/Infinity Pharmaceuticals merger. It is very insightful, and goes far deeper into the industry than your Cheap Stocks editor ever could. We are never afraid to admit our shortcomings here at CS.
Thanks, reader. Please don't hesitate to offer any other views you may have. Such well thought out insights are few and far between these days.
If the reader's analysis is correct, and this merger goes through, your editor no longer own a cash play NCAV company, but rather a biotech, likely to burn cash at a high rate. This is new territory!
*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
A Reader's Take on the Merger
A well informed reader emailed his take on the Discovery Partners/Infinity Pharmaceuticals merger. It is very insightful, and goes far deeper into the industry than your Cheap Stocks editor ever could. We are never afraid to admit our shortcomings here at CS.
Merger changes the essence of the investment. The acquiring company clearly needs a development team, and Discovery was unlikely to provide the return on the cash that the board was looking for, hence the merger. Since I suspect this is all a San Diego area bio deal, expect to see the company transformed into a biotech with a high burn rate. This will be a boom-bust investment, and there is no way to value the net asset value because any pipeline drug must be devalued by at least 90% until completion of phase II trials. Then you still have further development and marketing execution risk.
Whatever the future of the company holds, it is not a net asset value company anymore, as the cash will now be used to “develop” speculative compounds. A little like buying a company with a wad of cash and land, with unproven oil reserves, but in Texas, near where gushers were located. In my business, slow and steady just doesn’t excite enough people.
Thanks, reader. Please don't hesitate to offer any other views you may have. Such well thought out insights are few and far between these days.
If the reader's analysis is correct, and this merger goes through, your editor no longer own a cash play NCAV company, but rather a biotech, likely to burn cash at a high rate. This is new territory!
*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Saturday, April 22, 2006
Whats a Penny Worth? Northern Orion Resources (NTO)
Copper, Thinking outside the Box
The accelerating price of copper had your Cheap Stocks Editor deep in thought earlier this week. (We like to think outside the box here at Cheap Stocks, and that includes our philosophy of incorporating non-traditional asset classes into our portfolio.) With the realization that prior to 1982, pennies were 97.5% copper, I decided to do a few calculations. Based upon weight, 155 pre 1982 pennies make up a pound of pure copper. With copper trading at more than $3.00 a pound, that seemed like a natural business opportunity. I'd trade $1.55 for $3.00 anytime.
Armed with this information, I explained it all to my very skeptical (and highly intelligent) brother in-law. I told him, if we bought $10000 in pennies, and sorted out all the pre-1982 pennies, we could make some money. With a 50 percent hit rate, I explained, that is having half of the one million pennies being copper, we could
make a nice return, even at $2.00 per pound. The leftovers, or newer, primarily zinc pennies could be returned to the banks for cash, thus there is no downside to the strategy. If the strategy was successful, our 500000 copper pennies could be worth as much as $10,000...not a bad return.
My brother in law made some excellent points, including the time and effort needed to sort $10000 in pennies, as well as the sheer bulk and size of such a payload. He did seem intrigued, though.
The Experiment
So I pledged to do an experiment. I would go to a bank, obtain $10 worth of pennies, and get to work. Well, with help from my children, we completed that exercise this morning, sorting through the $10 in minutes. The results were disappointing. In that $10 in pennies, we found about 10 pre 1982 copper pennies. Thats a 1 percent hit rate. So back to the bank we go with our $9.90 in copper coated zinc, but don't be surprised if we try again.
Northern Orion Resources
Here's the other way we've been playing copper here at Cheap Stocks. Last year, we purchased shares in Northern Orion Resources, a Canadian based company (ticker NTO:AMEX)which owns or has interest in some low cost Argentinian copper mines. With a current market cap of $750 million, the company has $136 million in cash, no debt, and a forward P/E of less than 20.
Initiating a position in a copper company was a huge acknowledgement by your Cheap Stocks editor that a portfolio needs exposure to non-traditional asset classes. (Maybe one day he'll even buy a growth stock!!!) So far it has paid off nicely. We got in around $2.80, and are pleased with the results. We are not fooled though, this company goes as the price of copper goes. But we are believers in commodities exposure. We doubt their validity for pure investment purposes, but believe that their low correlations to other asset classes can help lower risk, and enhance returns.
*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Copper, Thinking outside the Box
The accelerating price of copper had your Cheap Stocks Editor deep in thought earlier this week. (We like to think outside the box here at Cheap Stocks, and that includes our philosophy of incorporating non-traditional asset classes into our portfolio.) With the realization that prior to 1982, pennies were 97.5% copper, I decided to do a few calculations. Based upon weight, 155 pre 1982 pennies make up a pound of pure copper. With copper trading at more than $3.00 a pound, that seemed like a natural business opportunity. I'd trade $1.55 for $3.00 anytime.
Armed with this information, I explained it all to my very skeptical (and highly intelligent) brother in-law. I told him, if we bought $10000 in pennies, and sorted out all the pre-1982 pennies, we could make some money. With a 50 percent hit rate, I explained, that is having half of the one million pennies being copper, we could
make a nice return, even at $2.00 per pound. The leftovers, or newer, primarily zinc pennies could be returned to the banks for cash, thus there is no downside to the strategy. If the strategy was successful, our 500000 copper pennies could be worth as much as $10,000...not a bad return.
My brother in law made some excellent points, including the time and effort needed to sort $10000 in pennies, as well as the sheer bulk and size of such a payload. He did seem intrigued, though.
The Experiment
So I pledged to do an experiment. I would go to a bank, obtain $10 worth of pennies, and get to work. Well, with help from my children, we completed that exercise this morning, sorting through the $10 in minutes. The results were disappointing. In that $10 in pennies, we found about 10 pre 1982 copper pennies. Thats a 1 percent hit rate. So back to the bank we go with our $9.90 in copper coated zinc, but don't be surprised if we try again.
Northern Orion Resources
Here's the other way we've been playing copper here at Cheap Stocks. Last year, we purchased shares in Northern Orion Resources, a Canadian based company (ticker NTO:AMEX)which owns or has interest in some low cost Argentinian copper mines. With a current market cap of $750 million, the company has $136 million in cash, no debt, and a forward P/E of less than 20.
Initiating a position in a copper company was a huge acknowledgement by your Cheap Stocks editor that a portfolio needs exposure to non-traditional asset classes. (Maybe one day he'll even buy a growth stock!!!) So far it has paid off nicely. We got in around $2.80, and are pleased with the results. We are not fooled though, this company goes as the price of copper goes. But we are believers in commodities exposure. We doubt their validity for pure investment purposes, but believe that their low correlations to other asset classes can help lower risk, and enhance returns.
*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Wednesday, April 12, 2006
Company Update: Discovery Partners and Infinity Pharmaceuticals To Merge
Ticker: DPII
Price: $2.54
Market Cap: $67.15 million
Net Current Asset Value: $85 million
Today Discovery Partners, which we recently featured on March 17th and March 3rd announced intentions to merge with Infinity Pharmaceuticals, a private company. Under the agreement, Infinity would own 69% of the new company, current Discovery Partners ahareholders would hold the balance. The new company will focus on cancer drug discovery and development.
The stock was up as high as $2.84, but closed at $2.54, up 5.4 percent on heavy volume. Clearly, the market, (and frankly your editor as a shareholder)does not know what to make of this merger. Since Infinity is not publicly traded, there is not a great deal of information available. It is difficult to calculate what a 31 percent stake in this new entity may be worth. It is clear however, that Discovery's cash position made it an attractive merger candidate to Infinity.
To a NCAV investor, a merger or takeover (which was part of our speculation in our March 3rd report)can be the key to unlocking value. In this case, it's too early to tell whether this deal will do that. We simply don't have enough information.
While its great to be right, we're not sure what the payoff will be. Stay tuned.
*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Ticker: DPII
Price: $2.54
Market Cap: $67.15 million
Net Current Asset Value: $85 million
Today Discovery Partners, which we recently featured on March 17th and March 3rd announced intentions to merge with Infinity Pharmaceuticals, a private company. Under the agreement, Infinity would own 69% of the new company, current Discovery Partners ahareholders would hold the balance. The new company will focus on cancer drug discovery and development.
The stock was up as high as $2.84, but closed at $2.54, up 5.4 percent on heavy volume. Clearly, the market, (and frankly your editor as a shareholder)does not know what to make of this merger. Since Infinity is not publicly traded, there is not a great deal of information available. It is difficult to calculate what a 31 percent stake in this new entity may be worth. It is clear however, that Discovery's cash position made it an attractive merger candidate to Infinity.
To a NCAV investor, a merger or takeover (which was part of our speculation in our March 3rd report)can be the key to unlocking value. In this case, it's too early to tell whether this deal will do that. We simply don't have enough information.
While its great to be right, we're not sure what the payoff will be. Stay tuned.
*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.
Sunday, April 09, 2006
A Legend: Marty Whitman from Third Avenue Funds
Explains His Take on “Net Nets” (aka companies trading below their net current asset value)
To me, Marty Whitman is truly a living legend in the world of value investing. Here’s the disclaimer: I’ve owned Third Avenues Small Cap Value Fund for several years. I’ve heard Marty speak, and I’ve spoken with him. So he’s a little cranky from time to time, that’s okay, he’s allowed. To be in this is business at his age (he’ll be 82 in September), as good as he’s been, and as much clarity as he’s brought to the world of value investing, a little crankyness is just fine with me. (Even your Cheap Stocks editor can be a bit of a curmudgeon from time to time. Just ask Mrs. Cheap Stocks editor…)
So I was very pleased upon receiving his latest letter to shareholders (dated January 31, 2006)
to notice his discussion on "net nets", otherwise known as companies trading below net current asset value. Whitman starts the "net net" discussion by disclosing that over 80 % of the Third Avenue Value Funds (the larger cap version of the fund I own) were bought at prices
Later, Whitman explains this better:
Ahh..now we are getting somewhere. Here at Cheap Stocks, we are using Graham and Dodd’s interpretation, not that that is the only way. In Marty’s world, you can’t manage significant amounts of money looking for net-nets the way we do here at Cheap Stocks. There simply is not a big enough pool of them available and, the large majority are micro caps. That’s where we come in. Since most of the net-nets we research are far too small to have a great deal of institutional interest, they tend to languish, unnoticed by the market. Therein lies the opportunity for the small investor.
Back to Marty Whitman’s interpretation. He goes onto describe the differences between TAVF’s net-net process and Graham and Dodd’s:
Marty continues
Marty continues down the inventory path
Whitman closes with the following:
Well said, Marty.
Explains His Take on “Net Nets” (aka companies trading below their net current asset value)
To me, Marty Whitman is truly a living legend in the world of value investing. Here’s the disclaimer: I’ve owned Third Avenues Small Cap Value Fund for several years. I’ve heard Marty speak, and I’ve spoken with him. So he’s a little cranky from time to time, that’s okay, he’s allowed. To be in this is business at his age (he’ll be 82 in September), as good as he’s been, and as much clarity as he’s brought to the world of value investing, a little crankyness is just fine with me. (Even your Cheap Stocks editor can be a bit of a curmudgeon from time to time. Just ask Mrs. Cheap Stocks editor…)
So I was very pleased upon receiving his latest letter to shareholders (dated January 31, 2006)
to notice his discussion on "net nets", otherwise known as companies trading below net current asset value. Whitman starts the "net net" discussion by disclosing that over 80 % of the Third Avenue Value Funds (the larger cap version of the fund I own) were bought at prices
" which at the time of acquisition, represented meaningful discounts from readily ascertainable net asset values.After reading this I was astonished, wondering why I’d never discovered the plethora of companies Whitman has? The reason is because Marty is a genius who takes the whole concept of “net nets” to the next level…a level of sophistication, insight, and research that is far beyond the scope of our “Cheap Stocks” research. (Not that we couldn’t take it to that level, mind you, unfortunately our time is limited, and I only wish this was my full-time job).
Later, Whitman explains this better:
"Rarely (except for cash and equivalents) were these readily ascertainable asset values classified as current assets under Generally Accepted Accounting Principles ("GAAP"). The Fund’s definition of “Net-Nets” is taken from Graham and Dodd’s Security Analysis, but with a few twists. Graham and Dodd relied on a GAAP classified balance sheet to define current assets in order to ascertain if a common stock was a Net-Net. TAVF (Third Avenue Value Funds) uses its own judgement rather than GAAP classification to define current assets in order to decide what is a liquid, i.e., current asset."
Ahh..now we are getting somewhere. Here at Cheap Stocks, we are using Graham and Dodd’s interpretation, not that that is the only way. In Marty’s world, you can’t manage significant amounts of money looking for net-nets the way we do here at Cheap Stocks. There simply is not a big enough pool of them available and, the large majority are micro caps. That’s where we come in. Since most of the net-nets we research are far too small to have a great deal of institutional interest, they tend to languish, unnoticed by the market. Therein lies the opportunity for the small investor.
Back to Marty Whitman’s interpretation. He goes onto describe the differences between TAVF’s net-net process and Graham and Dodd’s:
"First the fund is not interested in Net-Nets unless the company is extremely well financed. A large quantity of current assets, especially if they consist of inventories, costs in excess of billings, or receivables from less than credit worthy customers, probably cannot help the common stock of a company which cannot meet its obligations to its creditors."We certainly agree with Marty on these points. We place a much greater degree of value on cash and marketable securities than we do on other current asset accounts, but truth be told, here at Cheap Stocks, we do cover some companies that are not extremely well financed. That is one reason they are so "cheap", and its our charge to try and determine whether there’s any life left in these companies. We are not always right. But we don’t need to be. In this realm of deep value investing, it is not wise to concentrate too much money in too few companies.
Marty continues
"Second, many current assets classified as current assets under GAAP are really fixed assets of the worst sort. Take department store merchandise inventories. If the department store is to be liquidated, merchandise inventories are indeed a current asset, convertible to cash within 12 months at prices that conceivably could be close to book value, although much less than book value may be realized if the merchandise is disposed of in a GOB (Going Out of Business) sale."Again, we couldn’t agree more. When current assets are primarily inventory, we are much more skeptical of whether the NCAV calculation reveals true undervaluation. All else being equal, we like our current assets in cash and short-term marketable securities.
Marty continues down the inventory path
:"On the other hand, if the department store is a going concern, merchandise inventories are a fixed asset of the worst sort. The merchandise inventories have to be replaced, are hard to value, and are subject to markdowns, obsolescence, shrinkage, seasonality and mislocation."
"Third, the Graham and Dodd formulation does not account for off balance sheet liabilities which may, or may not be disclosed in footnotes, nor do Graham and Dodd take into account excessive expenses or losses; at TAVF such expenses or losses are capitalized and added to liabilities."The takeaway here is that is extremely important to read the footnotes in a companies SEC filing. You need to know what you are buying. Think of the footnotes as the "fine print".
"Fourth, Graham and Dodd only seem to recognize partially that certain fixed assets,e.g.m property, plant and equipment, can sometimes create cash."Let me handle this one, Mr, Graham, and Mr. Dodd: we at Cheapstocks want to be aware of the non-current assets, we don’t ignore them. We simply don’t include them in the calculation. This creates a safety net of sorts, depending on how valuable these assets may be. Essentially, we value the company as (Current Assts) – (Current Liabilities) – (Other long term liabilities), "ignoring", at least in the calculation, the potential value of property, plant and equipment, and any other long-term assets. (Certainly, we are interested in those assets, and knowing what they are.)
Whitman closes with the following:
"When all is said and done, however, TAVF management owes an enormous debt of gratitude to Graham and Dodd for introducing the concept of Net-Nets. It remains the most important part of the Fund’s common stock portfolio."
Well said, Marty.
Monday, April 03, 2006
Back With Another List:
Profitable Companies Trading Below Their Net Current Asset Value
Once in awhile, your Cheap Stocks editor throws in a list, and today is no exception. Truth be told, the latest NCAV company I "discovered" was not actually trading below it's NCAV. I was halfway through writing my report when the numbers just did not look right, much to my disappointment. The company yields 3%, trades at less than 8 times earnings, and about 1.3 times NCAV. But, I scrapped that report afterall. Maybe I'll save it for another day.
This list is comprised of companies trading below their NCAV, that have positive trailing 12 month earnings. Avid readers will recognize a few of the names from previous posts. It is pretty slim pickings though, as evidenced by the fact that we went all the way down to $10 million in market cap.
Trans World Entertainment (TWMC)
Industry: Entertainment Products
Current Price: $5.57
Market Cap: $269 million
NCAV: $322 million
P/E: 80
Tandy Brands (TBAC)
Industry: Apparel
Current Price: $10.3
Market Cap: $69 million
NCAV: $73 million
P/E: 40
Lazare Kaplan (LKI)
Industry: Diamonds
Price: $7.80
Market Cap: $68 million
NCAV: $79 million
P/E: 32
Boss Holdings (BSHI)
Industry: Apparel
Current Price: $7.9
Market Cap: $15.6 million
NCAV: $16.8 million
P/E: 22.5
Hirsch Intl (HRSH)
Industry: Machinery
Current Price: $1.28
Market Cap: $11.15 million
NCAV: $10.86 million
P/E: 42.75
*The author has a position in Lazare Kaplan. This is neither a recommendation to buy or sell this security, or any others mentioned in this piece. All information provided believed to be reliable and presented for information purposes only.
Profitable Companies Trading Below Their Net Current Asset Value
Once in awhile, your Cheap Stocks editor throws in a list, and today is no exception. Truth be told, the latest NCAV company I "discovered" was not actually trading below it's NCAV. I was halfway through writing my report when the numbers just did not look right, much to my disappointment. The company yields 3%, trades at less than 8 times earnings, and about 1.3 times NCAV. But, I scrapped that report afterall. Maybe I'll save it for another day.
This list is comprised of companies trading below their NCAV, that have positive trailing 12 month earnings. Avid readers will recognize a few of the names from previous posts. It is pretty slim pickings though, as evidenced by the fact that we went all the way down to $10 million in market cap.
Trans World Entertainment (TWMC)
Industry: Entertainment Products
Current Price: $5.57
Market Cap: $269 million
NCAV: $322 million
P/E: 80
Tandy Brands (TBAC)
Industry: Apparel
Current Price: $10.3
Market Cap: $69 million
NCAV: $73 million
P/E: 40
Lazare Kaplan (LKI)
Industry: Diamonds
Price: $7.80
Market Cap: $68 million
NCAV: $79 million
P/E: 32
Boss Holdings (BSHI)
Industry: Apparel
Current Price: $7.9
Market Cap: $15.6 million
NCAV: $16.8 million
P/E: 22.5
Hirsch Intl (HRSH)
Industry: Machinery
Current Price: $1.28
Market Cap: $11.15 million
NCAV: $10.86 million
P/E: 42.75
*The author has a position in Lazare Kaplan. This is neither a recommendation to buy or sell this security, or any others mentioned in this piece. All information provided believed to be reliable and presented for information purposes only.
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