Notes From The 4th Annual Value Investing Congress West

Over the next couple of days, I'll be posting notes from the Value Investing Congress, which I attended last week in Pasadena. Once again, this was a fantastic conference. I walked away from it with some very interesting investment ideas, as well as cautions about the days ahead. One of the greatest aspects of the VIC is the opportunity to meet other investors and portfolio managers, and to share ideas, perspectives and philosophies. Thanks to Congress founders John Schwartz and Whitney Tilson for once again putting on a first class event.

Fourth Annual Value Investing Congress West Day 1: Part I
David Nierenberg, D3 Family Funds
Not Dead Yet: Surviving Today to Triumph Tomorrow

David Nierenberg, who also appeared at the New York VIC back in October, led off the first day of the Congress. Interestingly enough, today we learned what D3 stands for: David’s Dirty Dogs. Nierenberg is a long-term investor, with an average holding period of 7 years, in the microcap space.

• Takes large stakes, average 10-15%
• Concentrated portfolio of 10 to 12 names
• Average market cap $300 million
• Seeks multiples, not percentages in terms of returns
• Works constructively with management and boards in order to improve companies
• Believes uncertainty does not equal risk of loss
• Looks out longer than the Street is willing to
• Believes leverage is lethal, and generally, will not use

Nierenberg’s presented his top holding, Move Inc (MOVE), in which D3 is the largest shareholder with an 18.4% position. Move Inc operates in the online media space, and owns Realtor.com, and Nierenberg believes that it will be a beneficiary of the decline in the newspaper industry, and a shift to more real estate internet advertising:

• Leading market share in their niche
• New CEO Steve Berkowitz, an industry veteran, who oversaw the buyout of Ask Jeeves, at more than 30 times the price from when he assumed leadership
• Relationship with NATIONAL Association of Realtors
• Recovering from years of bad management, fraud, and a history of losses
• Currently trading at TK, EV of $195 million
• Cash/Short term investments TK million, no LT debt
• Poised to be beneficiary of internet real estate advertising/bottoming housing market
• Company recently filed 13D asking management to reduce share count by 100 million shares
• Has a long-term price target range of $5.80-$14.50
Nierenberg also discussed Move at the last Congress. At the time shares were trading for $1.60, and are up 41% since.

Igor Lotsvin and David Chu- Soma Asset Management
Banks: Have We Seen the Worst Yet?

Newcomers to the Congress, Lotsvin and Chu launched their firm in December 2007, and had strong returns in their first full year (+26.1% net of fees). Their investment process is predicated on:
• Value bias
• Invest across the capital structure
• Long-term bias

Lotsvin painted an extremely sobering outlook for the banking system, credit and housing markets, suggesting that:
• Bank failures will accelerate, the worst of the banking crisis is yet to come
• Foreclosures will increase
• Commercial real estate is the next shoe to drop
• Construction loans will continue to go bad
• FDIC deposit insurance is running on empty ($16 billion left)

They presented the short case for Zion Bank, due to the following:
• Business in several bubble states (CA,NV,AZ)
• Credit deteriorating quickly
• Non-Performing assets grew 50% quarter/quarter
• Reserves are dropping
• Large degree of exposure to construction loans

*The author has a position in Move Inc. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.

Catalyst Investment Research highlights Chemed (CHE)

Hedge Fund Solutions, LLC's recently launched investment research product highlights companies that could potentially generate outsized returns due to an activist investor's involvement.

Click here to download a complimentary copy of our latest report, an analysis on Chemed Corp.

Annual Subscriptions (a minimum of 24 reports/year) are now available. Please message research@hedgerelations.com if you are interested in more information.

*The author does not have a position in CHE. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.

Catalyst Investment Research highlights Former Net/Net Tecumseh Products (TECUA,TECUB)

Hedge Fund Solutions, LLC recently launched an investment research product dedicated to uncovering undervalued publicly traded companies that could have the potential to generate outsized returns due to an activist investor's involvement.

Click here to download a complimentary copy of our latest report, an analysis on Tecumseh Products.

Annual Subscriptions (a minimum of 24 reports/year) are now available. Please message research@hedgerelations.com if you are interested in more information.

*The author has a position in TECUA. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.

Despite Recent Market "Run-up", Still plenty of Net/Nets

Markets have recently bounced nicely off their March lows, a situation which might typically create a "rising tide lifts all boats" effect. But while the Russell Microcap Index is up more than 30% from March 9th, there are still plenty of net/nets.

A recent, un-scrubbed screen revealed 325 companies with market caps greater than $5million trading below their net current asset value. While that's more than 100 fewer than the 433 we revealed in our March 2nd post, there's still plenty of opportunity in the land of the lost.

Here are the top 5 Net/Nets by market cap:

Ingram Micro
Ticker: IM
P/E: NA
Market Cap: $2.08 billion
NCAV: $2.247 billion
Mkt Cap/NCAV: .93
Price: $12.85
Cash/Share: $4.7

Skechers
Ticker: SKX
P/E: 6.5
Market Cap: $357 million
NCAV: $394 million
Mkt Cap/NCAV: .91
Price: $7.72
Cash/Share: $2.5

Adaptec
Ticker: ADPT
P/E: 49
Market Cap: $335
NCAV: $370
Mkt Cap/NCAV: .91
Price: $2.75
Cash/Share: $.8

Imation
Ticker: IMN
P/E: 7
Market Cap: $336
NCAV: $399
Mkt Cap/NCAV:.84
Price: $8.91
Cash/Share: $2.6

Facet Biotech
Ticker: FACT
P/E: NA
Market Cap: $240
NCAV: $315
Mkt Cap/NCAV: .76
Price: $9.75
Cash/Share: $16.6

*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.

Catalyst Investment Research- Consolidated Tomoka Land

Hedge Fund Solutions, LLC recently launched an investment research product dedicated to uncovering undervalued publicly traded companies that could have the potential to generate outsized returns due to an activist investor's involvement.

Click here to download a complimentary copy of our latest report, an analysis on Consolidated Tomoka Land.

Annual Subscriptions (a minimum of 24 reports/year) are now available. Please message research@hedgerelations.com if 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.

Rest In Peace, James G Boswell II

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.

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.