UDATE
It certainly didn't take long for Dominion Homes to tick up above its net current asset value. The stock closed yesterday at $21.31, up slightly (1%) since we highlighted this company last week. Here is how the other four fared:
Cellstar (CLST) $4.75 (up 4.2%)
G III Apparel (GIII) $6.55 (up 4.0%)
Boss Holdings (BSHI) $7.00 (unchanged)
Electro-Sensors (ELSE) $3.83 (up 1.9%)
Not a bad week for these companies. We'll continue to search for other NCAV companies, and post as we can.
Last but not least, we posted research on Duckwall-Alco recently, and since then the stock is up 2.9% (to $17.50). The company still trades below its NCAV. We'll continue to follow this interesting story. Merry Christmas to all from the research staff at CHEAP STOCKS.
feedback: cheapstocks@earthlink.net
Saturday, 18 December 2004
Friday, 10 December 2004
Five Profitable Companies Trading Below Net Current Asset Value
These five companies all trade below NCAV as of 12/10/04. All have a trailing 12 month profit. Please e-mail cheapstocks@earthlink.net if you'd like more analysis on each posted on this site.
Company Ticker Mkt cap(mln) NCAV(mln) Price(12/10/04)
Dominion Homes DHOM 171.19 176.31 20.64
Cellstar Corp CLST 95.93 131.26 4.56
G III Apparel GIII 44.67 52.41 6.30
Boss Holdings BSHI 13.56 15.64 7.00
Electro Sensors ELSE 12.1 13.29 3.76
These five companies all trade below NCAV as of 12/10/04. All have a trailing 12 month profit. Please e-mail cheapstocks@earthlink.net if you'd like more analysis on each posted on this site.
Company Ticker Mkt cap(mln) NCAV(mln) Price(12/10/04)
Dominion Homes DHOM 171.19 176.31 20.64
Cellstar Corp CLST 95.93 131.26 4.56
G III Apparel GIII 44.67 52.41 6.30
Boss Holdings BSHI 13.56 15.64 7.00
Electro Sensors ELSE 12.1 13.29 3.76
Friday, 3 December 2004
Company Report: 12/3/04
DUCKWALL-ALCO STORES
Ticker: DUCK
Exchange: NASDAQ
Price: $17.00 (12/3/04 close)
Market Cap: $74 million
P/E Ratio: 12.5
Shares Outstanding: 4.38 million
2003 sales: $423.5 million
Net Income: $6.3 million
Book Value per share:$25.23
THE COMPANY
First of all, I’ve got to admit that I had never heard of this company either. Headquartered in Kansas, the company is a regional discount retailer operating in 21 states in central U.S. It is comprised of two segments, ALCO Stores (185 total) which account for 92 % of company sales, and Duckwall Stores (80 total), accounting for 8 percent of sales. (Sales Data as of 2nd quarter, 2005).
The retail business is one of the most competitive, so how can a small-time chain such as this compete with the big boys? It doesn’t try to. As stated in the company’s 2nd quarter 2005 10Q report:
“The Company’s overall business strategy involves identifying, and opening stores in towns that currently have no direct competition from another larger national or regional full-line discount retailer. The Company’s business activities include operation of ALCO discount stores in towns with populations which are typically less than 5,000 not served by other regional or national full-line discount chains and Duckwall variety stores that offer a more limited selection of merchandise which are primarily located in communities of less than 2,500 residents”
THE NCAV STORY (Data as of 3rd quarter 2005)
Current Assets: $157.9 million
Current Liabilities: $53 million
LT Debt: $18 million
Other LT Liabilities: $4 million
NCAV: 82.9 million
Market Cap: 74 million
NCAV/MKT Cap: 1.12
Composition of current assets:
Cash: $3 million
Receivables: $ 2 million
Prepaid expenses and other: $3.4 million
Inventory: $149.2 million
The quality of current assets is not outstanding, but typical for a retailer. The company has $3 million in cash, but the bulk of current assets, $149 million, is inventory. (As students of NCAV investing know, cash is the most valuable current asset.) Still, the company is trading below its net current asset value. Remember also, that NCAV calculations completely ignore long-term assets. In Duckwall’s case, we are ignoring nearly $27 million in net property and equipment, and $4 million in other assets. These values represent book value; it is difficult to estimate their true value.
Institutional Ownership
One interesting facet to this company is that there is institutional ownership; quite rare for a company of this size. As of 9/04, Heartland Advisors, Franklin Resources, Dimensional Fund Advisors, and Royce Associates (to name a few) owned a combined 28 percent.
Conclusion
If nothing else, this is an interesting story to follow. The risks are obvious: it’s difficult for any retailer to prosper given the competitive environment. However, the company’s strategy makes sense: go to the towns no one else will. The company has been profitable for years, yet still trades below its NCAV. Just keep in mind how rare that is. Finally, with the company trading at just over 4 times cashflow, and 2/3 book, deep value investors may want to dig further.
Send comments and questions to: cheapstocks@earthlink.net
DUCKWALL-ALCO STORES
Ticker: DUCK
Exchange: NASDAQ
Price: $17.00 (12/3/04 close)
Market Cap: $74 million
P/E Ratio: 12.5
Shares Outstanding: 4.38 million
2003 sales: $423.5 million
Net Income: $6.3 million
Book Value per share:$25.23
THE COMPANY
First of all, I’ve got to admit that I had never heard of this company either. Headquartered in Kansas, the company is a regional discount retailer operating in 21 states in central U.S. It is comprised of two segments, ALCO Stores (185 total) which account for 92 % of company sales, and Duckwall Stores (80 total), accounting for 8 percent of sales. (Sales Data as of 2nd quarter, 2005).
The retail business is one of the most competitive, so how can a small-time chain such as this compete with the big boys? It doesn’t try to. As stated in the company’s 2nd quarter 2005 10Q report:
“The Company’s overall business strategy involves identifying, and opening stores in towns that currently have no direct competition from another larger national or regional full-line discount retailer. The Company’s business activities include operation of ALCO discount stores in towns with populations which are typically less than 5,000 not served by other regional or national full-line discount chains and Duckwall variety stores that offer a more limited selection of merchandise which are primarily located in communities of less than 2,500 residents”
THE NCAV STORY (Data as of 3rd quarter 2005)
Current Assets: $157.9 million
Current Liabilities: $53 million
LT Debt: $18 million
Other LT Liabilities: $4 million
NCAV: 82.9 million
Market Cap: 74 million
NCAV/MKT Cap: 1.12
Composition of current assets:
Cash: $3 million
Receivables: $ 2 million
Prepaid expenses and other: $3.4 million
Inventory: $149.2 million
The quality of current assets is not outstanding, but typical for a retailer. The company has $3 million in cash, but the bulk of current assets, $149 million, is inventory. (As students of NCAV investing know, cash is the most valuable current asset.) Still, the company is trading below its net current asset value. Remember also, that NCAV calculations completely ignore long-term assets. In Duckwall’s case, we are ignoring nearly $27 million in net property and equipment, and $4 million in other assets. These values represent book value; it is difficult to estimate their true value.
Institutional Ownership
One interesting facet to this company is that there is institutional ownership; quite rare for a company of this size. As of 9/04, Heartland Advisors, Franklin Resources, Dimensional Fund Advisors, and Royce Associates (to name a few) owned a combined 28 percent.
Conclusion
If nothing else, this is an interesting story to follow. The risks are obvious: it’s difficult for any retailer to prosper given the competitive environment. However, the company’s strategy makes sense: go to the towns no one else will. The company has been profitable for years, yet still trades below its NCAV. Just keep in mind how rare that is. Finally, with the company trading at just over 4 times cashflow, and 2/3 book, deep value investors may want to dig further.
Send comments and questions to: cheapstocks@earthlink.net
Tuesday, 30 November 2004
Company Update: Blair
Ticker: BL
Price: 35.00
Up 37 percent since initial report (2/14/03)
Shares of Blair Corp, a small mail order apparel company are up 37 percent since our initial report on 2/14/03. Just like the other companies we initially profiled on this site, the company no longer trades below its net current asset value. Nonetheless, the company still boasts a rock-solid balance sheet, with $35 million in cash (or about $4.50 per share), and no long-term debt.
While third quarter sales ($107.1 million) were down 14 percent from the same period last year ($124.1 million), net income was up significantly, from $793 thousand to $2.9 million. The company has been successful in cutting costs, boosting margins, and garnering more revenue from the e-commerce side of its business.
The company also continues to pay a $.15 quarterly dividend, and yields 1.68 percent. Blair is the epitome of a successful NCAV company: Solid balance sheet, unrecognized value in the marketplace, and profitable. Patient investors have been rewarded nicely.
OUR NEXT REPORT
Stay tuned for a new report which will reveal a profitable regional retailer which is currently trading below its net current asset value. Please send feedback and questions to:
cheapstocks@earthlink.net
Ticker: BL
Price: 35.00
Up 37 percent since initial report (2/14/03)
Shares of Blair Corp, a small mail order apparel company are up 37 percent since our initial report on 2/14/03. Just like the other companies we initially profiled on this site, the company no longer trades below its net current asset value. Nonetheless, the company still boasts a rock-solid balance sheet, with $35 million in cash (or about $4.50 per share), and no long-term debt.
While third quarter sales ($107.1 million) were down 14 percent from the same period last year ($124.1 million), net income was up significantly, from $793 thousand to $2.9 million. The company has been successful in cutting costs, boosting margins, and garnering more revenue from the e-commerce side of its business.
The company also continues to pay a $.15 quarterly dividend, and yields 1.68 percent. Blair is the epitome of a successful NCAV company: Solid balance sheet, unrecognized value in the marketplace, and profitable. Patient investors have been rewarded nicely.
OUR NEXT REPORT
Stay tuned for a new report which will reveal a profitable regional retailer which is currently trading below its net current asset value. Please send feedback and questions to:
cheapstocks@earthlink.net
Wednesday, 3 November 2004
Company Update
Ambassadors International
Up: 46 percent
Last report: 2/22/03
Price: $12.46
Shares of this tiny travel services company have performed well since our initial report (see archive). At the time, the company was trading below it's net current asset value, but with its subsequent run-up, it no longer does. That doesen't mean, however, that there is no value here.
Although trading at a high price earnings multiple (around 70), the company boasts a strong, cash-rich balance sheet. With $97 million in cash and marketable securities, (that equates to $10 per share!), the company has no debt. Third quarter 2004 sales rose to $4.5 million, or $.07 per share, up sharply from the same quarter last year ($3.0 million, breakeven). The company also pays a $.10 quarterly dividend, and currently yields more than 3 percent. Watch as this story unfolds. Essentially, if you purchase this stock at $12.46, you are theoretically buying $10 in cash, a 3% yield, and getting the operating businesses for $2.46.
Ambassadors International
Up: 46 percent
Last report: 2/22/03
Price: $12.46
Shares of this tiny travel services company have performed well since our initial report (see archive). At the time, the company was trading below it's net current asset value, but with its subsequent run-up, it no longer does. That doesen't mean, however, that there is no value here.
Although trading at a high price earnings multiple (around 70), the company boasts a strong, cash-rich balance sheet. With $97 million in cash and marketable securities, (that equates to $10 per share!), the company has no debt. Third quarter 2004 sales rose to $4.5 million, or $.07 per share, up sharply from the same quarter last year ($3.0 million, breakeven). The company also pays a $.10 quarterly dividend, and currently yields more than 3 percent. Watch as this story unfolds. Essentially, if you purchase this stock at $12.46, you are theoretically buying $10 in cash, a 3% yield, and getting the operating businesses for $2.46.
Saturday, 16 October 2004
Company Update
Circuit City
Ticker: CC
Current Price: 11.87
Up 159 percent
Since our initial report on this company (2/8/02), Circuit City shares are up 159 percent. Consequently, the stock no longer trades below it's net current asset value. As an NCAV investor, that's what you hope for. A rising stock price, once the market catches on to the true value of an NCAV company, lifting the company above it's NCAV.
Circuit City still looks healthy. The company's balance sheet boasts nearly $5 per share in cash, with little debt to speak of. Still the retail electronics market remains highly competitive. The company sold off it's credit card operation in January 2004 (deal completed in May 2004) for $1.8 billion, allowing it to concentrate on the core business.
Second quarter sales were up $190 million to $2.345 billion from the same quarter last year, resulting in earnings of 2 cents per share, up from last years loss of 15 cents. They key quarter for this company is the fourth quarter, ending in February. That's high season for retailers, make or break time.
Keep an eye on this company. As an NCAV investor, the objective is to identify companies offering tremendous value at a given price. If the market finally recognizes value in that company, lifting the share price, you need to re-evaluate. In order to protect your profits, consider instituting a stop loss on your shares. As the stock price rises, you can increase the stop loss price. This will help you protect your downside in the event of severe price decreases.
Circuit City
Ticker: CC
Current Price: 11.87
Up 159 percent
Since our initial report on this company (2/8/02), Circuit City shares are up 159 percent. Consequently, the stock no longer trades below it's net current asset value. As an NCAV investor, that's what you hope for. A rising stock price, once the market catches on to the true value of an NCAV company, lifting the company above it's NCAV.
Circuit City still looks healthy. The company's balance sheet boasts nearly $5 per share in cash, with little debt to speak of. Still the retail electronics market remains highly competitive. The company sold off it's credit card operation in January 2004 (deal completed in May 2004) for $1.8 billion, allowing it to concentrate on the core business.
Second quarter sales were up $190 million to $2.345 billion from the same quarter last year, resulting in earnings of 2 cents per share, up from last years loss of 15 cents. They key quarter for this company is the fourth quarter, ending in February. That's high season for retailers, make or break time.
Keep an eye on this company. As an NCAV investor, the objective is to identify companies offering tremendous value at a given price. If the market finally recognizes value in that company, lifting the share price, you need to re-evaluate. In order to protect your profits, consider instituting a stop loss on your shares. As the stock price rises, you can increase the stop loss price. This will help you protect your downside in the event of severe price decreases.
Tuesday, 12 October 2004
I'm back! This website has languished the past year and a half, but now it's back to business. What business? The business of identifying potentially undervalued stocks the Ben Graham way, or, the old fashioned way, you might say. In the coming weeks, I'll revisit the 3 companies Circuit City, Blair, and Ambassadors International, each of which was the subject of a research report posted on this site. We'll review how these stocks have performed since I conducted the initial research, as well as provide updates on the companies.
You can also expect to see new research reports: companies you may have never heard of that may represent tremendous value. To read more about the Ben Graham Net Current Asset Value approach to investing, please scroll down and read the very first posting on this site. In the meantime please e-mail me at cheapstocks@earthlink.net with any questions or comments.
You can also expect to see new research reports: companies you may have never heard of that may represent tremendous value. To read more about the Ben Graham Net Current Asset Value approach to investing, please scroll down and read the very first posting on this site. In the meantime please e-mail me at cheapstocks@earthlink.net with any questions or comments.
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