Cheap Stocks 26 Net/Net Update- Parlux Merger

The Parlux merger with Perfumania, which was completed last week, represents the third major transaction involving a CS26 Net/Net Index member since September's inception.  Parlux shareholders had the option of receiving .5333 shares of Perfumania per Parlux share, or $4 in cash and .2 Perfumania shares. We assumed the latter in the calculation of the Index

Previous transactions for CS 26 companies included the acquisition of BigBand Networks, and Trimeris-Synageva Merger.  Since inception The Cheap Stocks 26 Net/Net Index is up 25.6% versus 21% for the Russell Microcap Index.

Adams Golf Acquired

Well, that sure didn't take long!  Adams Golf (ADGF) became the second member of the Cheap Stocks 26 Net/Net Index to be acquired.  Last week, Adidas' TaylorMade unit bought the golf club maker for $70 million, or $10.80 per share.  That puts ADGF shares up 97% since the inception of the CS26 Net/Net Index.  The indexes allocation to ADGF will remain in cash once the deal has been completed.

*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.

Adams Golf (ADGO) On Fire

Cheap Stocks 26 Net/Net Index component Adams Golf (ADGO) has had quite a run lately.  It is the second best performer in our net/net index, and is up nearly 70% since index inception (9/13/2011).

There's been some activist activity in the name recently, which has no doubt been helping to move the stock higher.  When CS 26 was launched back in September, ADGF was a $42 million market cap company trading at .99 times net current asset value (NCAV); it now has a $72 million market capn and trades at 1.68 times NCAV.

Adams Golf (ADGO)
Price: $9.21
Market Cap: $71.9 million
NCAV: $42.8 million
Price/NCAV: 1.68
PE: 13.5
Cash/Share: $1.45
Total Debt: 0
Tangible Book Value/share: $7.16

Yesterday, CEO Chip Brewer, who has been with Adams for 13 years, resigned.  Taking the reigns on an interim basis will be company founder, and Chairman of the Board Barney Adams. Today, the company is scheduled to report fourth quarter earnings.  Certainly an interesting week for Adams Golf
*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 Named to Top 22 Investment Blog List

We were honored to be included in Vuru's list of the best investment blogs. Click here to see the list and associated commentary.

Cheap Stocks 26 Net/Net Index Update- Up 18.6% since inception

Net/net investors are typically not accustomed to instant gratification.  But we are seeing some good early results with the CS 26 Net/Net Index, which is up 18.6% since inception (9/13/2011).  The true test is not the short-term, but a period of at least two years. 

Furthermore, the overall direction of the markets has been higher since we rolled out the Index, and the benchmark Russell Microcap Value Index is up a solid 14.5% during the same timeframe.

We need to see a period of market stress to truly re-test our net/net index approach.  It's way too early to declare this approach a success.  Our previous net/net index experiment, the Cheap Stocks 21 Net/Net Index, which  was cap weighted, and commenced in February 2008, performed fairly well.  The jury is still out on the current incarnation, which is equal-weighted. 

Top performers since inception have been  Synageva BioPharma (GEVA, +287%, formerly Trimeris), Parlux Fragrances (PARL, +67%), ModusLink (MLNK,+49%), and Adams Golf (ADGF, +40%).

Top detractors include Advanced Battery Technologies (ABAT, -66%), Opnext (OPXT, -33%), and Imation (IMN, -20%).


*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

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.