Discount to Value Investing Congress West

Our friends at the Value Investing Congress are once again extending Cheap Stocks readers a discount to attend May's conference (May 3rd and 4th) in Pasadena. The current offer will expire on February 17th. To learn more, please click on the ad to the left of this post. Hope to see you in Pasadena!

Where are All the Net/Nets Part II

We've received several subscriber inquiries regarding the othernet/nets, those with market caps above $50 million, that we referenced last week. The pickings are slim, but here the are:

Myrexix Inc
Ticker: MYRX
Price: $4.21
Market Cap:$106
NCAV: $121.5
Mkt Cap/NCAV: .87
Cash & ST Invest: $124.8
P/E:NA

HQ Sustainable Maritime Ind
Ticker: HQS
Price: $4.75
Market Cap:$85
NCAV: $111
Mkt Cap/NCAV: .77
Cash & ST Invest: $64.5
P/E:7

Insmed Inc
Ticker: INSM
Price: $.65
Market Cap:$84.5
NCAV: $123
Mkt Cap/NCAV: .69
Cash & ST Invest: $124.3
P/E:50

Parlux Fragrances
Ticker: PARL
Price: $3.44
Market Cap:$70.5
NCAV: $91
Mkt Cap/NCAV: .78
Cash & ST Invest: $14.2
P/E:NA

Gencor Industries
Ticker: GENC
Price: $7.36
Market Cap:$70
NCAV: $76.3
Mkt Cap/NCAV: .78
Cash & ST Invest: $256.8
P/E:24

Trans World Entertainment
Ticker: TWMC
Price: $1.74
Market Cap:$55
NCAV: $114
Mkt Cap/NCAV: .48
Cash & ST Invest: $6.1
P/E:NA

Integrated Electrical Services
Ticker: IESC
Price: $3.64
Market Cap:$54
NCAV: $66
Mkt Cap/NCAV: .82
Cash & ST Invest: $32.9
P/E:NA

Duckwall Alco
Ticker: DUCK
Price: $13.87
Market Cap:$53
NCAV: $63
Mkt Cap/NCAV: .85
Cash & ST Invest: $5.4
P/E:NA

Not to sound like a broken record, but this is among the shortest list of net/nets with market caps above $50 million that we've seen in the dozen or so years we've been researching net/nets.

The author has no position in 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.

Last Call For JG Boswel Fundamentals Spreadsheet

We've decided to offer this spreadsheet, which includes the past 8 years of as-reported fundamental data taken directly from the annual reports, until February 1st only. Data includes the most recent fiscal year end.

If you are interested in obtaining this, please contact us at:cheapstocks@verizon.net for pricing.

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

Where Are All The Net/Nets? Ben Graham asked the Same Question in 1968

At this writing, we've never seen so few net/nets at any point in the decade plus that we've been studying and researching them. In fact, we currently count a total of 12 with market caps in excess of $50 million. Unfortunately (or fortunately, depending on your perspective) a rising market tide tends to lift all boats, including net/nets. We've also seen a growing population of websites covering net/nets since we started this site in 2002, which may also partially explain the lack of opportunity; there are simply more investors that have caught on to this fascinating sub-culture.

Periods of low net/net opportunity are not uncommon; even Ben Graham wriote about one such period that occurred in 1968 in the 1973 edition of Intelligent Investor. Ben wrote:

But the picture changed in the 1970 decline, and at the low prices of that year a goodly number of common stocks could have been bought at below their working capital value.

In our experience, it's more than likely that the univerese of net/nets will only grow if there is a significant market pullback. I'm not wishing that on anyone, but will continue to look for opportunity in the current crop of net/nets. Having some dry powder available is not a bad idea.

Top 5 Net/Nets by Market Cap

Imation Corp
Ticker: IMN
Price: $10.59
Market Cap:$408
NCAV: $412
Mkt Cap/NCAV: .99
Cash & ST Invest: $256.8
P/E:NA

ADPT Corp
Ticker: ADPT
Price: $2.88
Market Cap: $317
NCAV: $368.6
Mkt Cap/NCAV:.86
Cash & ST Invest: $365.8
P/E: NA

Volt Information Sciences
Ticker: VOL
Price: $8.92
Market Cap: $186
NCAV: $199
Mkt Cap/NCAV: .93
Cash & ST Invest: $145.6
P/E: 4

Audiovox
Ticker: VOXX
Price: $7.91
Market Cap: $184
NCAV: $212
Mkt Cap/NCAV:.87
Cash & ST Invest: $73.1
P/E: 9

Maxygen
Ticker: MAXY
Price: $4.04
Market Cap: $121
NCAV: $142.5
NCAV/Mkt Cap: .85
Cash & ST Invest: $152.4
P/E: NA

The author has no position in 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.

JG Boswell Fundamentals

Thanks to the addition of the most recently available data, we've now reviewed 8 years of data, crunched a lot of numbers for JG Boswell, and have been able to string together eight years worth of fundamentals. Due to the complexity, and growing size of our spreadsheet, we've decided to share just some of the data that will put BWEL's current valuation in perspective.

JG Boswell (BWEL)
8 Year Averages Based on Annual Data:
P/E: 27.3
Price/Sales: 1.56
Price/Book Value: 1.41
Net Profit Margin: 7.49%
EV/EBITDA: 9.71
Dividend Yield: 2.31%
Market Cap: $596 million
Enterprise Value: $718 million

Current Data (2010 Annual)

Price: $699 (11/30 close)
P/E: 22.5
Price/Sales: 1.72
Price/Book Value: 1.48
Net Margin: 7.7%
EV/EBITDA: 10.06
Dividend Yield: 2.0%
Current Market Cap: $692.7 million
Current Enterprise Value: $857 million

We now have compiled 8 years of JG Boswell as-reported fundamental data (balance sheet, Cash Flow, Income Statements, Summary Valuation Data and ratios) in an excel spreadsheet. If you are interested in obtaining this, please contact us at:cheapstocks@verizon.net for pricing.

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

Lazare Kaplan Lives; Still No Balance Sheet, Though

No sooner did we part ways (for the second time) with LKII than the company announced a settlement agreement with ABN AMRO Bank and the Royal Bank of Scotland, which, as we understand it, resulted in $64 million in obligations being deemed "satisfied in full". ABN also agreed to transfer 2,151,103 shares of outstanding LKII stock, more than 25% of outstanding shares, back to the company. Lazare Kaplan forked over $14 million in cash to ABN and RBS as part of the settlement.

Shares jumped on the news, and now "trade" in the $1.41 range. With such a small float, trading volume is extremely light, and the bid ask spread very wide; $1.30/$1.75 at this writing.

Certainly sounds like some positive developments for Lazare, which has suffered in the aftermath of some missing inventory (diamonds), but we still don't know what shape the company is in, and have not seen a balance sheet in ages. We also don't know that status of the company's $640 million lawsuit with it's insurers.

This could get interesting, but there are still many unknowns.

Stay tuned.

*The author has no position in 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.

Parting Ways with Lazare Kaplan (LKII)

One of the great frustrations with the companies that end up in net/net land, is that you never know what might happen. This comes with the territory. In the case of diamond company Lazare Kaplan, "lost diamonds" led to a 10 month period where shares did not trade. The company was not talking, either. Shareholders were left in limbo with very little information, and no financial statements. The company was suspended from trading, but ultimately listed on the pink sheets, and began "trading" again in July.

We'd all but given up on Lazare; this was the second time we owned it, and thankfully our cost basis this time was $1.18.

But more details of the company's troubles began to emerge over the summer. We've seen some speculation by others that the company's $640 million lawsuit against its insurers, who are refusing to pay claims over the missing diamonds, may end up handsomely rewarding shareholders. We, however, have decided that the risk-reward is not in our favor in this case, and have closed our position.

While a lawsuit victory would be a huge windfall to the company, we believe that the fundamentals continue to deteriorate. The company's most recent 8K suggested that Q1 revenue will be about $33.2 million, down from $74.2 million last year. Meanwhile, we don't know what shape the balance sheet is currently in; it's been ages since we've seen one. In any event, we would rather walk away with $.80 or $.90 per share of our original $1.18 investment than take the chance of total loss.

*The author has no position in 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.