2/10/2010

Book value and Real Estate Plays

LUB: Luby's Inc

LUB provide quick service and casual dining. I read although cant verify that Luby’s has more repeat customers than other casual dining chains, so Lubys has customer loyalty that goes for many repeat visits. The company owns 94 restaurants on owned land, as well as an additional 24 restaurants on long-term ground leases.

The stock is near its 52 week low and down %31. over the past 3 years.

I’ve been adding a small amount of shares over the past few weeks with a longer term view to a highly diversified portfolio.

Additional investing data

ARDNA: Arden Group

ARDNA owns 2 free standing supermarket properties and a shopping center located in Calabasas, southern California. The price recorded on the books drastically understates the fair value. But the story for this closely held grocery store operation is the tremendous ROIC over many years.

I’ve been adding shares recently with a longer term view to a highly diversified portfolio.

Additional investing data

RLH: Red Lion Hotels Corporation

RLH is trading at half its book value but the market has moved the stock higher. The one year return is about 165% but the 3 year return is negative -21%.

Additional investing data

Non of these ideas are recomendations

4 comments:

Robert Pio Molloy said...

If you're into microcaps, you could consider the Dewey Electronics Corporation (DEWY.OB). They're a medicore electronics group that happen to have a 90 acre plot of land in New Jersey which is worth what the current market cap alone. The only problem is that you might be waiting a decade to see value realised.

Another company that looks promising in terms of real estate is Avalon Holdings (AWX). Company is quite shareholder unfriendly, has a poor history of capital allocation and a bad operating business. Is it so bad that it should trade at 1/4 book value though?

ShadowStock said...

Hi Robert

DEWY.OB is a Paul Sonkin holding and Jeff Moore wrote a great piece on DEWY.OB at Seeking Alpha.

http://seekingalpha.com/article/152364-hard-to-monetize-dewey-electronics-value

I completely agree with your assessment AWX. They are horrible capital allocators and the dual class of stock ownership makes the stock difficult to hold. But at a 2.27 price with a book value of 10.27 the idea seems reasonable but not great imo.

Check out KEWL.PK another Sonkin stock that is sitting on great real estate holdings.

Post from yahoo message board.
“155000 acres of prime hard wood timber land in the UP of Michigan and some land adjacent to towns such as Ironwood. They also own the mineral rights to about 400000 acres in the UP. On a per share basis that is 1/4 of an acre of hard wood timber for each share of stock. How much is quality timber land worth in the UP???? $1,000/acre at a minimum may be $1500. That means that the underlying land value of the stock is at least $250 to 300 per share. They also have cash and securities listed. The stock trades for $160-170. Sounds cheap to me.”

But when if ever will the value ever be realized?

Robert Pio Molloy said...

Paul Sonkin talks about KEWL in an article in Value Investing Insight - http://valuehunter.files.wordpress.com/2010/01/vii_sonkin_v2.pdf Like you said though, how long will you be waiting for value to be recognised?

I think there are better investment opportunities in stocks which have been showing improving sales over the previous quarters. Look at RLOG for example, it was clear that this quarter was going to be an excellent one from the pre-earnings investor report, but yet the stock price remained low despite this very strong indication.

If you look at companies such as VFIL, SODI, ITEX, SOPK and LAWE you'll see they already trading at a low P/E on very depressed earnings. This is a handicappers dream because to lose money on these stocks at current prices you need earnings to fall by quite a bit. If similar stocks are an indicator though, earnings are far more likely to be positive in the coming quarter and may even be excellent (see TCCO.OB!). The downside is clearly limited, but the upside should be decent, with the possibility of being explosive.

ShadowStock said...

Useful and important comments!

That was a very smart move on RLOG recognizing the market never recognized the optimistic pre-earnings report. I’ve been buying plenty of RLOG over the past year around 3 and under. Wish I added even more after the report but I guess my position was large enough. I feel lucky with the current move to $4.46. My concern with RLOG was the Canadian debt and the weak us dollar.

I agree KEWL is more value trap but I’m a sucker for a tiny position with these arcane pink sheet ideas. Like super illiquid RAFI.PK at ~3 or less even though management does not want public shareholders.

ITEX,own this stock for some time with a nice position. SODI, made money in the past and have no position now. TCCO, owned this stock in 07 and made out very well just wish I never sold.

Thanks
John