Cheap Stocks 26 Net/Net Index Update

Three months since launch, the Cheap Stocks 26 Net/Net Index is plain and simple getting the stuffing knocked out of it.  We are not all that surprised at this point.  The Russell Microcap Index is up 7.3% since the inception of CS26, while the Index itself is up about 2.1%.  We expect a roller coster ride with this index over the next couple of years, and believe that a 2 year timeframe is the minimum time period for proper evaluation of indexing net/nets. 

So far, much has happened to the constituents of CS26.  BigBand Networks was acquired, which resulted in a 65% gain.  Rather than replace BigBand, the proceeds now sit in cash. 

In November, Trimeris (TRMS) merged with Synageva BioPharma Corp (GEVA), and that company replaces Trimeris in the Index.

The winners to date include ModusLink (MLNK, +35.8%), Synageva (Trimeris-GEVA, +116%), and RCM Technologies (RCMT, +21%).  The losers include Advanced Battery Technologies (ABAT, -73%), Opnext (OPXT, -37%) and Volt Information (VOLT, -24%)

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.

JG Boswell Fundamentals Update- 2011

Thanks to the addition of the most recently available year-end data, we've now strung together nine years worth of fundamentals for JG Boswell. 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)
9 Year Averages Based on Annual Data:
P/E: 26
Price/Sales: 1.58
Price/Book Value: 1.41
Net Profit Margin: 7.87%
EV/EBITDA: 9.51
Dividend Yield: 2.29%
Market Cap: $616 million
Enterprise Value: $718 million

Current Data (2011 Annual)
Price: $714 (10/26 close)
EPS (Fully Diluted): $48.05
P/E: 14.9
Price/Sales: 1.62
Price/Book Value: 1.32
Net Margin: 10.9%
EV/EBITDA: 7.47
Indicated Dividend Yield: 2.24%
Current Market Cap: $713.1 million
Current Enterprise Value: $918.9million
Cash: $1.31 million

*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.

Cheap Stocks 26 Net/Net Index Update: Bigband Networks to be Acquired

We've already had one name change, and a reverse split (Steel Excel, formerly ADPT) among the members of the CS 26 Net/Net Index, and now another name is being taken out.  Big Band Networks (BBND) is to be acquired by Arris for $2.24 per share.  Big Band is now the leading performer since inception for CS26, up 67%.  If and when the deal is completed, for the purposes of the index, proceeds from the sale will be put in cash.

Its only been one month since we launched CS 26, and given past experience, there will likely be more acquisitions, perhaps a bankruptcy, and other surprises during the two year period we'll be traking this index.

So it goes in Net/Net land.

*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.

Cheap Stocks 26 Net/Net Index Update and Crates

There's been one change in the Cheap Stocks 26 Net/Net Index since we rolled it out on September 13th.  Adaptec has undergone a 1 for 10 reverse split, and changed it's name to Steel Excel Inc (ADPTD).  There will no doubt be more changes on the way; at least that was our experience with the CS21 Net/Net Index.

Four weeks in, CS26 is down 2.59%, while the Russell Microcap Index, the benchmark we are using, is up 1.89%.  The biggest gainer so far is Trimeris (TRMS), which is up 41%, while the biggest loser, Opnext (OPXT) is down 23.4%.  Stay tuned.

Crates??

You may have noticed the reference to "Crates" in today's title, as well as the ad for Overhead Crates that was added to the site this morning.  This is a complete departure for us, but we wanted to recognize this amazingly simple innovation.  This is an unpaid, unsolicted ad, and we have no financial ties to the company that has created this product.  Nonetheless, we felt compelled to bring the company, and it's product to our subscribers attention.

Overhead Crates has designed a simple product that takes advantage of space available in many basements, that most people don't realize could be utilized as storage space.  We've installed the product ourselves, and found it to be brilliant!  A very simple installation!  Check out the site for yourself.

*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.

Interview on Moneyshow.com

Kate Stalter of Moneyshow.com recently interviewed me for a piece that was released today regarding net/nets.

Portfolio Metrics for The Cheap Stocks 26 Net/Net Index

Thanks for all of the e-mails that we've received regarding the new index. Some have questioned the inclusion of certain companies in the Index, based on one issue or another. The truth is, net/nets often have fleas. Perhaps there are corporate governance issues, the operating business is broken, or there is simply great skepticism as to whether a company is a going concern. Sometimes the companies are simply too small to generate any interest, and a decent name may have fallen through the cracks. Make no mistake, we fully expect that there will be bankruptcies by the time the our two year time frame has passed. There will probably be companies that will be acquired; and a few whose stock price will skyrocket relative to their current price. We experienced all of the above with the CS 21 Net/Net Index; this is simply another experiment in Net/Net Indexing.

Cheap Stocks 26 Net/Net Index Portfolio Metrics at inception (9/13/2011)

Total Market Cap:$6.297 billion

Average Market Cap:$242 million

Total Cash and ST Investments:$3.944 billion

Price to Book Ratio:.63

Price to Net Current Assets Value (NCAV):.84

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

Introducing The New Cheap Stocks 26 Net/Net Index

Back in February of 2008, we launched the Cheap Stocks 21 Net/Net Index, an experiment in net/net indexing. This was not a particularly good time for net/nets; the quality of those available was quite low. What better time, we thought, to truly stress test the concept. The results after two years, while not as compelling as we'd hoped, were still quite good. The CS 21 Net/Net Index, a rag-tag bunch of troubled companies outperformed the S&P 500 by 2537 basis points, and the more appropriate benchmark The Russell Microcap Index by 1537 basis points, returning 5.1% during the two year period.



In the past year or so, the ranks of net/nets have been extremely thin. Our readers have wondered where we've been, with so few postings in recent months, but the truth is, there simply has not been much to write about in net/net land. The recent market pullback, however, has helped to push a few more companies below net current asset value. While the number of net/nets is still a bit thin, we've decided to introduce a new net/net index.



Unlike our previous CS 21 Net/Net Index which was cap weighted, the New Cheap Stocks 26 Net/Net Index will be equal weighted. It is comprised of 26 companies with market caps in excess of $40 million that were trading below their net current asset value as of today's market close. There will be no rebalancing, no companies will be added or deleted, and we'll track the results over the next two years. We are keeping this very simple.



Here are the constituents of the CS 26 Net/Net Index:



Ingram Micro (IM)

ADPT Corp (ADPT)

Benchmark Electronics(BHE)

Imation Corp.(IMN)

RealNetworks, Inc.(RNWKD)

ModusLink Global Solutions(MLNK)

Tuesday Morning Corporation (TUES)

Maxygen, Inc.(MAXY)

Volt Information Sciences, Inc (VISI)

Axcelis Technologies, Inc. (ACLS)

Kimball International (KBALB)

Opnext, Inc. (OPXT)

Advanced Battery Technologies,(ABAT)

BigBand Networks, Inc. (BBND)

Myrexis, Inc.(MYRX)

Gencor Industries, Inc. (GENC)

Parlux Fragrances, Inc. (PARL)

Trans World Entertainment Corp (TWMC)

Heelys, Inc. (HLYS)

RCM Technologies, Inc. (RCMT)

Trimeris, Inc. (TRMS)

GTSI Corp. (GTSI)

Emerson Radio Corp (MSN)

Adams Golf, Inc. (ADGF)

Planar Systems, Inc. (PLNR)

Books-A-Million, Inc.(BAMM)



In true net/net fashion this is not a well diversified group of companies, and is very heavy on technology.



The beginning value for the Index will be 260.00, and we'll update the progress weekly.



Stay tuned for more on the index members, portfolio fundamental data, and more.



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