3/06/2011

Valuation Improvements … No Correlated Market Price Change

HH (Hooper Holmes) : Current Price .79

I first mentioned HH (Hooper Holmes) at .58 on Thursday, July 29, 2010 and subsequent times when there was positive insider activity.

http://shadowstock.blogspot.com/2010/07/micro-cap-value-turn-around-candidate.html

http://shadowstock.blogspot.com/search?q=hh

The worst appears to be behind after years of just poor operational performance. New management over the past year coupled with a strong balance sheet, improved valuation, modest positive insider activity, reputable value institutions holding and some increasing positions , valuable real estate on the books substantially below market value all contribute to my interest.

Morningstar Business description

“Hooper Holmes provides services to the insurance industry. Its Health Information Division performs examinations in offices across the country to help life insurers decide the risk involved in underwriting specific policies. The Claims Evaluations Divisions gives claims management services in the medical, auto life and workers compensation insurance sectors.”

Hooper Holmes, Inc. was founded in 1906 and is headquartered in Basking Ridge, New Jersey

Debt pay down;

Debt was reduced by 57% from 2005

2005 liabilities = 35,810,000

TTM liabilities = 15,276,000

Cash increase;

36.77% increase in cash from a 2005 12.06 million balance to the TTM of 16.495 million

Price and EV change from 2005 to the TTM

The price was 2.55 (12/30/2005) or 167,059,300 million. The stock closed Friday (03/04/11) at .79 or 55,233,754 representing a 66% drop in market value. The enterprise value saw a 73% drop in from year end 2005 (2.91 per share/190,803,300 million) to the TTM (.77 per share/54,014,754 million).

The valuation improvements resulting from the cash buildup, debt reduction offset by a modest share count increase improved several ratios.

46% improvement in the EV/Revenue ratio for the period covering 2005 to the TTM


2005: EV/Revenue = .5956

TTM: EV/Revenue = .3216

The company owns the following real estate purchased at least before 1995 recorded on the books at the original cost. The real estate includes a five building complex located at 170 Mt. Airy Road, Basking Ridge, New Jersey approximately 45 miles southwest of New York City.


There is a reasonable strong margin of safety and management expects to continue with recent profitable results.

Long HH


BLD (Highly leveraged quickly paying down debt) Long position Current price $1.50


Supertex Inc. SUPX


Price 22.49 EV = 15.63

Recently two institutions have downgraded SUPX. This negative press causing the price to decline may be an opportunity. The strong balance sheet allows interested investor to wait for an improved sentiment.


The 52 week change was -13%. EV/revenue is historically low @ 2.45. YOY quarterly revenue growth was 17.60% SGA/Revenue = .1698; EV/OI = 7.01%

Cash per share = 10.62; short % float = 5.20%

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