James G. Boswell II, a major focus of the great book on the JG Boswell farming empire entitled "The King of California: J.G. Boswell and the Making of a Secret American Empire" passed away last Friday at age 86. Here's the obituary from the LA Times (thanks to Cheap Stocks reader Scott Hall for this link).
Boswell presided over JG Boswell, Co (Ticker:BWEL), one of the most interesting quasi-publicly traded companies that most investors have never heard of, as chairman, president and CEO from 1952 until 1984. He was still serving on the board of directors at the time of his death.
For more on the company, see our most recent BWEL post.
*The author has a position in JG Boswell. 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, 8 April 2009
Wednesday, 25 March 2009
Catalyst Investment Research- Avigen Inc
Two week's ago, Damien Park (of Hedge Fund Solutions and the Activist Investing Blog)and I announced the formation of Catalyst Investment Research, a research product that will combine shareholder activism with deep value fundamental analysis.
Click here to download a complimentary copy of our latest report, an analysis on Avigen Inc.
Annual Subscriptions (a minimum of 24 reports/year) are now available. Please message:research@hedgerelations.comif you are interested in more information.
*The author does not have positions in any of the companies mentioned. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.
Click here to download a complimentary copy of our latest report, an analysis on Avigen Inc.
Annual Subscriptions (a minimum of 24 reports/year) are now available. Please message:research@hedgerelations.comif you are interested in more information.
*The author does not have positions in any of the companies mentioned. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.
Thursday, 19 March 2009
JG Boswell Update: 2008 Annual Report
Shares of cotton and farming giant JG Boswell, owner of an estimated 142,000 California acres, and another 30,000 in Australia, have been hit hard this year, just like most other companies. Shares can now had for $435, (if you can get them that is; average daily volume is just 322), nearly 60% below the 52 week high of $1000.
The appeal of Boswell (BWEL) is not in its farming operations, which although impressive in their own right, merely represent the current use of assets which might ultimately be much more valuable used for other purposes.
The company continues to develop its Yokohl Ranch project, a master planned community of 35,000 acres in Tulare County California which may have a 10 year life. The Eastlake project, a master planned community in Chula Vista, California is near completion.
But, as we've stated several times before, the real gem may lie beneath some of Boswell's land: massive amounts of water that may be worth several billions. ("May" being the operative word. Ultimately, in order for value to be realized, assets must be converted, or have a good probability of being converted into cash. Water is a touchy and political subject, especially in California, and given dire predictions about California agriculture by officials in the new administration.)
We recently obtained a copy of the company’s 2008 annual report, and here are the highlights for the year ended June 2008:
Current Price: $435
Current Dvd Yield: 3.2%
Quarterly Dvd: $3.50/shr
2008 Revenue: $366.494 million
Net Income: $15.31 million
Diluted EPS/shr: $15.57
Current Assets: $205.471 million
Cash: $4.451 million
Total Assets: $729.75 million
Current Liab: $218.678 million
Short Term Debt: $147.261 million
Long Term Debt: $0
Stockholders Equity: $463.349 million
Shares Out: 974,132
Book Value Per share: $475.7
Market Cap: $423.75 million
Enterprise Value: $566.7 million
Enterprise Value/California Acre: $3991 (estimated)
2008 revenue rose 8% to $366.5 million, while net income jumped 9.6% to $15.57 (fully diluted). Boswell ended the year with $147 million in short-term debt and no long-term debt. Shares currently trade at just .91 times book value, and yield 3.2%.
Based on just the California land, we estimate Enterprise Value/Acre to be about $3991, and that ignores any value in the Australian land. We continue to be intrigued by the Boswell story, especially at these prices. Buyer beware, though: Shares are difficult to obtain, information is scarce, and there is little liquidity.
*The author has a position in JG Boswell. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.
The appeal of Boswell (BWEL) is not in its farming operations, which although impressive in their own right, merely represent the current use of assets which might ultimately be much more valuable used for other purposes.
The company continues to develop its Yokohl Ranch project, a master planned community of 35,000 acres in Tulare County California which may have a 10 year life. The Eastlake project, a master planned community in Chula Vista, California is near completion.
But, as we've stated several times before, the real gem may lie beneath some of Boswell's land: massive amounts of water that may be worth several billions. ("May" being the operative word. Ultimately, in order for value to be realized, assets must be converted, or have a good probability of being converted into cash. Water is a touchy and political subject, especially in California, and given dire predictions about California agriculture by officials in the new administration.)
We recently obtained a copy of the company’s 2008 annual report, and here are the highlights for the year ended June 2008:
Current Price: $435
Current Dvd Yield: 3.2%
Quarterly Dvd: $3.50/shr
2008 Revenue: $366.494 million
Net Income: $15.31 million
Diluted EPS/shr: $15.57
Current Assets: $205.471 million
Cash: $4.451 million
Total Assets: $729.75 million
Current Liab: $218.678 million
Short Term Debt: $147.261 million
Long Term Debt: $0
Stockholders Equity: $463.349 million
Shares Out: 974,132
Book Value Per share: $475.7
Market Cap: $423.75 million
Enterprise Value: $566.7 million
Enterprise Value/California Acre: $3991 (estimated)
2008 revenue rose 8% to $366.5 million, while net income jumped 9.6% to $15.57 (fully diluted). Boswell ended the year with $147 million in short-term debt and no long-term debt. Shares currently trade at just .91 times book value, and yield 3.2%.
Based on just the California land, we estimate Enterprise Value/Acre to be about $3991, and that ignores any value in the Australian land. We continue to be intrigued by the Boswell story, especially at these prices. Buyer beware, though: Shares are difficult to obtain, information is scarce, and there is little liquidity.
*The author has a position in JG Boswell. 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, 10 March 2009
Announcing: Catalyst Investment Research
Damien Park, the President and CEO of Hedge Fund Solutions, LLC, a Philadelphia based firm focused on issues related to shareholder activism, and I are teaming up to launch Catalyst Investment Research, a new research product that will combine shareholder activism, with deep value fundamental analysis.
Each report will explore an interesting activist situation with a catalyst event. Damien has built a solid reputation in this area of expertise, and is a frequent speaker at related conferences. He currently offers a free weekly product, Catalyst Equity Research, which highlights current activist situations, and The Offical Activist Investing Blog.
In each case, the research will strive to provide readers with: (1) the activist's investment thesis and analysis, (2) the activist's track record for improving value in targeted companies, (3) the likelihood that the activist investor will achieve their goals in this circumstance, and (4) an in-depth analysis of the company's financial health irrespective of the activist's involvement.
For additional information about the subscription-based product email research@hedgerelations.com.
Click Here to download a complimentary copy
Each report will explore an interesting activist situation with a catalyst event. Damien has built a solid reputation in this area of expertise, and is a frequent speaker at related conferences. He currently offers a free weekly product, Catalyst Equity Research, which highlights current activist situations, and The Offical Activist Investing Blog.
In each case, the research will strive to provide readers with: (1) the activist's investment thesis and analysis, (2) the activist's track record for improving value in targeted companies, (3) the likelihood that the activist investor will achieve their goals in this circumstance, and (4) an in-depth analysis of the company's financial health irrespective of the activist's involvement.
For additional information about the subscription-based product email research@hedgerelations.com.
Click Here to download a complimentary copy
Value Investing Congress West, May 5th and 6th
I'll be heading back to Pasadena in early May, to attend my fourth session of the Value Investing Congress. This has become the premier forum for value investors; an extremely well-run event that attracts quality speakers, offering compelling insights and actionable ideas. What's more, I've found the presenters to be approachable both during and after the Congress.
There's even more reason to attend this year given the markets implosion. That may sound counter-intuitive, but I believe that there's a great deal of value to be had now, for patient investors. This market has decimated some companies to the point that they've become "stupid" cheap, and there's no better event to gather intelligence from some of the greatest value investors.
The folks at The Value Investing Congress have been kind enough to extend a discount -$100 off the early bird rate for a total savings of $1300- to Cheap Stocks readers. If you are intested in attending, please click here use discount code P09CS1, which will be valid until March 15th.
Hope to see you in Pasadena!
There's even more reason to attend this year given the markets implosion. That may sound counter-intuitive, but I believe that there's a great deal of value to be had now, for patient investors. This market has decimated some companies to the point that they've become "stupid" cheap, and there's no better event to gather intelligence from some of the greatest value investors.
The folks at The Value Investing Congress have been kind enough to extend a discount -$100 off the early bird rate for a total savings of $1300- to Cheap Stocks readers. If you are intested in attending, please click here use discount code P09CS1, which will be valid until March 15th.
Hope to see you in Pasadena!
Monday, 2 March 2009
Fertile Environment For Net/Nets
As the market doldrums continue, hope springs eternal that we will hit a bottom. But, when? Investors continue to receive their daily doses of bad news, continue to see their portfolio balances diminish, and continue to lose hope; all of which is a self fulfilling prophecy of sorts, driving the markets even lower.
The new administration is not helping matters. The hope and optimism we were bombarded with during the campaign has given way to fear, uncertainty, dire predictions if certain legislation is not passed, and an almost complete lack of confidence among consumers and investors alike. There has been no bounce; the S&P 500 is down 30% since election day, and 12% since inauguration day. With all the big spending plans, Mr. Market is signaling fear that the new agenda will not have a positive outcome. Without confidence, without hope that the recession will end and that there are better days ahead, we'll continue to be whipsawed.
Meanwhile, the list of companies trading below their net current asset value continues to rise to levels we have not seen since the tech bubble burst. As of last count there were:
433 companies with market caps greater than $5 million trading below their NCAV, including:
58 above $100 million
24 above $200 million
The difference between what we are seeing now and post tech bubble, is that today's net/nets are of much higher quality then what we saw in the early 2000's. There are dozens of profitable companies, many are loaded with cash on a relative basis, and more than we've ever seen trading below 2/3 of NCAV. In the coming weeks, we'll reveal some of the more interesting names in various categories, starting with:
Top 5 Profitable Net/Nets by market Cap
Tech Data
Ticker: TECD
P/E: 7
Market Cap: $816
NCAV: $1.415 billion
Mkt Cap/NCAV: .58
Price: $16.29
Cash/Share: $7.7
Signet Jewelers
Ticker: SIG
P/E: 4
Market Cap: $641
NCAV: $977
Mkt Cap/NCAV: .66
Price: $7.51
Cash/Share: $.4
OM Group
Ticker: OM
P/E: 3
Market Cap: $450
NCAV: $492
Mkt Cap/NCAV: .91
Price: $14.78
Cash/Share: $8.11
K-Swiss Inc
Ticker: KSWS
P/E: 10
Market Cap: $335
NCAV: $353
Mkt Cap/NCAV: .93
Price: $9.57
Cash/Share: $8.4
Skechers
Ticker: SKX
P/E: 5
Market Cap: $277
NCAV: $303
Mkt Cap/NCAV: .91
Price: $5.98
Cash/Share: $2.5
*The author does not have positions in any of the companies mentioned. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. The author will not trade any of the securities mentioned (buy, sell, short) for at least two weeks
following the date of this post.
The new administration is not helping matters. The hope and optimism we were bombarded with during the campaign has given way to fear, uncertainty, dire predictions if certain legislation is not passed, and an almost complete lack of confidence among consumers and investors alike. There has been no bounce; the S&P 500 is down 30% since election day, and 12% since inauguration day. With all the big spending plans, Mr. Market is signaling fear that the new agenda will not have a positive outcome. Without confidence, without hope that the recession will end and that there are better days ahead, we'll continue to be whipsawed.
Meanwhile, the list of companies trading below their net current asset value continues to rise to levels we have not seen since the tech bubble burst. As of last count there were:
433 companies with market caps greater than $5 million trading below their NCAV, including:
58 above $100 million
24 above $200 million
The difference between what we are seeing now and post tech bubble, is that today's net/nets are of much higher quality then what we saw in the early 2000's. There are dozens of profitable companies, many are loaded with cash on a relative basis, and more than we've ever seen trading below 2/3 of NCAV. In the coming weeks, we'll reveal some of the more interesting names in various categories, starting with:
Top 5 Profitable Net/Nets by market Cap
Tech Data
Ticker: TECD
P/E: 7
Market Cap: $816
NCAV: $1.415 billion
Mkt Cap/NCAV: .58
Price: $16.29
Cash/Share: $7.7
Signet Jewelers
Ticker: SIG
P/E: 4
Market Cap: $641
NCAV: $977
Mkt Cap/NCAV: .66
Price: $7.51
Cash/Share: $.4
OM Group
Ticker: OM
P/E: 3
Market Cap: $450
NCAV: $492
Mkt Cap/NCAV: .91
Price: $14.78
Cash/Share: $8.11
K-Swiss Inc
Ticker: KSWS
P/E: 10
Market Cap: $335
NCAV: $353
Mkt Cap/NCAV: .93
Price: $9.57
Cash/Share: $8.4
Skechers
Ticker: SKX
P/E: 5
Market Cap: $277
NCAV: $303
Mkt Cap/NCAV: .91
Price: $5.98
Cash/Share: $2.5
*The author does not have positions in any of the companies mentioned. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. The author will not trade any of the securities mentioned (buy, sell, short) for at least two weeks
following the date of this post.
Friday, 13 February 2009
Cheap Stocks 21 Net/Net Index Completes First Year
Last year at this time, we rolled out what we believed to be the first index comprised of companies trading below their net current asset value. It was an experiment to test the notion that "passive" management of net/nets could generate above-market returns.
The CS21 Net/Net Index was down about 36% in its first year, versus -40% for the Russell Microcap Index. Hardly proves our theory about the relevance of applying a scatter gun approach to net/net investing, but we'll continue to let this index run as is rather than rebalancing, in order to judge the results over a longer time horizon.
Just two of the 21 companies in the index were in positive territory during the period, as The Finish Line rose about 80%, and Anadys Pharmaceuticals was up 280%. During the year, one company, Renovis, was acquired, and we decided not to replace it in the index.
We still plan on rolling out an additional net/net index in the near future, and are finding the quality of names much better now than those available at this time last year.
For more on the CS21 Net/Net Index, below is the original post we ran at this time last year.
February 15th 2008
Introducing the Cheap Stocks 21 Net/Net Index: The First Index of Companies Trading Below Net Current Asset Value
We’ve designed what we believe to be the first index of companies trading below their net current asset value. The main purpose of this index will be to track a passive portfolio of net/nets. This index is chock full of small companies many of which have been beaten down, and some of which may not survive. We’ve developed this index primarily as an attempt to gauge net/net performance using a basket approach.
The Cheap Stocks 21 Net/Net Index is a market cap weighted index comprised of companies that met the following criteria at index inception on Tuesday, February 12th, 2008:
•Market Cap is below net current asset value, defined as:
Current Assets – Current Liabilities – all other long term liabilities (including preferred stock, and minority interest where applicable)
•Stock Price above $1.00 per share
•Companies have an operating business; acquisition companies were excluded
•Minimum average 100 day volume of at least 5000 shares (light we know, but welcome to the wonderful world of net/nets)
*Index constituents were selected by market cap. The index is comprised of the “largest” companies meeting the above criteria.
The Index is naïve in construction in that:
•It will be rebalanced annually, and companies no longer meeting the net/net criteria will remain in the index until annual rebalancing.
•Only bankruptcies, de-listings, or acquisitions will result in replacement
•Does not discriminate by industry weighting—some industries may have heavy weights.
Cheap Stocks 21 Net/Net Index Constituents and Weights (%, rounded):
Adaptec Inc(ADPT)18.72%
Computer Systems
Audiovox Corp(VOXX)12.20%
Electronics
Trans World Entertainment(TWMC)7.58%
Retail-Music and Video
Finish Line Inc(FINL)6.30%
Retail-Apparel
Nu Horizons Electronics(NUHC)5.76%
Electronics Wholesale
Richardson Electronics(RELL)5.09%
Electronics Wholesale
Pomeroy IT Solutions(PMRY)4.61%
IT
Ditech Networks(DITC)4.31%
Communication Equip
Parlux Fragrances(PARL)3.92%
Personal Products
InFocus Corp(INFS)3.81%
Computer Peripherals
Renovis Inc(RNVS)3.80%
Biotech
Leadis Technology Inc(LDIS)3.47%
Semiconductor-Integrated Circuits
Replidyne Inc(RDYN)3.31%
Biotech
Tandy Brands Accessories Inc(TBAC)2.94%
Apparel, Footwear, Accessories
FSI International Inc(FSII)2.87%
Semiconductor Equip
Anadys Pharmaceuticals Inc(ANDS)2.49%
Biotech
MediciNova Inc(MNOV)2.33%
Biotech
Emerson Radio Corp(MSN)1.71%
Electronics
Handleman Co(HDL)1.66%
Music- Wholesale
Chromcraft Revington Inc(CRC)1.62%
Furniture
Charles & Colvard Ltd(CTHR)1.50%
Jewel Wholesale
The initial value of the Cheap Stocks Index was 100, as of the close on 2/11/08. Initially, we’ll report the index value on a weekly basis.
*The author does not have positions in any of the companies mentioned. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. The author will not trade any of the securities mentioned (buy, sell, short) for at least two weeks
following the date of this post.
The CS21 Net/Net Index was down about 36% in its first year, versus -40% for the Russell Microcap Index. Hardly proves our theory about the relevance of applying a scatter gun approach to net/net investing, but we'll continue to let this index run as is rather than rebalancing, in order to judge the results over a longer time horizon.
Just two of the 21 companies in the index were in positive territory during the period, as The Finish Line rose about 80%, and Anadys Pharmaceuticals was up 280%. During the year, one company, Renovis, was acquired, and we decided not to replace it in the index.
We still plan on rolling out an additional net/net index in the near future, and are finding the quality of names much better now than those available at this time last year.
For more on the CS21 Net/Net Index, below is the original post we ran at this time last year.
February 15th 2008
Introducing the Cheap Stocks 21 Net/Net Index: The First Index of Companies Trading Below Net Current Asset Value
We’ve designed what we believe to be the first index of companies trading below their net current asset value. The main purpose of this index will be to track a passive portfolio of net/nets. This index is chock full of small companies many of which have been beaten down, and some of which may not survive. We’ve developed this index primarily as an attempt to gauge net/net performance using a basket approach.
The Cheap Stocks 21 Net/Net Index is a market cap weighted index comprised of companies that met the following criteria at index inception on Tuesday, February 12th, 2008:
•Market Cap is below net current asset value, defined as:
Current Assets – Current Liabilities – all other long term liabilities (including preferred stock, and minority interest where applicable)
•Stock Price above $1.00 per share
•Companies have an operating business; acquisition companies were excluded
•Minimum average 100 day volume of at least 5000 shares (light we know, but welcome to the wonderful world of net/nets)
*Index constituents were selected by market cap. The index is comprised of the “largest” companies meeting the above criteria.
The Index is naïve in construction in that:
•It will be rebalanced annually, and companies no longer meeting the net/net criteria will remain in the index until annual rebalancing.
•Only bankruptcies, de-listings, or acquisitions will result in replacement
•Does not discriminate by industry weighting—some industries may have heavy weights.
Cheap Stocks 21 Net/Net Index Constituents and Weights (%, rounded):
Adaptec Inc(ADPT)18.72%
Computer Systems
Audiovox Corp(VOXX)12.20%
Electronics
Trans World Entertainment(TWMC)7.58%
Retail-Music and Video
Finish Line Inc(FINL)6.30%
Retail-Apparel
Nu Horizons Electronics(NUHC)5.76%
Electronics Wholesale
Richardson Electronics(RELL)5.09%
Electronics Wholesale
Pomeroy IT Solutions(PMRY)4.61%
IT
Ditech Networks(DITC)4.31%
Communication Equip
Parlux Fragrances(PARL)3.92%
Personal Products
InFocus Corp(INFS)3.81%
Computer Peripherals
Renovis Inc(RNVS)3.80%
Biotech
Leadis Technology Inc(LDIS)3.47%
Semiconductor-Integrated Circuits
Replidyne Inc(RDYN)3.31%
Biotech
Tandy Brands Accessories Inc(TBAC)2.94%
Apparel, Footwear, Accessories
FSI International Inc(FSII)2.87%
Semiconductor Equip
Anadys Pharmaceuticals Inc(ANDS)2.49%
Biotech
MediciNova Inc(MNOV)2.33%
Biotech
Emerson Radio Corp(MSN)1.71%
Electronics
Handleman Co(HDL)1.66%
Music- Wholesale
Chromcraft Revington Inc(CRC)1.62%
Furniture
Charles & Colvard Ltd(CTHR)1.50%
Jewel Wholesale
The initial value of the Cheap Stocks Index was 100, as of the close on 2/11/08. Initially, we’ll report the index value on a weekly basis.
*The author does not have positions in any of the companies mentioned. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. The author will not trade any of the securities mentioned (buy, sell, short) for at least two weeks
following the date of this post.
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