http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/24334
See the write up below
CLARUS CORP(CLRS) - $4.22 on Jan 6, 2010 by greenshoes93
I generally am not a fan of posting ideas that have been repeatedly written up, but I believe that given the current stock price, initial NOL expiry, acquisition related charge on last quarter's 10Q, and finished restructuring at PC Group, a deal is likely imminent for Clarus. Nevertheless, regardless of whether a deal is done in the next 6 months or two years, a high quality management team and discount to NAV make Clarus a great long in the current environment of overly valued equities and low interest rates.
Clarus is a trading at $4.22/share with $4.95/share in cash and NOLs worth $228mm (which I value at 10% or $1.30/share) for a total NAV of $6.25. The company is run by a high quality owner/manager, Warren Kanders (20% of common stock with over 1.1mm shares purchased in the market for between $4 and $6). The thesis here is very simple, Kanders has a history of successfully running quality businesses and if he can find a highly cash flow generating business and harness the NOLs, the stock should move to at least $6.25, value of PV of NOLs and net cash.
From 2002 proxy, Kanders' successes:
Armor: The price per share increased from $0.76 in January 1996, the date of our initial investment, to $26.80 on May 2, 2002.
Langer: The price per share increased from $1.52 in February 2001, the date of our initial investment, to $8.15 on May 2, 2002.
Benson: The price per share increased from $0.375 in January 1992, the date of our initial investment, to $10.25 in the summer of 1995 when I sold my interest.
Kanders sold Armor in 2007 for $88/share. Langer, on the other hand, wasn't nearly as successful as Armor or Benson. However, I would argue that given the massive restructuring in 2008 at Langer (now PC Group), Kanders now has more time to spend on Clarus. Without getting into all the details, PC Group massively restructured in 2008, selling its Langer UK business in January, Regal Medical Supply business in June, Bi-Op Laboratories business in July and Langer Orthotics business in October in order to strengthen its balance sheet, cut opex and re-focus on its Twincraft and Silipos businesses. The company is currently very small and management will now focus on growing core businesses rather than acquiring new businesses, which should allow Kanders more time to focus on Clarus. While one might argue that he's had all of 2009 to focus on acquisitions for Clarus, I'd say that through speaking with the company, those who know him and reading through many interviews with him and his colleagues, I've learned that he's a very patient investor and has been evaluating opportunities in 2009, but will only pull the trigger on an appropriate acquisition. Now that the restructuring at PC Group is complete, he has the time to focus on high quality investment opportunities for Clarus. While Kanders' spreading himself too thinly is a risk, I believe he is a smart capital allocator and if he can't find a proper acquisition, he would likely liquidate the stock for net cash. Alternatively, if he wasn't able to run the company post acquisition, he has had a history of finding high quality talent in the past and would likely appoint a CEO to run the business
Why has the stock dropped into the $4 range despite $4.95 in net cash?
As discussed in previous VIC writeups, it looked interesting in the $6-7 range, but over the last couple years certain investors, mainly Ashford Capital have been massively selling their stake in the company. Ashford owned close to 2mm shares in Q2 08 and steadily sold that down each quarter to a current 745k shares, a substantial supply given the 13.7mm share float. I can't speculate as to Ashford's impetus for selling, but many other smaller investors have also thrown in the towel given the delay in finding an acquisition. While I agree, it has taken awhile to potentially get a deal done, other than Kanders' potentially having more time to spend on Clarus, a couple more signs point to an imminent deal. Q3's 10-Q showed a $32k line item for acquisition related expenses. The company has never had such an expense in the past and it clearly points to legal / banking / auditing fees related to the diligence of a particular acquisition. Also, the first of the NOLs recently expired in Q4 09, thus it is in the company's best interests to acquire a target soon, rather than lose the tax shield. Nevertheless $200+ in NOLs does not expire until after 2020.
The main risk here is that Kanders squanders the cash by acquiring a low quality company and the market does not attribute cash + PV of NOLs to the company. Given Kanders' substantial ownership in the company and his history of being a smart operator, this risk seems to be mitigated.
Cash Burn
Clarus is currently burning cash on salaries and office space. While the company projected FCF neutrality last year, given low interest rates, the company has been burning some cash. In a worst case scenario, assuming interest rates do not rise and it takes two years for Kanders to decide he cannot find an acquisition and liquidates the company, cash distributed would be $4.69 ($4.95 minus $.13/yr in cash burn), thus an 11% return over two years (absolute worst case in my opinion).
For the reasons above, I think a deal gets done very soon, but if not, given the stock is trading at below net cash, Kanders has been buying in this range and Ashford Capital is close to selling the majority of their stake (seems like they are disciplined and aren't selling below $4-it's not that their fund is liquidating, but rather that they are focusing on other opportunities), there's a strong margin of safety to owning the stock. Moreover, with low borrowing costs, the opportunity cost to own the company is low, given the 50% upside, even if a deal isn't announced this year.
Catalyst:
Given a recent acquisition related charge in the 10-Q, recent expiry of NOLs and additional bandwidth for Kanders to evaluate an acquisition, a deal looks imminent.
2/20/2010
Direct Insider buys 02/15/10 - 02/19/10
Last week (02/15/10 -02/19/10) Insider buys for companies below 300 million in market capitalization.
Click to view results
Fundamental historical Data part 2 of 1
Fundamental historical Data part 2 of 2
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Fundamental historical Data part 2 of 1
Fundamental historical Data part 2 of 2
2/13/2010
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
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
SYMS: "Overlooked Retailer With Big Real Estate Ownership"
The Manual of ideas published the following today on Seeking Alpha
http://seekingalpha.com/article/187764-syms-overlooked-retailer-with-big-real-estate-ownership?source=hp_wc
The Manual of Ideas
Discount retailer Syms (SYMS) recently received a major insurance payout following the passing of founder and chairman Sy Syms. While the company remains controlled by the Syms family, positive changes may be expected over time as younger family members seek to extract value rather than sit on a stagnating asset. In the meantime, Syms’s opportunistic purchase of bankrupt Filene’s Basement enlarges the company’s share of the discount clothing market and positions the business to benefit from an upturn in consumer spending. The downside is protected by a strong balance sheet, with modest net cash and ownership of 1.9 million square feet of real estate associated with 21 stores. The value of the real estate alone may exceed the recent market value of the company, implying that the $500+ million retail business is essentially being given away. While no immediate catalyst to value realization is evident, we view the valuation discount as too large to ignore.
BUSINESS OVERVIEW
Syms operates retail stores offering discounted merchandise from designer labels for men, women and children. Syms opened the first store in 1959 and currently operates 53 stores, including 23 Filene’s stores acquired in 2009.
COMPANY-OWNED REAL ESTATE
Source: Company filings, The Manual of Ideas analysis.
INVESTMENT HIGHLIGHTS
Owns real estate associated with 21 of 30 Syms-branded retail stores, with retail space of 1.2 million sq. ft, warehouse/office space of 350k sq. ft (including 19 acres of land) and other space of 391k sq. ft. The PP&E is carried at $96 million but is likely worth substantially more. One owned store is located in NYC, while the others are generally near highways in places with at least one million people.
Won bankruptcy auction for Filene’s in 2009, adding 23 leased stores and $315 million revenue (based on November 2009 quarter-end annualized revenue). Syms paid $39 million in cash, and also acquired $21 million of inventory, $30 million of store fixtures, and the Filene’s brand. Syms recorded a related $10 million bargain gain.
Retail concept: Sell brand-name apparel for less. Brands carried by Syms include Burberry, Ralph Lauren, Calvin Klein, and Tommy Hilfiger. Filene’s stores also offer “off-price” branded apparel and are located in similar markets (mostly in Eastern U.S.).
Received $30 million of insurance proceeds in December related to death of chairman Sy Syms. CEO Marcy Syms (57) has become chairman.
Pro-forma net cash of $8 million as of November 28, 2009 (includes $30 million insurance windfall).
Shares trade at 0.6x tangible book value and 0.2x enterprise value to pro forma trailing revenue.
INVESTMENT RISKS & CONCERNS
Syms-branded same store sales fell 10% in June-November of 2009. Despite revenue pressure, "clean" EBIT was $1+ million in FQ3 on revenue of $135 million, including full Filene’s contribution.
Controlled by the founding Syms family, which owns 56% of the company. While the passing of Sy Syms may lead to changes down the road, CEO Marcy Syms, who draws a $600,000+ base salary, appears firmly in charge and set to continue.
Competes against discount stores, specialty apparel stores, department stores and factory outlet stores, with few sources of competitive advantage.
Low returns on capital. Although the purchase of Filene’s leased stores lowers incremental capital intensity, capital remains tied up in owned property.
MAJOR HOLDERS
Syms family 56 % | Other insiders <1% | Franklin 10% | DFA 8% | Kahn Brothers 3% | Barington 2% | MFP 1%
VARIANT VIEW
Syms appears to be covered by only one sell-side analyst who appears not to have adjusted his model to reflect the transformative Filene's deal, which closed last year. As a result of the lack of credible sell-side coverage and as a result of the company's small size, Syms may simply be overlooked by most investors. It would be easy at first glance to simply dismiss Syms as a sleepy retailer with corporate governance issues, without realizing that the company has huge real estate holdings relative to its market value.
We also believe that the recent passing of Syms founder Sy Syms may catalyze some changes that could benefit shareholder value over time. Of course, this is purely speculative at this point, but it wouldn't be the first time that the passing of a company founder leads to actions that allow his family members to monetize their equity stakes in the company.
Finally, the market does not appear to have digested Syms's opportunistic acquisition of certain assets of Filene's Basement as part of the latter's bankruptcy proceeding in 2009. Filene's is a strong brand in the off-price apparel retail segment, and Syms could benefit from the increased scale of operations. Syms's historical results do not yet show the anticipated contribution of Filene's Basement.
SELECTED OPERATING DATA
Source: Company filings, The Manual of Ideas analysis.
http://seekingalpha.com/article/187764-syms-overlooked-retailer-with-big-real-estate-ownership?source=hp_wc
The Manual of Ideas
Discount retailer Syms (SYMS) recently received a major insurance payout following the passing of founder and chairman Sy Syms. While the company remains controlled by the Syms family, positive changes may be expected over time as younger family members seek to extract value rather than sit on a stagnating asset. In the meantime, Syms’s opportunistic purchase of bankrupt Filene’s Basement enlarges the company’s share of the discount clothing market and positions the business to benefit from an upturn in consumer spending. The downside is protected by a strong balance sheet, with modest net cash and ownership of 1.9 million square feet of real estate associated with 21 stores. The value of the real estate alone may exceed the recent market value of the company, implying that the $500+ million retail business is essentially being given away. While no immediate catalyst to value realization is evident, we view the valuation discount as too large to ignore.
BUSINESS OVERVIEW
Syms operates retail stores offering discounted merchandise from designer labels for men, women and children. Syms opened the first store in 1959 and currently operates 53 stores, including 23 Filene’s stores acquired in 2009.
COMPANY-OWNED REAL ESTATE
Source: Company filings, The Manual of Ideas analysis.
INVESTMENT HIGHLIGHTS
Owns real estate associated with 21 of 30 Syms-branded retail stores, with retail space of 1.2 million sq. ft, warehouse/office space of 350k sq. ft (including 19 acres of land) and other space of 391k sq. ft. The PP&E is carried at $96 million but is likely worth substantially more. One owned store is located in NYC, while the others are generally near highways in places with at least one million people.
Won bankruptcy auction for Filene’s in 2009, adding 23 leased stores and $315 million revenue (based on November 2009 quarter-end annualized revenue). Syms paid $39 million in cash, and also acquired $21 million of inventory, $30 million of store fixtures, and the Filene’s brand. Syms recorded a related $10 million bargain gain.
Retail concept: Sell brand-name apparel for less. Brands carried by Syms include Burberry, Ralph Lauren, Calvin Klein, and Tommy Hilfiger. Filene’s stores also offer “off-price” branded apparel and are located in similar markets (mostly in Eastern U.S.).
Received $30 million of insurance proceeds in December related to death of chairman Sy Syms. CEO Marcy Syms (57) has become chairman.
Pro-forma net cash of $8 million as of November 28, 2009 (includes $30 million insurance windfall).
Shares trade at 0.6x tangible book value and 0.2x enterprise value to pro forma trailing revenue.
INVESTMENT RISKS & CONCERNS
Syms-branded same store sales fell 10% in June-November of 2009. Despite revenue pressure, "clean" EBIT was $1+ million in FQ3 on revenue of $135 million, including full Filene’s contribution.
Controlled by the founding Syms family, which owns 56% of the company. While the passing of Sy Syms may lead to changes down the road, CEO Marcy Syms, who draws a $600,000+ base salary, appears firmly in charge and set to continue.
Competes against discount stores, specialty apparel stores, department stores and factory outlet stores, with few sources of competitive advantage.
Low returns on capital. Although the purchase of Filene’s leased stores lowers incremental capital intensity, capital remains tied up in owned property.
MAJOR HOLDERS
Syms family 56 % | Other insiders <1% | Franklin 10% | DFA 8% | Kahn Brothers 3% | Barington 2% | MFP 1%
VARIANT VIEW
Syms appears to be covered by only one sell-side analyst who appears not to have adjusted his model to reflect the transformative Filene's deal, which closed last year. As a result of the lack of credible sell-side coverage and as a result of the company's small size, Syms may simply be overlooked by most investors. It would be easy at first glance to simply dismiss Syms as a sleepy retailer with corporate governance issues, without realizing that the company has huge real estate holdings relative to its market value.
We also believe that the recent passing of Syms founder Sy Syms may catalyze some changes that could benefit shareholder value over time. Of course, this is purely speculative at this point, but it wouldn't be the first time that the passing of a company founder leads to actions that allow his family members to monetize their equity stakes in the company.
Finally, the market does not appear to have digested Syms's opportunistic acquisition of certain assets of Filene's Basement as part of the latter's bankruptcy proceeding in 2009. Filene's is a strong brand in the off-price apparel retail segment, and Syms could benefit from the increased scale of operations. Syms's historical results do not yet show the anticipated contribution of Filene's Basement.
SELECTED OPERATING DATA
Source: Company filings, The Manual of Ideas analysis.
2/09/2010
Value Investors Club: LOV Sparks Networks
http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/21784
Nice post on value investors club on LOV (Sparks Networks)
Over the last three years the enterprise value for Spark has fallen just under 75% ($7 to $3.00, plus share ct was reduced from 34mn to 20mn). One would like guess the paid dating business is in decline and by looking at Spark's results that would appear to be the case. However, 90% of the loss in subscribers over the last three years has come from an intentional run off of a General Markets segment and a brand called AmericanSingles.com. While the rest of the business has declined modestly, the valuation has imploded (from buybacks/price decline). We believe the contraction in Spark's subscribers is nearly complete and the company should begin to start to show growth in 2010 which we believe could lead to the stock valued in the $6-7 range (10x our 2010 fcf estimate on ev basis). We believe there is a well defined niche for paid subscription based dating sites for serious daters such as Match.com, eHarmony, and Yahoo Personals. Paid online dating industry is a $1.2bn market with consistent +/-20% operating margins from what we can find. Over the last 4 years Spark has generated $45mn in free cash flow, repurchased $23mn and $20mn worth of stock in 2007 & 2008, with an EV of $55mn.
Why Spark is cheap:
a) Subscribers have fallen over the last 3 years from 230K to 165K (The vast majority has come from an intentional run off of General Markets -62K subscribers) b) investor frustration at the inability to isolate JDate's value which we believe is substantially higher than what is reflected in the share price (NY Times article rumored bids from Match/Yahoo/eHarmony of up to $9.25 for Spark in Jan 2008) c) tough micro cap market for underfollowed, no coverage, and non-promotional management teams d) repurchased 34% of the company at $4.05 then stopped (as it would push GHP over 50% and impair NOL's) e) built a "platform" for growth whereby revenue per emp is $250K vs. $700K Meetic, PeopleMedia $1.3mn, Udate.com $1mn, industry avg is about $1mn in revenue per empl. Spark is not quite an apples to apples comp as they own a small offline speed dating company). g) Over the last few years JDate was negatively impacted due to: cutting marketing 50%, +14% price hike, and the obvious recession in 2008/2009.
Why we like Spark:
Spark should become a growth story going forward. Yes you read that right. Subscribers in their big brands are starting to grow with Jewish +4% qtr/qtr, +2% for Other Affinity, while their smallest segment General Markets (6% of subs) which is in runoff was down -20% (last week the company announced merging Date.ca and AmericanSingles.com into a new brand Spark.com, who knows what the impact will be). We think comps should now be in position to show yr/yr growth in subs going into 2010.
According to the CEO paraphrasing certain brands (inside Other affinity segment) have grown substantially...while others they are not being marketed and are declining..but the ones that are growing are approaching key inflection points in critical mass. To support this claim FWIW we recently found that, ChristianMingle was ranked #1 site for Christian Dating while BlackSingles.com was rated #2 in October & November 2009 according to Hitwise. Other sites we think the company is focused on Moretolove.com, Singleseniorsmeet.com, and Singleparentsmingle.com. Affinity brands have been one area of growth in the paid online dating industry. People Media's CEO said unique users grew 50% yr/yr in April 2009 (it's the only metric he gave in this interview: http://www.onlinepersonalswatch.com/news/2009/07/josh-meyers-ceo-of-peoplemedia.html)
Eventually there will be a very good argument for IACI's Match.com to buy Spark to merge into their subsidiary People Media which would be a dominate player in Affinity dating (co's are #1 and #2 in several categories now).
Great Hill Partners invested $47mn into Spark for a 33% stake in Dec 2005 and June 2006. In 2007 and 2008 Spark repurchased 34% of the outstanding shares at $4.05 per share and today GHP owns just under 45% of the company. GHP has a strong track record of success based on building growth co's (from what I can tell invested $50mn in IGN and sold to FOX for $550mn 3 years later, September 2009 sold 91% stake in Buscape for $374mn, and GHP doubled AUM in Feb 2009 to $3bn). It appears GHP is highly active in working with management on capital allocation/strategy.
Attractive M&A opportunities:there are literally close to 1000 small mom and pop brands ignored by other large competitors that could make attractive acquisition candidates. M&A in online dating has been successful, it is a business of scale. Match.com has acquired Udate in 2003, merged Match Europe with Meetic in June 2009, and acquired People Media in July 2009. M&A works well in this industry as: very scalable business with typical $1mn in revenue per employee, tons of backend synergies customer support, IT, accounting, etc, and significant economies of scale in marketing (a heavy direct marketing business).
Spark has an experienced 5 man board that has sold over $1bn in Internet co's: former CEO of Weddingchannel.com (sold to KNOT for $80mn), former CEO of Ancestry.com (ACOM $600mn market cap), former President of Ticketmaster, former CEO of barnesandnoble.com, GHP success include the sale IGN (online video game reviews and movie reveiws) ($550mn) and Buscape (largest online comparison shopping business in Brazil) for $391mn ... management is very focused on driving shareholder value and not a lot of promotion or spin with this company.
Why online dating is a great business:
Customers supply the inventory (pictures of themselves)
Pay monthly subscription upfront (DSO's 8)
Online subscription dating industry averages 20% operating margins (Match, Meetic, Spark)
Subscription based dating is an attractive oligopoly: Top 5 control 80% of the market, generate $1.2bn in revenue with industry profits of $240mn+ annually.
Attractive value proposition avg sub pays $27.50 for JDate and $15 for other affinity
100mn singles in US (short cycle, high churn, very profitable business)
Consumer behavior: many people subscribe to "yellow pages" of dating Match.com or eHarmony.com AND with something to their particular affinity. This was hard to find but the typical monthly churn rate of various paid subscription sites ranges from 25-35% on a monthly basis. Again this is a very large constantly churning market of 100 million daters that should generate about $1.2 billion in subscription fees.
What makes JDate attractive
80% come to the site organically (word of mouth referrals and high winback rates)
spends only 33% of the industry avg in marketing (6-7% vs. 20%+)
13 years in business.... it dominates the Jewish dating market in major metropolitan cities in US.
1/3 of members make over $100K, 2/3 make over $55K
45% of graduate degrees
94% of subscribers have college degrees
55% women 45% men
90-93% contribution margins = revenue less marketing
Jdate outstanding franchise
A) As a percent of revenue JDate cut its marketing budget 50% from 2005 levels
B) announced a price hike of 14% in 2007, held the price hike more than half way through 2008
C) Many JDate subs were affected by the layoffs at Citibank, Lehman, and rest of financial services sector in addtion to overall economy
Given the above factors it is not entirely surprising given the above drivers that JDate memebership base shrunk over the last year or so.
A Rabbi in NJ who claims he performs 20-35 weddings per year gave a sermon "JDate the Jewish Mircale" stating that over the last 5 years 75% of the couples he has married met on JDate. http://www.jdate.com/jmag/2009/10/new-jersey-rabbi-says-jdate-is-a-miracle-of-the-modern-jewish-world/
I would largely agree with Skimmer610 valuation from Nov 2007, major difference is that Jewish Subs are down about 8% and Spark is investing more aggressively in other Affinity brands in 2009 than in 2007 which is depressing the overall business profitability. Skimmer610 valuation for Jewish Networks was between $161-181mn which would the mid point would be $7.35 a share today. Subscribers are down 8%, so a discount is warranted.
In looking at a number of other small cap Internet brands such as Ancestry.com (ACOM), Health Grades (HGRD), and Meetic (Meet) the group trades right around 12x EV/EBITDA.
A couple other small assets that Spark owns: domain names relationships.com/engage.com/date.co.uk/date.ca/cupid.co.il/americansingles.com, a social match making site kizmeet.com, an offline speed dating business (check out for details hurrydate.com), and a title to a $1.7mn house in Seattle from a law suit.
1) Continue to invest in Jewish Networks: This business has stabilized and the site was redesigned in July 2009
2) Increase Marketing spend and increase scale
3) Pursue new advertising revenue streams: Spark’s websites generate 200-300 million monthly page views a month
4) Continue cost reductions:
5) Prudent capital allocation: returned a $1.15 and $1 per share to shareholders through share repurchases in 2007 and 2008
Downside should be very well protected: Fundamentals should improve. However, if nothing really changes over the next year: Spark likely ends 2010 with likely .90-$1 in cash per share, EV would around $35mn and business is trading at around 4x CF.
Disclosure: This does not constitute a recommendation to buy or sell this stock. We own shares in this company, and we may buy or sell shares at any time without updating the borad.
Catalysts:
Inflection point: where subscribers start to grow after 3 years of declines. AmericanSingles runoff from 40% to 6% of total subs, Jewish subs grew 4% qtr/qtr while other affinity subs grew 2%.
Develops leadership position in other niche markets: Hitwise recently rated LOV brands ChristianMingle.com #1 in and BlackSingles.com #2 in their respective categories for Oct/Nov 09. We think this might support mgt assertion that certain brands they are investing in the other affinity segment are growing substantially.
Advertising opportunity with subscribers viewing between 200-300 million monthly page views.
Great business: through numbers nearly 20% ebitda margins, 20% ROIC and cheap 6x depressed cash flow
Comps are valued at 12x EBITDA vs. around 4x for Spark. JDate is a top notch brand.
New direct comps to benchmark Sparks valuation: FriendFinder IPO shortly, Yahoo Personals is sold (alledgedly for sale) or even an eHarmony IPO in 2010 would not be surprising
Nice post on value investors club on LOV (Sparks Networks)
Over the last three years the enterprise value for Spark has fallen just under 75% ($7 to $3.00, plus share ct was reduced from 34mn to 20mn). One would like guess the paid dating business is in decline and by looking at Spark's results that would appear to be the case. However, 90% of the loss in subscribers over the last three years has come from an intentional run off of a General Markets segment and a brand called AmericanSingles.com. While the rest of the business has declined modestly, the valuation has imploded (from buybacks/price decline). We believe the contraction in Spark's subscribers is nearly complete and the company should begin to start to show growth in 2010 which we believe could lead to the stock valued in the $6-7 range (10x our 2010 fcf estimate on ev basis). We believe there is a well defined niche for paid subscription based dating sites for serious daters such as Match.com, eHarmony, and Yahoo Personals. Paid online dating industry is a $1.2bn market with consistent +/-20% operating margins from what we can find. Over the last 4 years Spark has generated $45mn in free cash flow, repurchased $23mn and $20mn worth of stock in 2007 & 2008, with an EV of $55mn.
Why Spark is cheap:
a) Subscribers have fallen over the last 3 years from 230K to 165K (The vast majority has come from an intentional run off of General Markets -62K subscribers) b) investor frustration at the inability to isolate JDate's value which we believe is substantially higher than what is reflected in the share price (NY Times article rumored bids from Match/Yahoo/eHarmony of up to $9.25 for Spark in Jan 2008) c) tough micro cap market for underfollowed, no coverage, and non-promotional management teams d) repurchased 34% of the company at $4.05 then stopped (as it would push GHP over 50% and impair NOL's) e) built a "platform" for growth whereby revenue per emp is $250K vs. $700K Meetic, PeopleMedia $1.3mn, Udate.com $1mn, industry avg is about $1mn in revenue per empl. Spark is not quite an apples to apples comp as they own a small offline speed dating company). g) Over the last few years JDate was negatively impacted due to: cutting marketing 50%, +14% price hike, and the obvious recession in 2008/2009.
Why we like Spark:
Spark should become a growth story going forward. Yes you read that right. Subscribers in their big brands are starting to grow with Jewish +4% qtr/qtr, +2% for Other Affinity, while their smallest segment General Markets (6% of subs) which is in runoff was down -20% (last week the company announced merging Date.ca and AmericanSingles.com into a new brand Spark.com, who knows what the impact will be). We think comps should now be in position to show yr/yr growth in subs going into 2010.
According to the CEO paraphrasing certain brands (inside Other affinity segment) have grown substantially...while others they are not being marketed and are declining..but the ones that are growing are approaching key inflection points in critical mass. To support this claim FWIW we recently found that, ChristianMingle was ranked #1 site for Christian Dating while BlackSingles.com was rated #2 in October & November 2009 according to Hitwise. Other sites we think the company is focused on Moretolove.com, Singleseniorsmeet.com, and Singleparentsmingle.com. Affinity brands have been one area of growth in the paid online dating industry. People Media's CEO said unique users grew 50% yr/yr in April 2009 (it's the only metric he gave in this interview: http://www.onlinepersonalswatch.com/news/2009/07/josh-meyers-ceo-of-peoplemedia.html)
Eventually there will be a very good argument for IACI's Match.com to buy Spark to merge into their subsidiary People Media which would be a dominate player in Affinity dating (co's are #1 and #2 in several categories now).
Great Hill Partners invested $47mn into Spark for a 33% stake in Dec 2005 and June 2006. In 2007 and 2008 Spark repurchased 34% of the outstanding shares at $4.05 per share and today GHP owns just under 45% of the company. GHP has a strong track record of success based on building growth co's (from what I can tell invested $50mn in IGN and sold to FOX for $550mn 3 years later, September 2009 sold 91% stake in Buscape for $374mn, and GHP doubled AUM in Feb 2009 to $3bn). It appears GHP is highly active in working with management on capital allocation/strategy.
Attractive M&A opportunities:there are literally close to 1000 small mom and pop brands ignored by other large competitors that could make attractive acquisition candidates. M&A in online dating has been successful, it is a business of scale. Match.com has acquired Udate in 2003, merged Match Europe with Meetic in June 2009, and acquired People Media in July 2009. M&A works well in this industry as: very scalable business with typical $1mn in revenue per employee, tons of backend synergies customer support, IT, accounting, etc, and significant economies of scale in marketing (a heavy direct marketing business).
Spark has an experienced 5 man board that has sold over $1bn in Internet co's: former CEO of Weddingchannel.com (sold to KNOT for $80mn), former CEO of Ancestry.com (ACOM $600mn market cap), former President of Ticketmaster, former CEO of barnesandnoble.com, GHP success include the sale IGN (online video game reviews and movie reveiws) ($550mn) and Buscape (largest online comparison shopping business in Brazil) for $391mn ... management is very focused on driving shareholder value and not a lot of promotion or spin with this company.
Why online dating is a great business:
Customers supply the inventory (pictures of themselves)
Pay monthly subscription upfront (DSO's 8)
Online subscription dating industry averages 20% operating margins (Match, Meetic, Spark)
Subscription based dating is an attractive oligopoly: Top 5 control 80% of the market, generate $1.2bn in revenue with industry profits of $240mn+ annually.
Attractive value proposition avg sub pays $27.50 for JDate and $15 for other affinity
100mn singles in US (short cycle, high churn, very profitable business)
Consumer behavior: many people subscribe to "yellow pages" of dating Match.com or eHarmony.com AND with something to their particular affinity. This was hard to find but the typical monthly churn rate of various paid subscription sites ranges from 25-35% on a monthly basis. Again this is a very large constantly churning market of 100 million daters that should generate about $1.2 billion in subscription fees.
What makes JDate attractive
80% come to the site organically (word of mouth referrals and high winback rates)
spends only 33% of the industry avg in marketing (6-7% vs. 20%+)
13 years in business.... it dominates the Jewish dating market in major metropolitan cities in US.
1/3 of members make over $100K, 2/3 make over $55K
45% of graduate degrees
94% of subscribers have college degrees
55% women 45% men
90-93% contribution margins = revenue less marketing
Jdate outstanding franchise
A) As a percent of revenue JDate cut its marketing budget 50% from 2005 levels
B) announced a price hike of 14% in 2007, held the price hike more than half way through 2008
C) Many JDate subs were affected by the layoffs at Citibank, Lehman, and rest of financial services sector in addtion to overall economy
Given the above factors it is not entirely surprising given the above drivers that JDate memebership base shrunk over the last year or so.
A Rabbi in NJ who claims he performs 20-35 weddings per year gave a sermon "JDate the Jewish Mircale" stating that over the last 5 years 75% of the couples he has married met on JDate. http://www.jdate.com/jmag/2009/10/new-jersey-rabbi-says-jdate-is-a-miracle-of-the-modern-jewish-world/
I would largely agree with Skimmer610 valuation from Nov 2007, major difference is that Jewish Subs are down about 8% and Spark is investing more aggressively in other Affinity brands in 2009 than in 2007 which is depressing the overall business profitability. Skimmer610 valuation for Jewish Networks was between $161-181mn which would the mid point would be $7.35 a share today. Subscribers are down 8%, so a discount is warranted.
In looking at a number of other small cap Internet brands such as Ancestry.com (ACOM), Health Grades (HGRD), and Meetic (Meet) the group trades right around 12x EV/EBITDA.
A couple other small assets that Spark owns: domain names relationships.com/engage.com/date.co.uk/date.ca/cupid.co.il/americansingles.com, a social match making site kizmeet.com, an offline speed dating business (check out for details hurrydate.com), and a title to a $1.7mn house in Seattle from a law suit.
1) Continue to invest in Jewish Networks: This business has stabilized and the site was redesigned in July 2009
2) Increase Marketing spend and increase scale
3) Pursue new advertising revenue streams: Spark’s websites generate 200-300 million monthly page views a month
4) Continue cost reductions:
5) Prudent capital allocation: returned a $1.15 and $1 per share to shareholders through share repurchases in 2007 and 2008
Downside should be very well protected: Fundamentals should improve. However, if nothing really changes over the next year: Spark likely ends 2010 with likely .90-$1 in cash per share, EV would around $35mn and business is trading at around 4x CF.
Disclosure: This does not constitute a recommendation to buy or sell this stock. We own shares in this company, and we may buy or sell shares at any time without updating the borad.
Catalysts:
Inflection point: where subscribers start to grow after 3 years of declines. AmericanSingles runoff from 40% to 6% of total subs, Jewish subs grew 4% qtr/qtr while other affinity subs grew 2%.
Develops leadership position in other niche markets: Hitwise recently rated LOV brands ChristianMingle.com #1 in and BlackSingles.com #2 in their respective categories for Oct/Nov 09. We think this might support mgt assertion that certain brands they are investing in the other affinity segment are growing substantially.
Advertising opportunity with subscribers viewing between 200-300 million monthly page views.
Great business: through numbers nearly 20% ebitda margins, 20% ROIC and cheap 6x depressed cash flow
Comps are valued at 12x EBITDA vs. around 4x for Spark. JDate is a top notch brand.
New direct comps to benchmark Sparks valuation: FriendFinder IPO shortly, Yahoo Personals is sold (alledgedly for sale) or even an eHarmony IPO in 2010 would not be surprising
2/07/2010
Micro cap stocks with potential hidden value creation
from share buybacks at discount prices. I only selected stocks buying back shares during the last quarter of 2008 and the first quarter of 2009. The thought was prices were significantly depressed during this time period. After that filter I also applied the following.
1) A margin of safety as measured by a strong balance sheet, market capitalization / Enterprise value <1.35
2) Mean Reversion: 3 year stock return < 0%
3) Share count outstanding reduced from the 2004 balance.
4) Potential discount to normalized earnings using the following formula; Average operating income from 2005 to 2008 as a percentage to current enterprise value greater than the operating income over the prior 12 months as a percentage of the current enterprise value.
5) Share short as a percentage of float less the 5%
6) Improved valuation based on TTM P/B and P/S ratios versus the 05-08 ratios.
See the 5 selected ideas
1) A margin of safety as measured by a strong balance sheet, market capitalization / Enterprise value <1.35
2) Mean Reversion: 3 year stock return < 0%
3) Share count outstanding reduced from the 2004 balance.
4) Potential discount to normalized earnings using the following formula; Average operating income from 2005 to 2008 as a percentage to current enterprise value greater than the operating income over the prior 12 months as a percentage of the current enterprise value.
5) Share short as a percentage of float less the 5%
6) Improved valuation based on TTM P/B and P/S ratios versus the 05-08 ratios.
See the 5 selected ideas
1/27/2010
Deep Value created by large buybacks supported by free cash flow
Spark Networks (LOV) continues to be ignored by the general market in terms of price appreciation and institutional ownership. LOV posted 19% increase over the past year and lost -20% over the prior 3 year period. Symbol LOV (Spark Networks) operates dating websites and has a vast portfolio of web sites that includes JDate.com, AmericanSingles.com, BlackSingles.com and about a total of 23 unique dating sites. The sites include multiple user functionality like real time chat, instant messaging services user profiles, onsite email centers, and offline single events. The company’s most valuable asset at this time and having a huge economic moat is Jdate.com. It’s the leading Jewish dating website and has been mentioned on popular TV shows such as House, South Park and the Daily Show. The word of mouth impact keeps promotion costs low for this business.
The LOV (Spark Networks) story is simple so I won’t bore you with a lengthy business description. Instead, I will try to focus on the main reasons why I think the stock is worth a closer look, management, capital allocation, sustained free cash flow, activist shareholders, high ROIC and clean capital structure.
Let’s start with the management team. Great Hills advisor took a 45% minority stake and was able to get a board seat and push to find an experienced and shareholder oriented management team incentivized with large amounts of stock options. The large amount of management options outstanding are far out of the money and should motivate management to drive the stock price higher along with the influence of a board seat from Great Hills advisors. I’ve never seen such a highly educated and experienced executive team and board members for such a small company.
Adam Berger is the CEO who led WeddingChannel.com, Inc. and grew the company for seven years through its sale toThe Knot, Inc. He received a Havard M.B.A. with distinction and a B.S. in Chemical Engineering from the University of California at Berkeley. Gregory R. Liberman was appointed President on June 2006 and Chief Operating Officer August 2005. Mr. Liberman earned a J.D. from the University of Chicago and an A.B. in Economics from Stanford University. Brett A. Zane was appointed the Chief Financial Officer December 2007. Mr. Zane holds an MBA from UCLA and a B.S. in Economics from The Wharton School, University of Pennsylvania. Gregory J. Franchina was appointed as the Chief Information Officer on June 2007. Mr. Franchina has over 22 years of technical and operational experience. Franchina holds a B.S. in Computer Science from The College of William and Mary.Joshua A. Kreinbeg has been the general counsel since April 2006 earned a J.D. with honors from Duke University’s School of Law as well as an M.B.A. from Duke University’s. Mr. Kreinberg also holds an A.B. in Quantitative Economics and Political Science from Stanford University. The board is just as strong with Great Hill Partners getting representation with Michael A. Kumin. Kumin is a partner of Great Hill Partners, LLC where he has served as an investment professional since June 2002. Previously, he served at separate times as an investment professional for Apollo Advisors, L.P. and Goldman Sachs. He holds a B.A. from Princeton University.
Valuation:
Management has bought back a stunning amount of shares over the past 2 years. In fact $47,354,000 was expended for share repurchases over the two year period from 12/06 to 12/08. The share count was reduced from 31,271,000 for the period ending 09/06 to 20,582,000 for the period ending 09/09. LOV may have paid a bit more than was necessary but when looking at the true intrinsic value I believe it was a smart use of excess capital. The buybacks were supported by their strong free cash flow. I calculated the average price paid was $4.20.
LOV generated $5,057,000 in FCF from 12/31/08 to 09/30/09 , $15,160,000 from 12/31/07 to 9/30/08 and $13,701,000 from 09/30/06 to 06/30/07. To put this into perspective using the current enterprise value of $69,792,000 this would provide a FCF yield of 7.25% ,21.72% , or 19.63% for the yearly period ending 09/09, 09/08,09/06 respectively. The drop from 21.72% (09/08) or 19.63% (09/06) to 7.25% (09/09) could indicate the stock is trading at a discount to normalized earnings.
Return on invested capital has also been stellar with pre tax ROIC at 39.93% (2008), 14.04% (2007) and 17.76% (2006). It’s important to note that the FCF would be much higher with a new or larger company as the SGA could reduced given the current large salaries that were required to recruit and retain the executive talent and turn the company around or simply dress up for a future sale.
There are several scenarios where LOV receives a higher market price . I would not be surprised if Jdate.com alone receives a price greater than the current market cap for the entire company. Match.com owned by IAC, Yahoo , MySpace or e-Harmony are all potential suitors. A dividend may be initiated given the consistent FCFand I’m sure the 45% active shareholder Great Hills advisors is seeking to monetize their work and risk.
Andrew Ross Sorkin wrote in the NY times on January 4, 2008. “The parent company of the popular Jewish online dating site JDate has put itself up for sale, people close to the auction said Thursday, and is already in talks with several prominent media companies. For rivals like the unit Match.com unit of IAC, analysts say Spark would bolster business, allowing it to offer more niche categories to its 20 million members. Spark could also provide a personal service for MySpace and a natural extension for eHarmony, which has focused strictly on its high-end subscription service and falls right behind Spark, with total traffic of 2.18 million.”
http://www.nytimes.com/2008/01/04/technology/04deal.html
At year end 2009 the successful micro cap value and sometimes activist institution Osmium Partners run by John Lewis filed a 13g reporting a 5% position.
So in conclusion there are many forces that make this 61 million market cap idea worth a closer look including proven management talent, strong capital allocation, activist shareholders, outstanding FCF, high ROIC, balance sheet strength, a clean capital structure with a dramatically reduced outstanding share count or simple mean reversion along with the economic moat provided by Jdate.com.
Disclosure:Long LOV
The LOV (Spark Networks) story is simple so I won’t bore you with a lengthy business description. Instead, I will try to focus on the main reasons why I think the stock is worth a closer look, management, capital allocation, sustained free cash flow, activist shareholders, high ROIC and clean capital structure.
Let’s start with the management team. Great Hills advisor took a 45% minority stake and was able to get a board seat and push to find an experienced and shareholder oriented management team incentivized with large amounts of stock options. The large amount of management options outstanding are far out of the money and should motivate management to drive the stock price higher along with the influence of a board seat from Great Hills advisors. I’ve never seen such a highly educated and experienced executive team and board members for such a small company.
Adam Berger is the CEO who led WeddingChannel.com, Inc. and grew the company for seven years through its sale toThe Knot, Inc. He received a Havard M.B.A. with distinction and a B.S. in Chemical Engineering from the University of California at Berkeley. Gregory R. Liberman was appointed President on June 2006 and Chief Operating Officer August 2005. Mr. Liberman earned a J.D. from the University of Chicago and an A.B. in Economics from Stanford University. Brett A. Zane was appointed the Chief Financial Officer December 2007. Mr. Zane holds an MBA from UCLA and a B.S. in Economics from The Wharton School, University of Pennsylvania. Gregory J. Franchina was appointed as the Chief Information Officer on June 2007. Mr. Franchina has over 22 years of technical and operational experience. Franchina holds a B.S. in Computer Science from The College of William and Mary.Joshua A. Kreinbeg has been the general counsel since April 2006 earned a J.D. with honors from Duke University’s School of Law as well as an M.B.A. from Duke University’s. Mr. Kreinberg also holds an A.B. in Quantitative Economics and Political Science from Stanford University. The board is just as strong with Great Hill Partners getting representation with Michael A. Kumin. Kumin is a partner of Great Hill Partners, LLC where he has served as an investment professional since June 2002. Previously, he served at separate times as an investment professional for Apollo Advisors, L.P. and Goldman Sachs. He holds a B.A. from Princeton University.
Valuation:
Management has bought back a stunning amount of shares over the past 2 years. In fact $47,354,000 was expended for share repurchases over the two year period from 12/06 to 12/08. The share count was reduced from 31,271,000 for the period ending 09/06 to 20,582,000 for the period ending 09/09. LOV may have paid a bit more than was necessary but when looking at the true intrinsic value I believe it was a smart use of excess capital. The buybacks were supported by their strong free cash flow. I calculated the average price paid was $4.20.
LOV generated $5,057,000 in FCF from 12/31/08 to 09/30/09 , $15,160,000 from 12/31/07 to 9/30/08 and $13,701,000 from 09/30/06 to 06/30/07. To put this into perspective using the current enterprise value of $69,792,000 this would provide a FCF yield of 7.25% ,21.72% , or 19.63% for the yearly period ending 09/09, 09/08,09/06 respectively. The drop from 21.72% (09/08) or 19.63% (09/06) to 7.25% (09/09) could indicate the stock is trading at a discount to normalized earnings.
Return on invested capital has also been stellar with pre tax ROIC at 39.93% (2008), 14.04% (2007) and 17.76% (2006). It’s important to note that the FCF would be much higher with a new or larger company as the SGA could reduced given the current large salaries that were required to recruit and retain the executive talent and turn the company around or simply dress up for a future sale.
There are several scenarios where LOV receives a higher market price . I would not be surprised if Jdate.com alone receives a price greater than the current market cap for the entire company. Match.com owned by IAC, Yahoo , MySpace or e-Harmony are all potential suitors. A dividend may be initiated given the consistent FCFand I’m sure the 45% active shareholder Great Hills advisors is seeking to monetize their work and risk.
Andrew Ross Sorkin wrote in the NY times on January 4, 2008. “The parent company of the popular Jewish online dating site JDate has put itself up for sale, people close to the auction said Thursday, and is already in talks with several prominent media companies. For rivals like the unit Match.com unit of IAC, analysts say Spark would bolster business, allowing it to offer more niche categories to its 20 million members. Spark could also provide a personal service for MySpace and a natural extension for eHarmony, which has focused strictly on its high-end subscription service and falls right behind Spark, with total traffic of 2.18 million.”
http://www.nytimes.com/2008/01/04/technology/04deal.html
At year end 2009 the successful micro cap value and sometimes activist institution Osmium Partners run by John Lewis filed a 13g reporting a 5% position.
So in conclusion there are many forces that make this 61 million market cap idea worth a closer look including proven management talent, strong capital allocation, activist shareholders, outstanding FCF, high ROIC, balance sheet strength, a clean capital structure with a dramatically reduced outstanding share count or simple mean reversion along with the economic moat provided by Jdate.com.
Disclosure:Long LOV
1/24/2010
Insider direct purchases last week (01/18/10/ 01/22/10)
Please click the link to reveiw
Yahoo Quotes
Symbol Name Industry Amount
AEHR Aehr Test Systems de Semiconductor Equipment & Materials $41,000
DVD Dover Motorsports, I Sporting Activities $18,387
SGA Saga Communications, Broadcasting - Radio $27,000
NEN New England Realty A Property Management $27,310
RLH Red Lion Hotels Corp Lodging $128,777
GNCMA General Communicatio Long Distance Carriers $12,120
IRET Investors Real Estat REIT - Retail $3,454
ISCA International Speedw Sporting Activities $7,162
TEX Terex Corporation op Farm & Construction Machinery $10,290
Yahoo Quotes
Symbol Name Industry Amount
AEHR Aehr Test Systems de Semiconductor Equipment & Materials $41,000
DVD Dover Motorsports, I Sporting Activities $18,387
SGA Saga Communications, Broadcasting - Radio $27,000
NEN New England Realty A Property Management $27,310
RLH Red Lion Hotels Corp Lodging $128,777
GNCMA General Communicatio Long Distance Carriers $12,120
IRET Investors Real Estat REIT - Retail $3,454
ISCA International Speedw Sporting Activities $7,162
TEX Terex Corporation op Farm & Construction Machinery $10,290
1/18/2010
Tiny micro cap left far behind in the current rally
This stock needs more work. But it is still worth introducing tonight as its strong FCF can’t be ignored with potentially valuable internet properties.
"Spark Networks, Inc. is a provider of online personals services in the United States and internationally. The Websites enable adults to meet online, participate in a community, and form relationships. The features of the Company’s Websites include profiles, onsite e-mail centers, real-time chat rooms, instant messaging services, and offline singles events. The Websites include JDate.com, AmericanSingles.com, BlackSingles.com, and ChristianMingle.com. It also operates several international Websites and maintains operations in the United States and Israel."
deep talented management team
http://www.spark.net/managementProfiles.htm
Click here for current and historical quantitative data.
"Spark Networks, Inc. is a provider of online personals services in the United States and internationally. The Websites enable adults to meet online, participate in a community, and form relationships. The features of the Company’s Websites include profiles, onsite e-mail centers, real-time chat rooms, instant messaging services, and offline singles events. The Websites include JDate.com, AmericanSingles.com, BlackSingles.com, and ChristianMingle.com. It also operates several international Websites and maintains operations in the United States and Israel."
deep talented management team
http://www.spark.net/managementProfiles.htm
Click here for current and historical quantitative data.
Interview with Seth Klarman
Thanks to an email received from ManualofIdeas.com
Click to vist Manualofideas
"An interview with HBS alumnus Seth Klarman regarding his experience at HBS and his views on leadership and success and the priority of giving back to one's community."
click to view interview
Click to vist Manualofideas
"An interview with HBS alumnus Seth Klarman regarding his experience at HBS and his views on leadership and success and the priority of giving back to one's community."
click to view interview
1/17/2010
NOOF up 21% Friday
I own shares of NOOF and was glad to see some volume on Friday as the stock moved 20%higher on the day. Review the link below.
the stock has several positive metrics. mean reversion, large cash balance , huge share buybacks when stock was depressed by "Mr Market, material discount to prior 3 -5 years earnings, ownership by several value institutions, huge discount based on P/S or P/B ratios, 04-08 average ROIC of +18%, no shorts.
Please review the link for more data
the stock has several positive metrics. mean reversion, large cash balance , huge share buybacks when stock was depressed by "Mr Market, material discount to prior 3 -5 years earnings, ownership by several value institutions, huge discount based on P/S or P/B ratios, 04-08 average ROIC of +18%, no shorts.
Please review the link for more data
Insider Buys for the period 01/11/10- 01/15/10
For more details please click here
ZIGO: Zygo Corporation,
Industry: Scientific & Technical Instruments
SUPERVALU Inc : SVU
Industry: Grocery Stores
WMCO:Williams Controls
Industry: Auto Parts
SONC:Sonic Corp
Industry: Restaurants
DVD:Dover Motorsports
Industry: Sporting Activities
SHLM: A. Schulman
Industry:Rubber & Plastics
YORW: The York Water Company
Industry:Water Utilities
JCS: Communications Systems
Industry:Communication Equipment
ISCA: International Speedway
Industry:Sporting Activities
ZIGO: Zygo Corporation,
Industry: Scientific & Technical Instruments
SUPERVALU Inc : SVU
Industry: Grocery Stores
WMCO:Williams Controls
Industry: Auto Parts
SONC:Sonic Corp
Industry: Restaurants
DVD:Dover Motorsports
Industry: Sporting Activities
SHLM: A. Schulman
Industry:Rubber & Plastics
YORW: The York Water Company
Industry:Water Utilities
JCS: Communications Systems
Industry:Communication Equipment
ISCA: International Speedway
Industry:Sporting Activities
1/10/2010
Sorry the prices
in the previous posting were not updated correctly. All other data points were correct.
Please click
Please click
Direct insider buying last week 2010
These are the stocks I believe have the most promise and some have been discussed in the past.
Please click to review
Please click to review
1/05/2010
Double digit negative returns
over the past 3 years but doing the right things to redeem themselves.
Although these stocks have had a strong run over the past year they still trade over 55% – 86% off their 5 year high. Please check out the data as it may be useful now or on a watch list.
Click to review
Although these stocks have had a strong run over the past year they still trade over 55% – 86% off their 5 year high. Please check out the data as it may be useful now or on a watch list.
Click to review
12/27/2009
Potential reversion to the mean
I added more data to the previous list of ideas. Hopefully this format will be more useful.
data such as major shareholders, P/S, P/B, share count trend, and other meaningful decision making data.
Please click link to review
data such as major shareholders, P/S, P/B, share count trend, and other meaningful decision making data.
Please click link to review
12/26/2009
Stocks that posted less than 0% for the periods ending 1 and 3 years
I tried to find quality stocks that meet these return criteria. Several stocks were found but I will just introduce only 3 ideas that may outperform the market over the next few years. But I can’t know that
The ideas also needed to past these additional hurdles.
1)Average operating income from 05-08 as a percentage of the current enterprise value greater than the current operating income as a percentage of the current enterprise value
2)Average prior 5 year ROIC greater than 20%
3)Shorts as a percentage of float less than 10%
4)Share count reduced or stable over the past 3 or 5 year period
5)Strong balance sheet: Enterprise value / Market Cap < 1.30
The ideas were in 3 separate industries, Medical Laboratories & Research, Publishing – Books and Railroads
Many other metrics were added, the ideas are as follows
Please click to review the ideas
The ideas also needed to past these additional hurdles.
1)Average operating income from 05-08 as a percentage of the current enterprise value greater than the current operating income as a percentage of the current enterprise value
2)Average prior 5 year ROIC greater than 20%
3)Shorts as a percentage of float less than 10%
4)Share count reduced or stable over the past 3 or 5 year period
5)Strong balance sheet: Enterprise value / Market Cap < 1.30
The ideas were in 3 separate industries, Medical Laboratories & Research, Publishing – Books and Railroads
Many other metrics were added, the ideas are as follows
Please click to review the ideas
12/15/2009
Book review: “Why are we so clueless about the stock market?”
The book’s title does little justice to convey the usefulness of this sound and informative read. If you are a relatively new investors lacking formal financial or accounting studies this book will serve you well by covering and clearly explaining essential financial investment topics. Even the more experienced could benefit with a refresher on investment concepts simply forgot or just never fully understood their importance.
Mauriusz Skonieczny succinctly provides short examples of the economic impact of capital allocation decisions such as expanding the business, reinvesting in the business, share buybacks, debt reduction, or the distribution of dividends. The book also covers concepts such as identifying economic moats, margin of safety, stock valuation, discounting future cash flows all with easily understandable examples. Many other concepts covered such as when to sell, company analysis, capital structure, diversification, investing in IPOs, analyzing an investment, real estate versus stocks along with other nuggets of useful ideas for anyone.
This book with only 150 pages makes a perfect read for those that want an understanding of the qualitative and quantitative investment finance topics useful for all serious or soon to be serious investor.
I receive no compensation for writing this review
http://www.amazon.com/Clueless-Market-invest-stocks-market/dp/0615287484/ref=pd_rhf_p_img_1
Mauriusz Skonieczny succinctly provides short examples of the economic impact of capital allocation decisions such as expanding the business, reinvesting in the business, share buybacks, debt reduction, or the distribution of dividends. The book also covers concepts such as identifying economic moats, margin of safety, stock valuation, discounting future cash flows all with easily understandable examples. Many other concepts covered such as when to sell, company analysis, capital structure, diversification, investing in IPOs, analyzing an investment, real estate versus stocks along with other nuggets of useful ideas for anyone.
This book with only 150 pages makes a perfect read for those that want an understanding of the qualitative and quantitative investment finance topics useful for all serious or soon to be serious investor.
I receive no compensation for writing this review
http://www.amazon.com/Clueless-Market-invest-stocks-market/dp/0615287484/ref=pd_rhf_p_img_1
12/13/2009
Deep value small cap left behind based on the 3 year return
My filter included the financial hurdles below coupled with other qualitative and quantitative measures
1) Increasing book value: Current book value greater than the 2006 value.
2) Negative returns: A negative 3 year stock return.
3) No Dilution: Relatively constant or reduced share count from share buybacks over the past 5 years
4) Discount to normalized Earnings: Earnings yield using current operating income to enterprise value and only selecting those less than the earnings yield using the 5 year average annual free cash flow to current enterprise value. May indicate the company is trading at for less than the normalized earnings yield.
5) High magic formula Ranking: Rank high based on ROIC and earnings yield combination (magic formula)
6) Greed Factor: Annual SGA/Revenue < 30% (my management greed factor)
7) Margin of safety: Margin of safety based on selecting companies with an Enterprise Value/Market Cap < .90
The result was as a list of 8 deep value small cap stocks
Please Click to review stocks that I consider worth a second look
1) Increasing book value: Current book value greater than the 2006 value.
2) Negative returns: A negative 3 year stock return.
3) No Dilution: Relatively constant or reduced share count from share buybacks over the past 5 years
4) Discount to normalized Earnings: Earnings yield using current operating income to enterprise value and only selecting those less than the earnings yield using the 5 year average annual free cash flow to current enterprise value. May indicate the company is trading at for less than the normalized earnings yield.
5) High magic formula Ranking: Rank high based on ROIC and earnings yield combination (magic formula)
6) Greed Factor: Annual SGA/Revenue < 30% (my management greed factor)
7) Margin of safety: Margin of safety based on selecting companies with an Enterprise Value/Market Cap < .90
The result was as a list of 8 deep value small cap stocks
Please Click to review stocks that I consider worth a second look
12/11/2009
Positive Insider Activity
Positive officer and director insider trading for November and month to date December 2009
Sorted by industry and only market caps below 500 million
Please click to review
Using the current positive insider trading list above I selected only companies with a current FCF/EV selling for less than the average FCF annualized for the prior 3 years as a percentage of the current EV.
The more focused list is as follows, please click to review
Sorted by industry and only market caps below 500 million
Please click to review
Using the current positive insider trading list above I selected only companies with a current FCF/EV selling for less than the average FCF annualized for the prior 3 years as a percentage of the current EV.
The more focused list is as follows, please click to review
12/08/2009
Enterprise value below 200 million:: Discounted to normalized earnings
Some of the criteria was as follows
1) Enterprise value < 200 million
2) Share count over the prior trailing 12 months being less than the average 5 year annual count.
3)Calculated average annualized prior 5 year free cash flow (04- 08) as a percentage of the current enterprise value and then compare this yield to the yield using the prior 12 months of operating income as a percentage of the current enterprise value.
My goal was to select only those companies selling for a lower earnings yield using the current operating income/enterprise value versus the yield calculated by the average 5 year FCF/EV. The thought was to find stocks that may be temporarily trading at a discount to normalized earnings.
4) Cash flow from operation >0 over the past 12 months.
5) Company share buybacks over 2008 and YTD 2009.
6) Return on invested capital (ROIC) > the annualized return of 20% over the past 5 years.
Please click to review the results
1) Enterprise value < 200 million
2) Share count over the prior trailing 12 months being less than the average 5 year annual count.
3)Calculated average annualized prior 5 year free cash flow (04- 08) as a percentage of the current enterprise value and then compare this yield to the yield using the prior 12 months of operating income as a percentage of the current enterprise value.
My goal was to select only those companies selling for a lower earnings yield using the current operating income/enterprise value versus the yield calculated by the average 5 year FCF/EV. The thought was to find stocks that may be temporarily trading at a discount to normalized earnings.
4) Cash flow from operation >0 over the past 12 months.
5) Company share buybacks over 2008 and YTD 2009.
6) Return on invested capital (ROIC) > the annualized return of 20% over the past 5 years.
Please click to review the results
12/06/2009
12/05/2009
Discount to normalized earnings?
I attempted to find companies selling at a discount to normalized earnings by taking the average annualized prior 5 year free cash flow (04- 08) as a percentage of the the current enterprise value and then compare this yield to the yield using the prior 12 months of operating income as a percenge of the current enterprise. My goal was to select only those companies selling for a lower earnings yield using the current operating income/enterprise value versus the yield calculated by the average 5 year FCF/EV.
The thought was to locate companies where the current economics have temporarily depressed earnings when looking at the earnings capacity based on historical 5 year annualized FCF.
Additionally, companies were removed if they did not meet these metrics
-) Share count reduction: Select only companies with a trailing 12 month share count that was less than the average 5 year share count. This is a tough hurdle but can indicate a very shareholder friendly managment.
-) Strong financial position as measured by an enterprise value/market capitalization < .90; Another difficult goal only but wanted to only deal with cash rich companies. In a future post i will loosen this criteria.
-) Economic moat (High historical ROIC): Average 5 year Return on invested capital (ROIC) >25%; Companies with an annualized 5 year ROIC greater than an 25% clearly idicates a historical high economic moat.
Out of 4,320 stocks reviewed I came up with these 7 ideas
The thought was to locate companies where the current economics have temporarily depressed earnings when looking at the earnings capacity based on historical 5 year annualized FCF.
Additionally, companies were removed if they did not meet these metrics
-) Share count reduction: Select only companies with a trailing 12 month share count that was less than the average 5 year share count. This is a tough hurdle but can indicate a very shareholder friendly managment.
-) Strong financial position as measured by an enterprise value/market capitalization < .90; Another difficult goal only but wanted to only deal with cash rich companies. In a future post i will loosen this criteria.
-) Economic moat (High historical ROIC): Average 5 year Return on invested capital (ROIC) >25%; Companies with an annualized 5 year ROIC greater than an 25% clearly idicates a historical high economic moat.
Out of 4,320 stocks reviewed I came up with these 7 ideas
12/02/2009
Outsized Gross Profit to Enterprise value
The list of 17 ideas out of 4,000 was created using the following rules coupled with
others.
EV (Price -Cash + Ttl Debt) /Price < .90: Strong financial position
Prior average 3 year share count /TTM share count >.97 : No dillution, excessive options or financing
Gross profit/ EV > 1
See results with additional historical data such as 5 years woth of ROIC and FCF and how these value relate to current price.
Please Click to view
others.
EV (Price -Cash + Ttl Debt) /Price < .90: Strong financial position
Prior average 3 year share count /TTM share count >.97 : No dillution, excessive options or financing
Gross profit/ EV > 1
See results with additional historical data such as 5 years woth of ROIC and FCF and how these value relate to current price.
Please Click to view
11/29/2009
11/29/09 Magic Formula Results
The 129 results presented in the prior post:
http://shadowstock.blogspot.com/2009/11/magic-formula-investing.html
I’ve broken the ideas down into potentially more useful groups.
My first “filter” of the original magic formula 129 ideas was as follows:
Share count remaining stable over the past 3 years
1) Average share count over the past 3 years / trailing 12 month share count > .98
Balance sheet strength using cash versus total liabilities
2) Enterprise value (Price – (Cash + Total liabilities))/Price < .90
Also:
-SGA/Revenue over the past 12 months <.35
-Positive cumulative FCF over the past 5 years
-Positive CFFO (cash flow from operations) over the past year
See Results:
http://www.shadowstock.com/ss_112909Filter1.html
EV/Rev < .40
See Results:
http://www.shadowstock.com/ss_112909Filter2.html
Additional comments:
http://www.shadowstock.com/ss_112909NOTES.html
if this post was useful or you have suggestions please let me know. Thanks John
john@shadowstock.com
http://shadowstock.blogspot.com/2009/11/magic-formula-investing.html
I’ve broken the ideas down into potentially more useful groups.
My first “filter” of the original magic formula 129 ideas was as follows:
Share count remaining stable over the past 3 years
1) Average share count over the past 3 years / trailing 12 month share count > .98
Balance sheet strength using cash versus total liabilities
2) Enterprise value (Price – (Cash + Total liabilities))/Price < .90
Also:
-SGA/Revenue over the past 12 months <.35
-Positive cumulative FCF over the past 5 years
-Positive CFFO (cash flow from operations) over the past year
See Results:
http://www.shadowstock.com/ss_112909Filter1.html
EV/Rev < .40
See Results:
http://www.shadowstock.com/ss_112909Filter2.html
Additional comments:
http://www.shadowstock.com/ss_112909NOTES.html
if this post was useful or you have suggestions please let me know. Thanks John
john@shadowstock.com
11/28/2009
Magic Formula Investing
Joel Greenblatt’s magic formula investing site generated the following ideas based on multiple market caps as of 11/29/09.
http://www.magicformulainvesting.com
As we know his site looks for stocks with a high earnings yield and return on capital. 127 ideas were produced in 65 industries and 7 sectors as of 11/29/09.
The link provides all the ideas by sector, industry with critical financial data.
There is an Excel spread sheet that can be downloaded for further sorting or filtering on P/S,EV to price, and many other metrics. I will provide additional insight on the list generated in a future post.
Click to view results
http://www.magicformulainvesting.com
As we know his site looks for stocks with a high earnings yield and return on capital. 127 ideas were produced in 65 industries and 7 sectors as of 11/29/09.
The link provides all the ideas by sector, industry with critical financial data.
There is an Excel spread sheet that can be downloaded for further sorting or filtering on P/S,EV to price, and many other metrics. I will provide additional insight on the list generated in a future post.
Click to view results
11/25/2009
Buybacks at bargain prices: updated for corrected 52 week change
All the data in the previous post was correct except to the 52 week change. I reran the data but only included stocks with a negative 52 week change. The ideas in the other days post were valid for companies with large buybacks over the past 12 months.
The new list was created as follows:
1) No Dilution
: Average 3 years shares outstanding / Trailing 12 months shares outstanding > .97
2) Strong Balance Sheet
: EV/MC < .90
3) Negative return over the past 52 weeks
4) Share buybacks / Float Amount < -.05
The results are as follows and sorted by the largest sales buybacks to float amount ratio
Click to see the results
The new list was created as follows:
1) No Dilution
: Average 3 years shares outstanding / Trailing 12 months shares outstanding > .97
2) Strong Balance Sheet
: EV/MC < .90
3) Negative return over the past 52 weeks
4) Share buybacks / Float Amount < -.05
The results are as follows and sorted by the largest sales buybacks to float amount ratio
Click to see the results
11/24/2009
Share repurchases at depressed prices
The list was further refined with the following
No dilution:
1)Stocks with an average 3 year shares outstanding / trailing 12 months >.97
Strong Balance sheet:
2)Enterprise value (market cap - cash + total debt)/ market capitalization < .90
Only stocks reporting a negative return over the prior 12 months
3)52WkChng<0
The results are as follows
No dilution:
1)Stocks with an average 3 year shares outstanding / trailing 12 months >.97
Strong Balance sheet:
2)Enterprise value (market cap - cash + total debt)/ market capitalization < .90
Only stocks reporting a negative return over the prior 12 months
3)52WkChng<0
The results are as follows
11/22/2009
November 16-20:Positive insider buying
Celsion Corp (CLSN) $3.16
Tandy Brands Accessories (TBAC) $3.24
Charles & Colvard (CTHR) $1.28
Rofin-Sinar Technologies Inc (RSTI) $ 22.61
Courier Corporation (CRRC) $13.01
Urologix (ULGX) $.98
ACCO Brands (ABD) $6.10
Ultralife Corp (ULBI) $4.10
For a more complete list of positive insider activity for the prior week and important additional data
Click to view
Tandy Brands Accessories (TBAC) $3.24
Charles & Colvard (CTHR) $1.28
Rofin-Sinar Technologies Inc (RSTI) $ 22.61
Courier Corporation (CRRC) $13.01
Urologix (ULGX) $.98
ACCO Brands (ABD) $6.10
Ultralife Corp (ULBI) $4.10
For a more complete list of positive insider activity for the prior week and important additional data
Click to view
11/10/2009
Meade Instruments Corp (MEAD) is a RISKY 1- 2 year potential turnaround
Pros
For the current value of 2.7 million, shareholders receive “valuable brand names and intellectual property that provides MEAD a competitive advantage in the marketplace”. The Coronado brand name has a unique niche in the area of solar astronomy. 7.4 million in sales for the most recent quarter with a 17% gross profit margin.
Solid balance sheet with per share data as follows: EV = $2.39 ($2,789,130), Price = $2.50(2,917,500), Sales = $6.51, Cash = $2.07, AR = $5.17, Inventory = $7.47, Total Liabilities = $5.03
Read more
For the current value of 2.7 million, shareholders receive “valuable brand names and intellectual property that provides MEAD a competitive advantage in the marketplace”. The Coronado brand name has a unique niche in the area of solar astronomy. 7.4 million in sales for the most recent quarter with a 17% gross profit margin.
Solid balance sheet with per share data as follows: EV = $2.39 ($2,789,130), Price = $2.50(2,917,500), Sales = $6.51, Cash = $2.07, AR = $5.17, Inventory = $7.47, Total Liabilities = $5.03
Read more
11/08/2009
Large debt load … a catalyst for a higher stock price
A few thoughts for tonight
It makes sense that a large debt burden could be a motivating factor to improve productivity by forcing lower costs and executing a more selective approach to capital expenditures or acquisitions.
But to help avoid an investment mistake I want to stay with companies posting strong historical FCF but has a depressed stock price do to current earnings below expectations or historical profitability.
These were some of my search criteria;
1) No dilution and a share count that has been stable over the past 3-4 years. So my first filter was:
*Average share count last 3 years / Share count over the past 12 months >1.00
2)Large debt relative to total capital structure:
*EV{(Price+Total Debt)-(Cash)}/Price >4.00
3)Low administrative costs as measured by selling general and administrative costs as a percentage of total annual revenue.
*Annual SGA/Rev<.15
4) Postive FCF over the past 5 years demonstrating debt carrying capacity
5) Increasing total equity value over the past 4 years
6) Positive cash flow from operations over the past 12 months as a measure operational health regardless of the temporary poor bottom line results relative to historical performance
7) EV/Sales <1.90
8) Current price 75% below the 5 year high and a negative price return over the past 3 years.
9) Positive insider buying over the past 12 months
Two of the ideas that I’ve selected were as follows:
DPZ (Domino's Pizza) $7.38
DPZ is a pizza delivery company that has locations in all 50 states and in more the 60 countries. 90% of their stores are owned and operated by franchisees which reduces risk and maximizes free cash flow.
Although this has no influence on my thoughts, George Soros was recently buying according to gurufocus.com
Link
http://www.gurufocus.com/StockBuy.php?symbol=DPZ
Price to sales is selling at a discount of .30 for the trailing twelve months versus 1.0 for 2004.
Price to cash flow is trading at a trailing twelve month of 4.7 versus 12.10 for 2004.
Great historical ROIC; 2008 – 2004 = 26.34%, 17.75%,70.83%,62.10%,35.36%
PTRY (Pantry Inc) $14.27
Pantry is a convenience store operator in the Southeast, with more than 1,600 stores in 11 states. 373 locations coupled with the corporate headquarters are owned.
P/S, P/CF, P/B are at a discount to their historical measures. One year return is -38% and 79% off the 5 year high.
Neither one is a micro cap but the approach can be used with smaller companies.
It makes sense that a large debt burden could be a motivating factor to improve productivity by forcing lower costs and executing a more selective approach to capital expenditures or acquisitions.
But to help avoid an investment mistake I want to stay with companies posting strong historical FCF but has a depressed stock price do to current earnings below expectations or historical profitability.
These were some of my search criteria;
1) No dilution and a share count that has been stable over the past 3-4 years. So my first filter was:
*Average share count last 3 years / Share count over the past 12 months >1.00
2)Large debt relative to total capital structure:
*EV{(Price+Total Debt)-(Cash)}/Price >4.00
3)Low administrative costs as measured by selling general and administrative costs as a percentage of total annual revenue.
*Annual SGA/Rev<.15
4) Postive FCF over the past 5 years demonstrating debt carrying capacity
5) Increasing total equity value over the past 4 years
6) Positive cash flow from operations over the past 12 months as a measure operational health regardless of the temporary poor bottom line results relative to historical performance
7) EV/Sales <1.90
8) Current price 75% below the 5 year high and a negative price return over the past 3 years.
9) Positive insider buying over the past 12 months
Two of the ideas that I’ve selected were as follows:
DPZ (Domino's Pizza) $7.38
DPZ is a pizza delivery company that has locations in all 50 states and in more the 60 countries. 90% of their stores are owned and operated by franchisees which reduces risk and maximizes free cash flow.
Although this has no influence on my thoughts, George Soros was recently buying according to gurufocus.com
Link
http://www.gurufocus.com/StockBuy.php?symbol=DPZ
Price to sales is selling at a discount of .30 for the trailing twelve months versus 1.0 for 2004.
Price to cash flow is trading at a trailing twelve month of 4.7 versus 12.10 for 2004.
Great historical ROIC; 2008 – 2004 = 26.34%, 17.75%,70.83%,62.10%,35.36%
PTRY (Pantry Inc) $14.27
Pantry is a convenience store operator in the Southeast, with more than 1,600 stores in 11 states. 373 locations coupled with the corporate headquarters are owned.
P/S, P/CF, P/B are at a discount to their historical measures. One year return is -38% and 79% off the 5 year high.
Neither one is a micro cap but the approach can be used with smaller companies.
11/04/2009
Attributes that warrant a closer look
First I wanted to find well run stocks posting great ROIC for the past 5 years not just the prior 12 months.Then I wanted to find companies selling at a discount to normalized earnings.
ICOC: ICO Inc manufactures specialty resins and concentrates, and provides specialized polymer processing services.
- 2.74% held by famed value investor Michael Price.
- Shares outstanding reduced year or year. -5,556,000 paid to purchase shares over the prior 12 months.
- Pre tax ROIC 12.82% 2008, 16.97% 2007, 13.66% 2006
- OI/EV % currently selling at a discount to prior 5 and 3 years earnings run rate. The stock based on the high ROIC in past years may be selling at a substantial discount to normalized earnings to be realized in future periods.
- EV/Price = 1.59, CFFO/EV = 27.26%, EBITDA/EV = 7.72%
- 73% off 5 year high, 3 month return = 18.10%, 52 week change – 14.09%
- Price to book, sales and CF are all trading at a discount to the prior 3 years
- Real estate owned nationally and internationally
- EV = 168 million
Negatives
Declining GP margins
YOY revenue down 39%
Also looking into GPX and ASGR. Sorry for the rushed post.
I don’t own shares of ICOC and need to finish the above data. Going to sleep now but will search for and introduce other high ROIC stocks (well run companies) over the past few years selling at a discount to normalized earnings.
LINK
http://www.shadowstock.com/ss_portfolio.html
ICOC: ICO Inc manufactures specialty resins and concentrates, and provides specialized polymer processing services.
- 2.74% held by famed value investor Michael Price.
- Shares outstanding reduced year or year. -5,556,000 paid to purchase shares over the prior 12 months.
- Pre tax ROIC 12.82% 2008, 16.97% 2007, 13.66% 2006
- OI/EV % currently selling at a discount to prior 5 and 3 years earnings run rate. The stock based on the high ROIC in past years may be selling at a substantial discount to normalized earnings to be realized in future periods.
- EV/Price = 1.59, CFFO/EV = 27.26%, EBITDA/EV = 7.72%
- 73% off 5 year high, 3 month return = 18.10%, 52 week change – 14.09%
- Price to book, sales and CF are all trading at a discount to the prior 3 years
- Real estate owned nationally and internationally
- EV = 168 million
Negatives
Declining GP margins
YOY revenue down 39%
Also looking into GPX and ASGR. Sorry for the rushed post.
I don’t own shares of ICOC and need to finish the above data. Going to sleep now but will search for and introduce other high ROIC stocks (well run companies) over the past few years selling at a discount to normalized earnings.
LINK
http://www.shadowstock.com/ss_portfolio.html
11/03/2009
Another Margin of Safety , MVC
The below was copied and pasted from the link below
Link
<< As another "margin of safety" play, consider MVC Capital , a business development company that specializes in acquisitions and financing of middle market companies. The market cap is $227 million, or $9.35 a share, against stated net asset value of more than $17 a share. In fact, management just this morning issued a release that the aggregate value of the fund's investments increased by $1.33 a share at the end of October.
MVC is not highly levered; its portfolio is nearly two-thirds equity and the shares currently yield 5.3%. Chairman and portfolio manager Michael Tokarz receives no salary and an incentive of 20% for any realized gains. At a nearly 50% discount to net asset value, this stock is trading at one of its largest discounts ever, and you can rest assured management is considering how to fix this discrepancy. MVC invests in old-economy businesses, many that have been around for decades.
The big risk of course, is taking management's assessment of NAV at face value. (If this company were trading at 20% of NAV, I probably wouldn't be writing about it.) Management owns more than 11% of outstanding shares, a small sign of alignment of incentives. The discount in NAV protects you from some unexpected adjustments. The dividend along with the fair pay structure gives management every incentive to grow the value of the business.
All investing entails risk. Focusing on the balance sheet can help eliminate a lot of that risk, but an investor's greatest margin of safety comes when a sound business chugs ahead with a functioning earnings engine >>
I have a position in MVC
Link
<< As another "margin of safety" play, consider MVC Capital , a business development company that specializes in acquisitions and financing of middle market companies. The market cap is $227 million, or $9.35 a share, against stated net asset value of more than $17 a share. In fact, management just this morning issued a release that the aggregate value of the fund's investments increased by $1.33 a share at the end of October.
MVC is not highly levered; its portfolio is nearly two-thirds equity and the shares currently yield 5.3%. Chairman and portfolio manager Michael Tokarz receives no salary and an incentive of 20% for any realized gains. At a nearly 50% discount to net asset value, this stock is trading at one of its largest discounts ever, and you can rest assured management is considering how to fix this discrepancy. MVC invests in old-economy businesses, many that have been around for decades.
The big risk of course, is taking management's assessment of NAV at face value. (If this company were trading at 20% of NAV, I probably wouldn't be writing about it.) Management owns more than 11% of outstanding shares, a small sign of alignment of incentives. The discount in NAV protects you from some unexpected adjustments. The dividend along with the fair pay structure gives management every incentive to grow the value of the business.
All investing entails risk. Focusing on the balance sheet can help eliminate a lot of that risk, but an investor's greatest margin of safety comes when a sound business chugs ahead with a functioning earnings engine >>
I have a position in MVC
10/17/2009
Screening with Greenblatt’s Magic Formula
https://www.magicformulainvesting.com/marketing/servlet/forms/MFI/Marketing/forms/WelcomeForm
Link
Using the magic formula investing website I came up with a list of 115 symbols. The screen was run for stocks greater than 50, 350 and 3,000 million.
These 115 ideas were further filtered based on some additional criteria.
EV/Sales <1.50
3yr average Shares outstanding/TTM < .97
EV/Price<1.60
Annual SGA/Rev <.35
Company share buybacks
Click to see the ideas
Link
Link
Using the magic formula investing website I came up with a list of 115 symbols. The screen was run for stocks greater than 50, 350 and 3,000 million.
These 115 ideas were further filtered based on some additional criteria.
EV/Sales <1.50
3yr average Shares outstanding/TTM < .97
EV/Price<1.60
Annual SGA/Rev <.35
Company share buybacks
Click to see the ideas
Link
10/08/2009
Insider Buys Large Amount of Stock in MVC Capital (MVC)
<
MVC Capital is a private equity business development company which invests in a portfolio of private companies throughout the world and across several sectors.
MVC Capital is currently trading for close to 60% of net asset value and has largely missed the market run up since March.
The company is down 14.6% year to date, but did trade up 4.7% to $9.29/share today on higher than normal volume.>>
TAKEN FROM Benzinga.com
Link
MVC Capital is a private equity business development company which invests in a portfolio of private companies throughout the world and across several sectors.
MVC Capital is currently trading for close to 60% of net asset value and has largely missed the market run up since March.
The company is down 14.6% year to date, but did trade up 4.7% to $9.29/share today on higher than normal volume.>>
TAKEN FROM Benzinga.com
Link
9/30/2009
ICCC: ImmuCell Corp (Nano Cap Value)
Stock reached a price of 4.75 today on positive news:
I own shares of ICCC
"Co announces that in a study of approximately 300 qualified cows with subclinical mastitis that was conducted at sixteen sites across the United States, the Mast Out treatment group showed a statistically highly significant overall cure rate in comparison to the placebo group. The preliminary breakdown of the data by species suggests both the necessary numerical superiority and clinical relevancy to support robust product performance in the field. The primary objective of this study was to demonstrate effectiveness in the field, at a level similar to currently marketed intramammary antibiotics "
The post below was written June 09:
Link
ICCC: ImmuCell Corp
Cash per share is 1.73 with no long term debt. They own a 26,800 square foot building at 56 Evergreen Drive in Portland, Maine. Enterprise value is only .63 : Price (2.20) – (1.57) (Cash – Liabilities) = .63 EV
This biotechnology company is dedicated to marketing products that improve animal health and productivity in the dairy and beef industries. Their product focus encompasses prevention, diagnosis and treatment of bovine diseases.
The key risk is FDA approval of Mast out.
I have a position in ICCC.
Additional positive insider activity today 06/09/09
Additional positive insider activity
ICCC Quote
http://finance.yahoo.com/q/it?s=ICCC
Link to ShadowStock
I own shares of ICCC
"Co announces that in a study of approximately 300 qualified cows with subclinical mastitis that was conducted at sixteen sites across the United States, the Mast Out treatment group showed a statistically highly significant overall cure rate in comparison to the placebo group. The preliminary breakdown of the data by species suggests both the necessary numerical superiority and clinical relevancy to support robust product performance in the field. The primary objective of this study was to demonstrate effectiveness in the field, at a level similar to currently marketed intramammary antibiotics "
The post below was written June 09:
Link
ICCC: ImmuCell Corp
Cash per share is 1.73 with no long term debt. They own a 26,800 square foot building at 56 Evergreen Drive in Portland, Maine. Enterprise value is only .63 : Price (2.20) – (1.57) (Cash – Liabilities) = .63 EV
This biotechnology company is dedicated to marketing products that improve animal health and productivity in the dairy and beef industries. Their product focus encompasses prevention, diagnosis and treatment of bovine diseases.
The key risk is FDA approval of Mast out.
I have a position in ICCC.
Additional positive insider activity today 06/09/09
Additional positive insider activity
ICCC Quote
http://finance.yahoo.com/q/it?s=ICCC
Link to ShadowStock
9/27/2009
Deepest of deep value (DCU)
Dry Clean USA is completely neglected, ignored, unloved and illiquid but is still one of the deepest of deep value micro cap stocks, IMO. Dry Clean USA (DCU) closed at $1.00 this Friday 09/23/09 and qualifies as a candidate to discuss on Seeking Alpha. I thought it may interest some nano cap investors. My first mention of DCU on this blog was September 2008 at .75. Link
Not quite jaw dropping returns or suited for almost all institutional investors but in comparison to the returns generated by DFSCX (DFA US Micro Cap I) which was down 21% over the same period its fundamental performance as a company and to a much lesser extent its stock performance makes the idea interesting to some deep value investors.
DCU is a leading distributors of industrial laundry, dry cleaning, steam boiler equipment and replacement parts. They service the hotels, hospitals, cruise ships and independent dry cleaners. The Company also sells into the highly fragmented dry clean retail operations by selling individual and area franchises under the DRYCLEAN USA name and develops new turn-key dry cleaning establishments for resale to third parties. The Company primarily sells to customers located in the United States, the Caribbean and Latin America.
Year over year annual revenues posted a +2% growth rate .However, net earnings for the year fell 12.5 percent, to $526,863, or 7 cents a share, from $601,852, or 9 cents a share, in fiscal 2008. According to the CFO “the financial crisis will have a greater affect on the company’s operations at the start of fiscal 2010,” CFO Venerando J. Indelicato said in a news release. “However, it is anticipated that the economy will improve during the year, releasing pent-up demand that presently awaits financing.”
Valuation
Market cap = 6,693,466
EV = 4,570,705
Impressive average 5 Year (06/04 to 06/08) pre tax ROIC of 18.52% indicating a clear strong history of capital allocation.
Per Share Data:
Price = .99
EV(.65)/MC(.99) = .65
EV = .65
Sales = 3.25
OI = .116
Total Liabilities = .436
Cash (.776) – Total Liabilities (.43) = .34
GP = .7131
FCF = .223
Cash = .77
RATIOS based on the period ending 06/30/09,the most recent 10k filed 09/23/09
EV/Sales = .20
GP(.713)/EV (.65) = 110%
SGA/Revenues = .198
FCF / EV = 22.54%
FCF avg past two years (.1028)/EV (.65) = 15.82%
OI (.1106)/EV (.65) = 17.02%
No dilution as shares outstanding have remained constant over the past several years.
Shares outstanding = 7,033,804
74% below 5 year high
YTD return = 12.10%
Risk:
Closely held with CEO M Steiner owning 64% of the company. Also management made a ridiculous low ball offer of .85 cents about a year ago. The offer was quickly removed as I’m sure the minority shareholders would have rejected.
Not quite jaw dropping returns or suited for almost all institutional investors but in comparison to the returns generated by DFSCX (DFA US Micro Cap I) which was down 21% over the same period its fundamental performance as a company and to a much lesser extent its stock performance makes the idea interesting to some deep value investors.
DCU is a leading distributors of industrial laundry, dry cleaning, steam boiler equipment and replacement parts. They service the hotels, hospitals, cruise ships and independent dry cleaners. The Company also sells into the highly fragmented dry clean retail operations by selling individual and area franchises under the DRYCLEAN USA name and develops new turn-key dry cleaning establishments for resale to third parties. The Company primarily sells to customers located in the United States, the Caribbean and Latin America.
Year over year annual revenues posted a +2% growth rate .However, net earnings for the year fell 12.5 percent, to $526,863, or 7 cents a share, from $601,852, or 9 cents a share, in fiscal 2008. According to the CFO “the financial crisis will have a greater affect on the company’s operations at the start of fiscal 2010,” CFO Venerando J. Indelicato said in a news release. “However, it is anticipated that the economy will improve during the year, releasing pent-up demand that presently awaits financing.”
Valuation
Market cap = 6,693,466
EV = 4,570,705
Impressive average 5 Year (06/04 to 06/08) pre tax ROIC of 18.52% indicating a clear strong history of capital allocation.
Per Share Data:
Price = .99
EV(.65)/MC(.99) = .65
EV = .65
Sales = 3.25
OI = .116
Total Liabilities = .436
Cash (.776) – Total Liabilities (.43) = .34
GP = .7131
FCF = .223
Cash = .77
RATIOS based on the period ending 06/30/09,the most recent 10k filed 09/23/09
EV/Sales = .20
GP(.713)/EV (.65) = 110%
SGA/Revenues = .198
FCF / EV = 22.54%
FCF avg past two years (.1028)/EV (.65) = 15.82%
OI (.1106)/EV (.65) = 17.02%
No dilution as shares outstanding have remained constant over the past several years.
Shares outstanding = 7,033,804
74% below 5 year high
YTD return = 12.10%
Risk:
Closely held with CEO M Steiner owning 64% of the company. Also management made a ridiculous low ball offer of .85 cents about a year ago. The offer was quickly removed as I’m sure the minority shareholders would have rejected.
9/24/2009
Note worthy insider activity today
Insider Sales reported today:
Bidz.com, Inc.(BIDZ) 19,278 shares sold @ average price of $3.72, NUTR 5,000 shares were sold at $11.02, PABRAI MOHNISH sold shares of HNR and PNCL
Purchases:
RLOG (C4S & CO LLC) purchased 213,207 @3.00
GMTC 6,682 shares purchased @ an average price of $1.55
Bidz.com, Inc.(BIDZ) 19,278 shares sold @ average price of $3.72, NUTR 5,000 shares were sold at $11.02, PABRAI MOHNISH sold shares of HNR and PNCL
Purchases:
RLOG (C4S & CO LLC) purchased 213,207 @3.00
GMTC 6,682 shares purchased @ an average price of $1.55
9/16/2009
PABRAI, MOHNISH
Air Transport Services Group, Inc : ATSG, Pabrai, Mohnish has a position and there was a tiny purchase by an insider on the 15th. I have no thoughts on the stock but wanted to pass the insider transaction data to readers that may have further information.
Below is a list of other value oriented micro caps with insider purchases on september 16 and 15
Click to see more data and quotes
ABD
ATGN
ATSG
GNRG.OB
HBIO
SUPG
Below is a list of other value oriented micro caps with insider purchases on september 16 and 15
Click to see more data and quotes
ABD
ATGN
ATSG
GNRG.OB
HBIO
SUPG
9/15/2009
Select Insider Buys Tonight
Mirco Cap Positive Insider Activity on September 14: Sorted in descending order based on purchase value / Total Float Amount
Click to see Results
Additional posted on twitter yesterday
Click to see results
Click to see Results
Additional posted on twitter yesterday
Click to see results
9/13/2009
Significant company buybacks and positive direct insider buys for August and September
Micro caps with significant share buybacks over the prior 4 qtrs with direct insider buying by Officers or Directors for August and September YTD 2009
Quotes and Yahoo Finance Data on the ideas below
Additional information on the ideas below
NOOF New Frontier Media Inc. Movie Production, Theaters :Buybacks / Float Value = -18.17%
PLXT PLX Technology Inc. Semiconductor - Integrated Circuits :Buybacks / Float Value = -11.89%
LNUX SourceForge, Inc. Internet Software & Services :Buybacks / Float Value = -9.7%
BBSI Barrett Business Services Inc. Staffing & Outsourcing Services :Buybacks / Float Value = -8.62%
CLCT Collectors Universe Inc. Business Services :Buybacks / Float Value = -7.39%
INWK InnerWorkings Inc. Business Services :Buybacks / Float Value = -5.51%
DTPI Diamond Management &Technology Management Services :Buybacks / Float Value = -4.52%
TLGD Tollgrade Communications Inc. Industrial Electrical Equipment :Buybacks / Float Value = -4%
CALD Callidus Software Inc. Business Software & Services :Buybacks / Float Value = -3.54%
HRT Arrhythmia Research Technology Medical Appliances & Equipment :Buybacks / Float Value = -1.29%
SGI Silicon Graphics International Diversified Computer Systems :Buybacks / Float Value = -0.64%
Quotes and Yahoo Finance Data on the ideas below
Additional information on the ideas below
NOOF New Frontier Media Inc. Movie Production, Theaters :Buybacks / Float Value = -18.17%
PLXT PLX Technology Inc. Semiconductor - Integrated Circuits :Buybacks / Float Value = -11.89%
LNUX SourceForge, Inc. Internet Software & Services :Buybacks / Float Value = -9.7%
BBSI Barrett Business Services Inc. Staffing & Outsourcing Services :Buybacks / Float Value = -8.62%
CLCT Collectors Universe Inc. Business Services :Buybacks / Float Value = -7.39%
INWK InnerWorkings Inc. Business Services :Buybacks / Float Value = -5.51%
DTPI Diamond Management &Technology Management Services :Buybacks / Float Value = -4.52%
TLGD Tollgrade Communications Inc. Industrial Electrical Equipment :Buybacks / Float Value = -4%
CALD Callidus Software Inc. Business Software & Services :Buybacks / Float Value = -3.54%
HRT Arrhythmia Research Technology Medical Appliances & Equipment :Buybacks / Float Value = -1.29%
SGI Silicon Graphics International Diversified Computer Systems :Buybacks / Float Value = -0.64%
9/10/2009
Biotechnology Micro Cap Value with Positive Insider Buys for 2009
These two ideas are selling below net cash:
KDUS; Cadus Corp, Carl Icahn buying shares, selling for less than net cash
CAPS: Orthologic Corp, selling for less than net cash, share buy backs for 2009 in the amount of 6,845,000
Additional data and several more micro cap biotech ideas with positive 2009 insider activity
Follow Link
KDUS; Cadus Corp, Carl Icahn buying shares, selling for less than net cash
CAPS: Orthologic Corp, selling for less than net cash, share buy backs for 2009 in the amount of 6,845,000
Additional data and several more micro cap biotech ideas with positive 2009 insider activity
Follow Link
9/09/2009
Sept 7 - 9 insider buys; Micro Cap Value
Additional Details on the ideas below
Follow Link
INMD: Integramed America Inc, Medical Practitioner Industry,
MPET: Magellan Petroleum Corp, Heavy recent insider buying relative to float value
NENG:Network Engines Inc., Royce owns 3%
SNS: Steak and Shake, Continued insider buying at current prices by management
Follow Link
INMD: Integramed America Inc, Medical Practitioner Industry,
MPET: Magellan Petroleum Corp, Heavy recent insider buying relative to float value
NENG:Network Engines Inc., Royce owns 3%
SNS: Steak and Shake, Continued insider buying at current prices by management
9/08/2009
Micro Cap Insider Activity September 1 -4 with Value Attributes
See details
Link for Additional Data
CLCT: Collectors Universe Inc.: 2.4 mil in share buy backs prior 12 mnths
GNRG.OB: Gateway Energy Corporation (-60% YOY sales change)
IRIX: IRIDEX Corp. Medical Appliances
MPET: Magellan Petroleum Corp. EV/Price = 63%
PRPX: Portec Rail Products Inc.
SGRP: Spar Group Inc.
SNS: Steak n Shake Co.
SUPG: SuperGen Inc. EV/Price = 52%
TBAC: Tandy Brands Accessories Inc. (EV/SALES = .24)GP/EV = 120%, Textile
TIV: Tri-Valley Corp.
TRBR: Trailer Bridge Inc.
Link for Additional Data
CLCT: Collectors Universe Inc.: 2.4 mil in share buy backs prior 12 mnths
GNRG.OB: Gateway Energy Corporation (-60% YOY sales change)
IRIX: IRIDEX Corp. Medical Appliances
MPET: Magellan Petroleum Corp. EV/Price = 63%
PRPX: Portec Rail Products Inc.
SGRP: Spar Group Inc.
SNS: Steak n Shake Co.
SUPG: SuperGen Inc. EV/Price = 52%
TBAC: Tandy Brands Accessories Inc. (EV/SALES = .24)GP/EV = 120%, Textile
TIV: Tri-Valley Corp.
TRBR: Trailer Bridge Inc.
8/31/2009
Pervasive Software (PVSW)
Pervasive Software (PVSW)
Doing some systems work tonight and stumbled upon a stock I once owned. The most interesting aspect of this stock is as follows:
*Very aggressive share buybacks over the past few reported quarters. In fact they spent 12,254,000 to buy back shares at depressed prices over the past 5 quarters.
* The current share count has been reduced and is about the same count in 2003.
* FCF generated over the past 3 years as a percentage of the current enterprise value was 15%. Current FCF/EV = 12.62%
* Net income total over the past 3 years was $4,066,667. FCF was 8,500,000 over the prior 3 years.
* YTD return is 23.90%, one month return is -2.60%, 17% below the 52 week high.
* EV = 57.395 million, EV/Sales = 1.26, OI/EV = 11.06%, EBITDA/EV = 14.20%,
I don’t own shares at this time but if the stock continues to fall I may consider.
Looking into ALOY
Link
Doing some systems work tonight and stumbled upon a stock I once owned. The most interesting aspect of this stock is as follows:
*Very aggressive share buybacks over the past few reported quarters. In fact they spent 12,254,000 to buy back shares at depressed prices over the past 5 quarters.
* The current share count has been reduced and is about the same count in 2003.
* FCF generated over the past 3 years as a percentage of the current enterprise value was 15%. Current FCF/EV = 12.62%
* Net income total over the past 3 years was $4,066,667. FCF was 8,500,000 over the prior 3 years.
* YTD return is 23.90%, one month return is -2.60%, 17% below the 52 week high.
* EV = 57.395 million, EV/Sales = 1.26, OI/EV = 11.06%, EBITDA/EV = 14.20%,
I don’t own shares at this time but if the stock continues to fall I may consider.
Looking into ALOY
Link
8/27/2009
8/25/2009
Ideas 08/24/09
Some the following have been introduced in the past but the market has moved them higher.
But given the large cash balances, low debt, strong capital structure, 65%- 38% of the 5 year high, respectable profitability they deserve to be monitored.
MDF, industry = Health Care Plans, 38% off 5 year high, YTD return 38%, below 52 week high 14.40%, 3 month return 15.70%, average 4 year ROIC 24.75%, EV = 78 million, market cap 52 week change 3.1 %, off 52 week low 132%, Qtrly YO Y revenue growth 5.90%, OI/EV = 22.58%, short as a percentage of float 5.90%, EBITDA/EV = 24%
See more ideas and additional data on MDF, OPTV, DGII, NATH
Link
But given the large cash balances, low debt, strong capital structure, 65%- 38% of the 5 year high, respectable profitability they deserve to be monitored.
MDF, industry = Health Care Plans, 38% off 5 year high, YTD return 38%, below 52 week high 14.40%, 3 month return 15.70%, average 4 year ROIC 24.75%, EV = 78 million, market cap 52 week change 3.1 %, off 52 week low 132%, Qtrly YO Y revenue growth 5.90%, OI/EV = 22.58%, short as a percentage of float 5.90%, EBITDA/EV = 24%
See more ideas and additional data on MDF, OPTV, DGII, NATH
Link
7/14/2009
An overlooked metric to help identify value
We all know the P/E ratio or the price to sales multiple but how often do we hear about price to the GP multiple.
A stock trading at a deep discount based on a low price or EV to gross profit can help provide insight into an overreaction to negative news or other non essential long term negative event.
Not only was I looking for companies generating large gross profits relative the price paid but the stocks had to also clear these hurdles
Dilution factor: Average shares outstanding over 3 years/TTM shares outstanding
Smart money: avoid stocks heavily shorted, Shares shorts as a percentage of the float <5 br="">
Avoid companies with a large decline in sales. Quarterly year over year revenue growth > -5%
Management greed test: Selling and general administrative cost less than 30% of revenue
A few of the stocks worth introducing tonight
Link to the ideas
Quadra Med Corp
QDHC
Price: 6.42 (not sure why i looked but noticed all cash takeover 12/09 for 126 M or 8.50 per share)
Average ROA past 4 years: 11.61
Significnat Positive Direct insider buying
Large company Share Buybacks: 4.474 million expended on share buybacks over the past 12 months
5.50 million paid in dividends to shareholder over the prior 12 months
Annual SGA/REV = 26.35%
NTA per share = 7.36
EV per share = 13.12
Industry:Business Software & Services
A stock trading at a deep discount based on a low price or EV to gross profit can help provide insight into an overreaction to negative news or other non essential long term negative event.
Not only was I looking for companies generating large gross profits relative the price paid but the stocks had to also clear these hurdles
Dilution factor: Average shares outstanding over 3 years/TTM shares outstanding
Smart money: avoid stocks heavily shorted, Shares shorts as a percentage of the float <5 br="">
Avoid companies with a large decline in sales. Quarterly year over year revenue growth > -5%
Management greed test: Selling and general administrative cost less than 30% of revenue
A few of the stocks worth introducing tonight
Link to the ideas
Quadra Med Corp
QDHC
Price: 6.42 (not sure why i looked but noticed all cash takeover 12/09 for 126 M or 8.50 per share)
Average ROA past 4 years: 11.61
Significnat Positive Direct insider buying
Large company Share Buybacks: 4.474 million expended on share buybacks over the past 12 months
5.50 million paid in dividends to shareholder over the prior 12 months
Annual SGA/REV = 26.35%
NTA per share = 7.36
EV per share = 13.12
Industry:Business Software & Services
7/12/2009
"SUPER COMPANIES"
Price to sales was a measure guru investor Fisher used to identify super companies.
Filter created
Shareholder friendly factor: This was a quick attempt to find companies not diluting their shares outstanding
1)[Avg3Yrs/TTM]>.94
Average shares outstanding over the past 3 years/ TTM shares outstanding >.94
2) Investor sentiment or smart money:
Shares short as a percentage of float <3%
3) Positive cash flow from operation and Earnings before interest taxes depreciation and amortization greater than zero. Trying to avoid distressed firms
4) Positive quarterly year over year revenue growth
5) Measure management greed: Management greed factor using SGA as a percentage of revenue: select only companies with a SGA/Revenue <.30
6) EV (Price – Cash +Total Debt)/Price <1.75 identifies companies with no significant debt or having large cash balance.
See the results
Link
Filter created
Shareholder friendly factor: This was a quick attempt to find companies not diluting their shares outstanding
1)[Avg3Yrs/TTM]>.94
Average shares outstanding over the past 3 years/ TTM shares outstanding >.94
2) Investor sentiment or smart money:
Shares short as a percentage of float <3%
3) Positive cash flow from operation and Earnings before interest taxes depreciation and amortization greater than zero. Trying to avoid distressed firms
4) Positive quarterly year over year revenue growth
5) Measure management greed: Management greed factor using SGA as a percentage of revenue: select only companies with a SGA/Revenue <.30
6) EV (Price – Cash +Total Debt)/Price <1.75 identifies companies with no significant debt or having large cash balance.
See the results
Link
Month to date July 2009
Non Financial stocks with direct positive insider activity for July month to date
165 points of fundamental data to help with the investment decision
Link
NUTR (Nutraceutical International)
High ROIC and Earnings yield combination
Price $10.23
52 week return -13.93%, off 52 week high 23.06% off 52 week low 84%:
Industry = Drug related, YOY quarterly revenue growth = 5.6%,
Stocks buy backs over the past 12 months / EV = .01889% or $1,816,000 expended on share buybacks.
FCF/EV = 5.77%, EBITDA per share = 2.63, EV per share = 13.51, CFFO/EV = 15.47%,
EBITDA/EV = 19.47%, SGA/Rev = 39.80%, average ROA over the past 4 years = 9.09%
I have a position in NUTR
MEI (Methode Electronics)
Price = $6.29
EV per share =6.38 or $241,029,000
EV/Price = 1.028
Sales per share = 13.08
EV/Sales = .4876
ROA average 2 years = 3.96
NTA per share = 6.30
Rev/EV = 2.05
SGA/Rev = 12.47%
Average 3 years shares outstanding / TTM = .97
Current dividend yield = 4.50%
Share buy backs/EV = 2.59% or $6,246,000
Other stocks with positive activity
ISCA (International Speedway)
MMLP (Martin Midstream Partners)
CFWH.OB (The Center for Wound Healing)
TYL (Tyler Technologies)
ABM (ABM Industries)
CPK (Chesapeake Utilities Corporation)CFI (Culp, Inc. engages)
SD (SandRidge Energy)
SHE (Spartech Corporation)
HBE (Henry Bros. Electron)
VHI (Valhi, Inc. operates)
165 points of fundamental data to help with the investment decision
Link
NUTR (Nutraceutical International)
High ROIC and Earnings yield combination
Price $10.23
52 week return -13.93%, off 52 week high 23.06% off 52 week low 84%:
Industry = Drug related, YOY quarterly revenue growth = 5.6%,
Stocks buy backs over the past 12 months / EV = .01889% or $1,816,000 expended on share buybacks.
FCF/EV = 5.77%, EBITDA per share = 2.63, EV per share = 13.51, CFFO/EV = 15.47%,
EBITDA/EV = 19.47%, SGA/Rev = 39.80%, average ROA over the past 4 years = 9.09%
I have a position in NUTR
MEI (Methode Electronics)
Price = $6.29
EV per share =6.38 or $241,029,000
EV/Price = 1.028
Sales per share = 13.08
EV/Sales = .4876
ROA average 2 years = 3.96
NTA per share = 6.30
Rev/EV = 2.05
SGA/Rev = 12.47%
Average 3 years shares outstanding / TTM = .97
Current dividend yield = 4.50%
Share buy backs/EV = 2.59% or $6,246,000
Other stocks with positive activity
ISCA (International Speedway)
MMLP (Martin Midstream Partners)
CFWH.OB (The Center for Wound Healing)
TYL (Tyler Technologies)
ABM (ABM Industries)
CPK (Chesapeake Utilities Corporation)CFI (Culp, Inc. engages)
SD (SandRidge Energy)
SHE (Spartech Corporation)
HBE (Henry Bros. Electron)
VHI (Valhi, Inc. operates)
7/05/2009
Value Filter created 07/05/09
The value filter was developed as follow:
EV/Sales < 1.50
Average shares outstanding over past 3 years/TTM Shares outstanding >.94
Shares short as a % of Float < 10%
EV/Market Cap < 1.85
Share buybacks for the last reported quarter
Positive direct net insider buying for 2009
The list was sorted by direct net insider transactions (Buys less Sales)/Float Value (shares outstanding in float * Price)
Now the results
Link
EV/Sales < 1.50
Average shares outstanding over past 3 years/TTM Shares outstanding >.94
Shares short as a % of Float < 10%
EV/Market Cap < 1.85
Share buybacks for the last reported quarter
Positive direct net insider buying for 2009
The list was sorted by direct net insider transactions (Buys less Sales)/Float Value (shares outstanding in float * Price)
Now the results
Link
6/30/2009
New Ideas
The list was generated based on the following criteria;
Only companies with direct insider purchases by directors or officers for 2009.
Stocks with share buybacks over the past two quarters with the belief shares were acquired at bargain value building prices.
Average number of shares outstanding over the past 3 years /TTM share outstanding >.93
I was trying to measure improvement of the capital structure based on the actual reduction of share count.
Enterprise value /Market Capitalization < 1.75 (Low debt companies with a strong cash position)
The data was measured by the value of the direct shares purchased by insiders/enterprise value
Other criteria that I will discuss on another night.
Just hope you can find the data somewhat useful.
A link to the stocks based on the above criteria.
Just updated (07/01/09)the above ideas with fundamental financial data
Only companies with direct insider purchases by directors or officers for 2009.
Stocks with share buybacks over the past two quarters with the belief shares were acquired at bargain value building prices.
Average number of shares outstanding over the past 3 years /TTM share outstanding >.93
I was trying to measure improvement of the capital structure based on the actual reduction of share count.
Enterprise value /Market Capitalization < 1.75 (Low debt companies with a strong cash position)
The data was measured by the value of the direct shares purchased by insiders/enterprise value
Other criteria that I will discuss on another night.
Just hope you can find the data somewhat useful.
A link to the stocks based on the above criteria.
Just updated (07/01/09)the above ideas with fundamental financial data
6/24/2009
Share buy backs at value creating prices
Micro cap value with recent share buy backs at potential value creating prices; current insider buying
Link to ideas
Link to ideas
6/15/2009
Syms Corp {SYMS}
SYMS
"Assuming the bankruptcy judge approves the sale, this is a transformative deal for Syms in our view, it is double barreled, for their retail business and their owned real estate assets," said Andrew Sole, a managing member of Esopus Creek Advisors, which owns about 3.5 percent of Syms common stock.
http://finance.yahoo.com/news/SymsVornado-win-Filenes-with-rb-15529806.html?.v=1
Syms:Hidden values buried on the balance sheet
"Assuming the bankruptcy judge approves the sale, this is a transformative deal for Syms in our view, it is double barreled, for their retail business and their owned real estate assets," said Andrew Sole, a managing member of Esopus Creek Advisors, which owns about 3.5 percent of Syms common stock.
http://finance.yahoo.com/news/SymsVornado-win-Filenes-with-rb-15529806.html?.v=1
Syms:Hidden values buried on the balance sheet
6/14/2009
Joel Greenblatt meets Ben Graham and Warren Buffett
Ben Graham focused on buying as many statistically cheap stocks he could find. Buffett after many years of less than perfect results from investing in cheap ideas/cigar butts with textile mills, department stores and windmill companies his approached was modified. His modified approach was to focus on good companies at cheap prices such as Coca-Cola. The approach of buying good companies for cheap prices is exactly the focus of Joel Greenblatt. He took the best from both investors and with his ability to forecast normalized earnings several years out this approach has been unmatched for many years running the hedge fund Gotham Capital.
For this week’s direct positive insider activity I selected only stocks that would be potentially acceptable for further research to Ben Graham, Buffett and Joel Greenblatt.
ImmuCell Corp (ICCC)
Hurco Companies Inc (HURC)
Advocat Inc (ACVA)
Ramtron International (RMTR)
Nutraceutical International (NUTR)
Additional data on the above:
Link
All ideas last week with positive insider activity (not necessarily acceptable to Graham, Buffett or Greenblatt)
Sorted by amount of last week’s insider purchases/EV
Link
For this week’s direct positive insider activity I selected only stocks that would be potentially acceptable for further research to Ben Graham, Buffett and Joel Greenblatt.
ImmuCell Corp (ICCC)
Hurco Companies Inc (HURC)
Advocat Inc (ACVA)
Ramtron International (RMTR)
Nutraceutical International (NUTR)
Additional data on the above:
Link
All ideas last week with positive insider activity (not necessarily acceptable to Graham, Buffett or Greenblatt)
Sorted by amount of last week’s insider purchases/EV
Link
MVC Capital - MVC-NYSE
Taken from Saturday’s (06/13/09) Barrons
MVC Capital - MVC-NYSE
Buy - Price 8.56 on June 9
by Morgan Joseph
“MVC reported slightly lower-than-expected [net asset value] per share of $16.84 in F2Q09. This compares to our $17.24 ... In Securities and Exchange Commission filings, MVC reported F2Q09 income from interest, dividends, and fees of $5.8 million, operating income of $2.1 million, net income of $1.7 million, a net realized and unrealized loss on investments of $9.5 million, and a net decrease in assets of $7.8 million. The company also reported realized and unrealized losses of 32 cents per diluted share versus our estimate of a 10-cent gain. We think multiples have bottomed out among portfolio companies, while revenue and Ebidta appear to be stabilizing...We are maintaining our Buy rating and target of 17. We believe MVC's portfolio remains relatively strong and that write-downs to portfolio companies should slow in coming quarters. Our price target is based on our estimated NAV per share of $16.88 at the end of FY2Q [the fiscal second quarter of] 2010. Market cap: $208 million.”
Link
http://online.barrons.com/article/SB124484648775411207.html?ru=yahoo
I have a position in MVC
Significant positive insider activity
Link
Additional Fundamental Data
MVC Capital - MVC-NYSE
Buy - Price 8.56 on June 9
by Morgan Joseph
“MVC reported slightly lower-than-expected [net asset value] per share of $16.84 in F2Q09. This compares to our $17.24 ... In Securities and Exchange Commission filings, MVC reported F2Q09 income from interest, dividends, and fees of $5.8 million, operating income of $2.1 million, net income of $1.7 million, a net realized and unrealized loss on investments of $9.5 million, and a net decrease in assets of $7.8 million. The company also reported realized and unrealized losses of 32 cents per diluted share versus our estimate of a 10-cent gain. We think multiples have bottomed out among portfolio companies, while revenue and Ebidta appear to be stabilizing...We are maintaining our Buy rating and target of 17. We believe MVC's portfolio remains relatively strong and that write-downs to portfolio companies should slow in coming quarters. Our price target is based on our estimated NAV per share of $16.88 at the end of FY2Q [the fiscal second quarter of] 2010. Market cap: $208 million.”
Link
http://online.barrons.com/article/SB124484648775411207.html?ru=yahoo
I have a position in MVC
Significant positive insider activity
Link
Additional Fundamental Data
6/09/2009
ICCC: ImmuCell Corp (Nano Cap Value)
ICCC: ImmuCell Corp
Cash per share is 1.73 with no long term debt. They own a 26,800 square foot building at 56 Evergreen Drive in Portland, Maine. Enterprise value is only .63 : Price (2.20) – (1.57) (Cash – Liabilities) = .63 EV
This biotechnology company is dedicated to marketing products that improve animal health and productivity in the dairy and beef industries. Their product focus encompasses prevention, diagnosis and treatment of bovine diseases.
The key risk is FDA approval of Mast out.
I have a position in ICCC.
Additional positive insider activity today 06/09/09
Additional positive insider activity
http://finance.yahoo.com/q/it?s=ICCC
Cash per share is 1.73 with no long term debt. They own a 26,800 square foot building at 56 Evergreen Drive in Portland, Maine. Enterprise value is only .63 : Price (2.20) – (1.57) (Cash – Liabilities) = .63 EV
This biotechnology company is dedicated to marketing products that improve animal health and productivity in the dairy and beef industries. Their product focus encompasses prevention, diagnosis and treatment of bovine diseases.
The key risk is FDA approval of Mast out.
I have a position in ICCC.
Additional positive insider activity today 06/09/09
Additional positive insider activity
http://finance.yahoo.com/q/it?s=ICCC
6/08/2009
Biotechnology
I have no expertise with biotechnology but did write the following about using insider activity with biotechnology stocks.
It seems logical Insider activity within certain industries such as biotechnology may provide more directional information. The thesis is management understands the science and future possibilities of new drug breakthroughs or ability to pass future FDA hurdles
Link
http://seekingalpha.com/article/130846-how-to-interpret-insider-transactions
DYAX was provided on my value insider list on Sunday.
Link
http://www.shadowstock.com/ss_060509.html
Insider Activity for DYAX
http://finance.yahoo.com/q/it?s=DYAX
The idea may be worth a closer look.
It seems logical Insider activity within certain industries such as biotechnology may provide more directional information. The thesis is management understands the science and future possibilities of new drug breakthroughs or ability to pass future FDA hurdles
Link
http://seekingalpha.com/article/130846-how-to-interpret-insider-transactions
DYAX was provided on my value insider list on Sunday.
Link
http://www.shadowstock.com/ss_060509.html
Insider Activity for DYAX
http://finance.yahoo.com/q/it?s=DYAX
The idea may be worth a closer look.
6/07/2009
NUTR: High ROIC and earnings yield combination
Nutraceutical International Corp (NUTR) with its relatively high ROIC and earnings yield combination coupled with the additional small insider purchases forced me to take another look at this stock I own.
Industry = Drug Related Products
Insiders step up and add to their position but the activity has been less than perfect.
Link
http://finance.yahoo.com/q/it?s=NUTR
EV = 143,101,200
MC = 103,280,000
EV/Sales = .8650%
Trading at a historical discount
YOY Qtry Rev Growth = -5.60%
Shares outstanding consistent over several years
OI/EV = 14.12%
CFFO/EV = 30.58%
FCF/EV = 5.97%
EBITDA/EV = 20.04%
Short % Float = .20%
52WkChng = -28.34%
ROA = 9.47%
My comments back on April 14 when the stock was ~7.
Nutraceutical (NUTR) has successfully created shareholder value with a sensible capital allocation strategy. ROIC before taxes has averaged an enviable 21.58% for the past 4 reported fiscal years but has fallen to 13.81% for the most recent year end. The drop is not due to the margin compression that has actually risen from 52.56% in 2004 to 54.40% 09/08. The lower ROIC is directly attributable to SGA increasing 31.87% from 2004 coupled with sales improving 18.56% forcing operating margins to decline. But based on ROIC NUTR solidly outperforms its publicly held direct competitors: Schiff Nutrition (WNI), Natural Alternatives (NAII), NBTY (NTY), Natural Alternatives International (NAII) or Mannatech Inc (MTEX). At this point the profitability for NUTR is significantly higher than its peers and represents a bargain price with a current EBITDA/EV at 25.20%. Historical it has managed to keep its capital structure clean with a relatively constant outstanding share count over the past several years. The solid financial health is supported by years of well managed strong FCF.
Business summary taken from Yahoo
"Nutraceutical International Corporation engages in the manufacture, marketing, distribution, and retail of branded nutritional supplements and other natural products in the United States and Internationally. The company's products include vitamins and minerals, herbs, specialty formulas, and other products offered in various formulations and delivery forms, including capsules, tablets, softgels, chewables, liquids, creams, sprays, powders, and whole herbs. It also publishes, prints, and markets a line of books and booklets to book distributors, national retail bookstores, and health and natural food stores; distributes branded products of certain third parties; and owns neighborhood natural food markets and health food stores. Nutraceutical International sells its products primarily to and through domestic health and natural food stores. The company was founded in 1993 and is based in Park City, Utah.?"
Other potential value stocks on June 4/5 that had positive insider activity were the following. Hope you find the data useful.
Link
Industry = Drug Related Products
Insiders step up and add to their position but the activity has been less than perfect.
Link
http://finance.yahoo.com/q/it?s=NUTR
EV = 143,101,200
MC = 103,280,000
EV/Sales = .8650%
Trading at a historical discount
YOY Qtry Rev Growth = -5.60%
Shares outstanding consistent over several years
OI/EV = 14.12%
CFFO/EV = 30.58%
FCF/EV = 5.97%
EBITDA/EV = 20.04%
Short % Float = .20%
52WkChng = -28.34%
ROA = 9.47%
My comments back on April 14 when the stock was ~7.
Nutraceutical (NUTR) has successfully created shareholder value with a sensible capital allocation strategy. ROIC before taxes has averaged an enviable 21.58% for the past 4 reported fiscal years but has fallen to 13.81% for the most recent year end. The drop is not due to the margin compression that has actually risen from 52.56% in 2004 to 54.40% 09/08. The lower ROIC is directly attributable to SGA increasing 31.87% from 2004 coupled with sales improving 18.56% forcing operating margins to decline. But based on ROIC NUTR solidly outperforms its publicly held direct competitors: Schiff Nutrition (WNI), Natural Alternatives (NAII), NBTY (NTY), Natural Alternatives International (NAII) or Mannatech Inc (MTEX). At this point the profitability for NUTR is significantly higher than its peers and represents a bargain price with a current EBITDA/EV at 25.20%. Historical it has managed to keep its capital structure clean with a relatively constant outstanding share count over the past several years. The solid financial health is supported by years of well managed strong FCF.
Business summary taken from Yahoo
"Nutraceutical International Corporation engages in the manufacture, marketing, distribution, and retail of branded nutritional supplements and other natural products in the United States and Internationally. The company's products include vitamins and minerals, herbs, specialty formulas, and other products offered in various formulations and delivery forms, including capsules, tablets, softgels, chewables, liquids, creams, sprays, powders, and whole herbs. It also publishes, prints, and markets a line of books and booklets to book distributors, national retail bookstores, and health and natural food stores; distributes branded products of certain third parties; and owns neighborhood natural food markets and health food stores. Nutraceutical International sells its products primarily to and through domestic health and natural food stores. The company was founded in 1993 and is based in Park City, Utah.?"
Other potential value stocks on June 4/5 that had positive insider activity were the following. Hope you find the data useful.
Link
5/31/2009
Dramatic run up justified?
Is the recent dramatic run up justified?
Link Bloomberg
<
‘Danger Is High’>>
Spending too much effort trying to gain additional macroeconomic insight may provide little reward given how closely this topic is covered. I prefer to allocate my investing time finding new ideas or gaining additional understanding of my current positions.Trying to look 3 - 5 years out,for some ideas,and determining normalized earnings seems like a more profitable use of time.
Regardless of the direction of the economy I will continue to follow and buy micro cap value ideas. I’ve never given much weight to insider activity but instead relied solely on fundamental data. But at this time with economic uncertainty and forecasts changing daily correctly using insider transactions coupled with fundamental data may add additional value to the investment process. I’m adding this approach to assist in finding potential new ideas.
Link
http://seekingalpha.com/article/130846-how-to-interpret-insider-transactions
Some stocks I was buying this week; These are not recommendations but for me they were worth adding at that time to an existing diversified micro cap portfolio.
Brief points
RFIL:
High ROIC plus earnings yield combination, large share buybacks over the last two recently reported quarters. Solid balance sheet, stable dividend,clean capital structure, reversion to mean valuation
CLRO:
Strong fundamental valuation with exceptional insider buying over the past month, institutions such as Royce have been increasing their ownership
RAIL:
discount to normalized earnings several years out imo,
Mohnish Pabrai in the past talked about relevance of clean coal and that coal use will increase. He believes there is a 30-40 year bulge in railcar demand. Negative is that the business is unionized and narrow. Pabrai sold last year for a small profit given he had a better opportunity and thought the 40 year bulge may be off by 2 or 3 years. He made the correct move as the stock has a -63.63% 52 week return.
Source SeekingApha
UTMD:
Consistent and generous dividend yield, high ROIC and earnings yield with strong balance sheet , reducing shares outstanding, take over potential
Utah Medical: A Small Cap Gem
http://seekingalpha.com/article/131134-utah-medical-a-small-cap-gem
SIDG.PK:
VERY RISKY and although not a traditional value stock SIDG.PK does have additional attributes that can make the idea work, again very risky with no margin of safety. Good management team, Warren Kanders, recent large contract with world trade center to supply counter weights, seeking listing on major exchange, actively looking at acquisitions. Be careful as the auditors recently added a going concern statement due to loan convent violations.
Link to portfolio
Link Bloomberg
<
‘Danger Is High’>>
Spending too much effort trying to gain additional macroeconomic insight may provide little reward given how closely this topic is covered. I prefer to allocate my investing time finding new ideas or gaining additional understanding of my current positions.Trying to look 3 - 5 years out,for some ideas,and determining normalized earnings seems like a more profitable use of time.
Regardless of the direction of the economy I will continue to follow and buy micro cap value ideas. I’ve never given much weight to insider activity but instead relied solely on fundamental data. But at this time with economic uncertainty and forecasts changing daily correctly using insider transactions coupled with fundamental data may add additional value to the investment process. I’m adding this approach to assist in finding potential new ideas.
Link
http://seekingalpha.com/article/130846-how-to-interpret-insider-transactions
Some stocks I was buying this week; These are not recommendations but for me they were worth adding at that time to an existing diversified micro cap portfolio.
Brief points
RFIL:
High ROIC plus earnings yield combination, large share buybacks over the last two recently reported quarters. Solid balance sheet, stable dividend,clean capital structure, reversion to mean valuation
CLRO:
Strong fundamental valuation with exceptional insider buying over the past month, institutions such as Royce have been increasing their ownership
RAIL:
discount to normalized earnings several years out imo,
Mohnish Pabrai in the past talked about relevance of clean coal and that coal use will increase. He believes there is a 30-40 year bulge in railcar demand. Negative is that the business is unionized and narrow. Pabrai sold last year for a small profit given he had a better opportunity and thought the 40 year bulge may be off by 2 or 3 years. He made the correct move as the stock has a -63.63% 52 week return.
Source SeekingApha
UTMD:
Consistent and generous dividend yield, high ROIC and earnings yield with strong balance sheet , reducing shares outstanding, take over potential
Utah Medical: A Small Cap Gem
http://seekingalpha.com/article/131134-utah-medical-a-small-cap-gem
SIDG.PK:
VERY RISKY and although not a traditional value stock SIDG.PK does have additional attributes that can make the idea work, again very risky with no margin of safety. Good management team, Warren Kanders, recent large contract with world trade center to supply counter weights, seeking listing on major exchange, actively looking at acquisitions. Be careful as the auditors recently added a going concern statement due to loan convent violations.
Link to portfolio
5/25/2009
Part Science, Art and Personal Goals
A question was asked about a specific idea that recently had positive insider activity.
Link
http://www.shadowstock.com/ss_051509.html
The only reason for providing potential ideas with frequent current positive insider activity with fundamental supporting data is for some investors the idea may fit into their portfolio. Or they may have additional specific insight into the industry or company to go long or concentrate their holdings. How and if an idea fits into your portfolio is personal. Not having a solid reason for buying or portfolio strategy may force the sale or purchase at the wrong time. You may also avoid intelligently adding more shares when the stock is down. Hopefully the direct insider activity with supporting fundamental data will prove useful at times for some readers.
When I’m managing my portfolio I take a highly diversified approach. Value oriented stocks are added slowly. I try to avoid position concentration, most of the time. My emotions can get carried away leading to an overweighting. This highly diversified approach will not be the most successful approach for other investors but for me it fits into my goals.
Famed investor Mohnish Pabrai became a rock star easily crushing the market with a concentrated portfolio of his best ideas for many years. He even bid $650,001 to have lunch with Warren Buffet. His Warren Buffet concentrated portfolio approach was working for several years. But 2008 he was devastated with this approach, down 59% in 2008, and the last half of 2007 was even more destructive.
Thanks to the outstanding noisefreeinvesting.com blog he just posted a recent link to a Columbia university investment class by Mohnish Pabrai. Mohnish discusses how and why he changed his investment style and now takes a much more diversified basket approach and no longer concentrates on just 4-5 of his best ideas.
Mohnish Pabrai
Link
http://www2.gsb.columbia.edu/cis/classrooms/FlashPlayer/CBSplay-nologo.html?video=class_sessions/09s/Greenwald_U412_4-21-09_1745-2045_34068.flv
Link Noise Free Investing
http://www.noisefreeinvesting.com/blog/?p=920
On Friday I mentioned PDII had positive insider activity and was a net/net Ben Graham style stock.
Link
http://shadowstock.blogspot.com/2009/05/insider-micro-cap-value-buying-on.html
The Net/Net attribute and insider activity doesn’t make the stock an automatic buy for all investors. But the information was worth discussing because for some it fits into their portfolio if they want to add to their basket of Net/Net stocks.
For me it was worth adding a tiny piece to my portfolio, less than 1% of my total equities. I believe you must take a basket approach if you want to invest in these Net Net ideas.
No guarantee but I believe there is a margin of safety and so I added a tiny piece until there is more visibility.
http://finance.yahoo.com/q/it?s=PDII
PDII has been proactive by reducing expenses. Hopefully future cash burn will slow. Any positive news the stock may begin to act positive. This is not a recommendation.
Magic formula type micro cap stocks (Joel Greenblatt) with positive insider activity during May. Good companies (High ROA) at a cheap price (High investment Yield).
Link
http://www.shadowstock.com/ss_053009.html
Good Luck
John
Link
http://www.shadowstock.com/ss_051509.html
The only reason for providing potential ideas with frequent current positive insider activity with fundamental supporting data is for some investors the idea may fit into their portfolio. Or they may have additional specific insight into the industry or company to go long or concentrate their holdings. How and if an idea fits into your portfolio is personal. Not having a solid reason for buying or portfolio strategy may force the sale or purchase at the wrong time. You may also avoid intelligently adding more shares when the stock is down. Hopefully the direct insider activity with supporting fundamental data will prove useful at times for some readers.
When I’m managing my portfolio I take a highly diversified approach. Value oriented stocks are added slowly. I try to avoid position concentration, most of the time. My emotions can get carried away leading to an overweighting. This highly diversified approach will not be the most successful approach for other investors but for me it fits into my goals.
Famed investor Mohnish Pabrai became a rock star easily crushing the market with a concentrated portfolio of his best ideas for many years. He even bid $650,001 to have lunch with Warren Buffet. His Warren Buffet concentrated portfolio approach was working for several years. But 2008 he was devastated with this approach, down 59% in 2008, and the last half of 2007 was even more destructive.
Thanks to the outstanding noisefreeinvesting.com blog he just posted a recent link to a Columbia university investment class by Mohnish Pabrai. Mohnish discusses how and why he changed his investment style and now takes a much more diversified basket approach and no longer concentrates on just 4-5 of his best ideas.
Mohnish Pabrai
Link
http://www2.gsb.columbia.edu/cis/classrooms/FlashPlayer/CBSplay-nologo.html?video=class_sessions/09s/Greenwald_U412_4-21-09_1745-2045_34068.flv
Link Noise Free Investing
http://www.noisefreeinvesting.com/blog/?p=920
On Friday I mentioned PDII had positive insider activity and was a net/net Ben Graham style stock.
Link
http://shadowstock.blogspot.com/2009/05/insider-micro-cap-value-buying-on.html
The Net/Net attribute and insider activity doesn’t make the stock an automatic buy for all investors. But the information was worth discussing because for some it fits into their portfolio if they want to add to their basket of Net/Net stocks.
For me it was worth adding a tiny piece to my portfolio, less than 1% of my total equities. I believe you must take a basket approach if you want to invest in these Net Net ideas.
No guarantee but I believe there is a margin of safety and so I added a tiny piece until there is more visibility.
http://finance.yahoo.com/q/it?s=PDII
PDII has been proactive by reducing expenses. Hopefully future cash burn will slow. Any positive news the stock may begin to act positive. This is not a recommendation.
Magic formula type micro cap stocks (Joel Greenblatt) with positive insider activity during May. Good companies (High ROA) at a cheap price (High investment Yield).
Link
http://www.shadowstock.com/ss_053009.html
Good Luck
John
5/20/2009
Comments
A reader asked for other potential investment ideas that are posted in a portfolio format.
Potential Ideas: I own most of the stocks listed
http://www.shadowstock.com/ss_portfolio.html
Since time is limited for now I recommend using the frequent posting of nightly insider micro cap value buying as a starting point posted on twitter.
Twitter.com/shadowstock
http://twitter.com/shadowstock
05/20/09 insider purchases
Potential Ideas: I own most of the stocks listed
http://www.shadowstock.com/ss_portfolio.html
Since time is limited for now I recommend using the frequent posting of nightly insider micro cap value buying as a starting point posted on twitter.
Twitter.com/shadowstock
http://twitter.com/shadowstock
05/20/09 insider purchases
5/17/2009
Insider micro cap value buying on Friday
All the ideas had insider buying on Friday (05/15/09) or Thursday (05/14/09)
I only have time for one tonight
PDII (PDI, Inc) $3.29 on 05/15/09
- Selling below net cash: EV = -.10 , price = 3.29,
Per Share Data
- GP per share = .32, Sales per share 7.91,
- AR per share $1.28, Rev Qtrly growth = -.27%, Short % Float = .6%,
- Per share cash + AR –Ttl Liab = 4.68 , cash per share = 6.33, EBITDA per share = -2.50
- Positive insider buying for 09, 08 and 07
- Clean capital structure with almost no dilution
Large shareholders are value institutions
Heartland Advisors
Rutabaga Capital Management
Royce & Associates
Kennedy Capital Management
Insider transactions:
Director purchased 5,000 shares for 3.30 to 3.47 on May 14th
Officer purchased 50,000 shares for 4.00 on December 2008
Director purchased 6,000 for 4.00 on November 24, 2008
View all transactions
http://finance.yahoo.com/q/it?s=PDII
Other that made the insider list
http://www.shadowstock.com/ss_051509.html
I only have time for one tonight
PDII (PDI, Inc) $3.29 on 05/15/09
- Selling below net cash: EV = -.10 , price = 3.29,
Per Share Data
- GP per share = .32, Sales per share 7.91,
- AR per share $1.28, Rev Qtrly growth = -.27%, Short % Float = .6%,
- Per share cash + AR –Ttl Liab = 4.68 , cash per share = 6.33, EBITDA per share = -2.50
- Positive insider buying for 09, 08 and 07
- Clean capital structure with almost no dilution
Large shareholders are value institutions
Heartland Advisors
Rutabaga Capital Management
Royce & Associates
Kennedy Capital Management
Insider transactions:
Director purchased 5,000 shares for 3.30 to 3.47 on May 14th
Officer purchased 50,000 shares for 4.00 on December 2008
Director purchased 6,000 for 4.00 on November 24, 2008
View all transactions
http://finance.yahoo.com/q/it?s=PDII
Other that made the insider list
http://www.shadowstock.com/ss_051509.html
5/13/2009
Value Insider Purchases
I will be posting micro cap value stocks with positive insider activity on a frequent basis.
My updates can be found at http://twitter.com/shadowstock
You can also view them on the this blog to the right
Today buys were as follows:
http://www.shadowstock.com/ss_051309.html
My updates can be found at http://twitter.com/shadowstock
You can also view them on the this blog to the right
Today buys were as follows:
http://www.shadowstock.com/ss_051309.html
5/03/2009
Industry: Industrial Metals & Mineral
direct insider purchases for the week ending 04/29/09
RTI International Metals, Inc. produces titanium mill products. Aerospace, defense, and industrial applications are their main source of customers.
Director Ronald Gallatin purchased 6,220 shares at $12.5 for a total value of $77,812. RTI is an interesting investment due to the following;
EBITDA/EV = 24.67%
Share buybacks have reduced the share count outstanding.
ROA 4 year average = 11.52
ROA 2 year average = 6.48
Other notable companies in the Industrial Metals & Mineral industry are
ZINC: Horsehead Holding Corp
EBITDA/EV = 37.12%
ROA 4 year average = 25.20
ROA 2 year average = 21.24
Share count increasing over several years.
TC: Thompson Creek Metals
EBITDA/EV = 49.38%
ROA 4 year average = 16.59
ROA 2 year average = 11.05
Share count increasing over several years.
The high earnings yield and return on capital make all 3 ideas worth a closer look
I own shares in ZINC.
RTI International Metals, Inc. produces titanium mill products. Aerospace, defense, and industrial applications are their main source of customers.
Director Ronald Gallatin purchased 6,220 shares at $12.5 for a total value of $77,812. RTI is an interesting investment due to the following;
EBITDA/EV = 24.67%
Share buybacks have reduced the share count outstanding.
ROA 4 year average = 11.52
ROA 2 year average = 6.48
Other notable companies in the Industrial Metals & Mineral industry are
ZINC: Horsehead Holding Corp
EBITDA/EV = 37.12%
ROA 4 year average = 25.20
ROA 2 year average = 21.24
Share count increasing over several years.
TC: Thompson Creek Metals
EBITDA/EV = 49.38%
ROA 4 year average = 16.59
ROA 2 year average = 11.05
Share count increasing over several years.
The high earnings yield and return on capital make all 3 ideas worth a closer look
I own shares in ZINC.
4/05/2009
Informativeness of insider transactions
Everyday thousands of insider trades occur. Insiders can only use public information but their advantage is the interpretation of this data.
Insider trading activity is not a magic potion. Many newsletters have failed to justify their existence and have folded by solely relying or simply misinterpreting the information. But having said this historical results has demonstrated if used properly insider trading data does contain predictive information and can serve as a catalyst for the stock price.
If analyzed correctly trading by insiders should help convey directional information about a company’s stock price.
A summary of key points
Insiders have a better understanding of their business economics and top executives (CEO, CFO) have the most accurate record
Purchases reveal more information than sales. Multiple insider sales with a high short position reveal negatives.
Agreement by multiple insiders increases the predictive information of trades
The magnitude of transactions is important including number of shares and net value
Multiple buys over time with no sales increases the transactions information
Current purchase in one month increases the probability of purchase for the next month
Smaller companies with activity provide more information given they are less efficiently priced.
Only analyze open market transactions, ignore private transactions
Insider activity within industries such as biotechnology may provide more predictive power. The thesis is management understands the science and future possibilities of new drug breakthroughs or ability to pass future FDA hurdles
The results of the 03/24 post for March positive insider activity was as follows
take a look
I ran a query for positive insider activity for the one week ended 04/03/09
Stocks that have excellent value for different reasons were
NUTR $6.99
Nutraceutical Int'l Corp.
Drug Related Products
PRPX $6.38
Portec Rail Products, Inc.
Railroads
PRLS $1.80
Peerless Systems Corp.
Computers Wholesale
QLTI $1.78
QLT Inc. (USA)
Biotechnology
Price Quotes for the above
Quotes on the above
click for additional information
Insider trading activity is not a magic potion. Many newsletters have failed to justify their existence and have folded by solely relying or simply misinterpreting the information. But having said this historical results has demonstrated if used properly insider trading data does contain predictive information and can serve as a catalyst for the stock price.
If analyzed correctly trading by insiders should help convey directional information about a company’s stock price.
A summary of key points
Insiders have a better understanding of their business economics and top executives (CEO, CFO) have the most accurate record
Purchases reveal more information than sales. Multiple insider sales with a high short position reveal negatives.
Agreement by multiple insiders increases the predictive information of trades
The magnitude of transactions is important including number of shares and net value
Multiple buys over time with no sales increases the transactions information
Current purchase in one month increases the probability of purchase for the next month
Smaller companies with activity provide more information given they are less efficiently priced.
Only analyze open market transactions, ignore private transactions
Insider activity within industries such as biotechnology may provide more predictive power. The thesis is management understands the science and future possibilities of new drug breakthroughs or ability to pass future FDA hurdles
The results of the 03/24 post for March positive insider activity was as follows
take a look
I ran a query for positive insider activity for the one week ended 04/03/09
Stocks that have excellent value for different reasons were
NUTR $6.99
Nutraceutical Int'l Corp.
Drug Related Products
PRPX $6.38
Portec Rail Products, Inc.
Railroads
PRLS $1.80
Peerless Systems Corp.
Computers Wholesale
QLTI $1.78
QLT Inc. (USA)
Biotechnology
Price Quotes for the above
Quotes on the above
click for additional information
3/29/2009
May be worth a closer look again
It was encouraging to see Barrons this weekend providing commentary on stocks that in the past were never allowed due to the relative small size.
Taken from Barrons in an article "Cheap? Yes; A Bargain? Probably Not"
"Bradford Evans, co-manager of Heartland Value Fund (HRTVX), cites Digirad (DRAD), which specializes in cardiovascular- and nuclear-imaging systems. It projects '09 sales of $80 million, and has $28 million in cash and equivalents and a book value of $2.47. Yet its market cap is $18 million and its shares are just 95 cents. In 2008, the stock traded down from its peak of $3.50 in early February, to a bottom of 48 cents on Dec. 4. Evans, who owns Digirad stock, believes it is poised for a turnaround this year, thanks to a strong balance sheet, good technology, significant partnerships with leading medical schools and a restructuring plan that will better manage growth while controlling costs. "
Direct officer insider March buys for DRAD
http://shadowstock.blogspot.com/2008/10/digirad-corporation-drad.html
Along with DRAD, PSTA was another stock that has been on the insider buying list recently provided.
"Monterey Gourmet Foods (PSTA) is a pasta maker whose shares he has held since 2001, buying them at an average five bucks each. Although the stock is trading at 1.01, Athey isn't panicked: "The company has the lead position at large retailers including Costco and Sam's Club." He notes that Monterey also has a book value of $1.71 a share, 12 cents of cash per share, positive operating earnings and net cash flow, and no debt. "
Direct officer insider March buys for PSTA
In my opinion both of these stocks are worth closer look.
I own shares in DRAD and PSTA
Taken from Barrons in an article "Cheap? Yes; A Bargain? Probably Not"
"Bradford Evans, co-manager of Heartland Value Fund (HRTVX), cites Digirad (DRAD), which specializes in cardiovascular- and nuclear-imaging systems. It projects '09 sales of $80 million, and has $28 million in cash and equivalents and a book value of $2.47. Yet its market cap is $18 million and its shares are just 95 cents. In 2008, the stock traded down from its peak of $3.50 in early February, to a bottom of 48 cents on Dec. 4. Evans, who owns Digirad stock, believes it is poised for a turnaround this year, thanks to a strong balance sheet, good technology, significant partnerships with leading medical schools and a restructuring plan that will better manage growth while controlling costs. "
Direct officer insider March buys for DRAD
http://shadowstock.blogspot.com/2008/10/digirad-corporation-drad.html
Along with DRAD, PSTA was another stock that has been on the insider buying list recently provided.
"Monterey Gourmet Foods (PSTA) is a pasta maker whose shares he has held since 2001, buying them at an average five bucks each. Although the stock is trading at 1.01, Athey isn't panicked: "The company has the lead position at large retailers including Costco and Sam's Club." He notes that Monterey also has a book value of $1.71 a share, 12 cents of cash per share, positive operating earnings and net cash flow, and no debt. "
Direct officer insider March buys for PSTA
In my opinion both of these stocks are worth closer look.
I own shares in DRAD and PSTA
3/24/2009
Additional Company Data on the March Insider Buys
VTAL (Vital Images Inc)
http://finance.yahoo.com/q?s=VTAL
The closing price on Tuesday 03/24/09 was $10.71
Director Peet Greg purchased 5,000 shares on 03/05/09 for $9.15 and 5,000 at $9.00 on 03/09/09. Institutional investors have been reducing their positions based on the reported balances on 12/31/08. But value shop Royce and Associates still had the largest position although reduced at 8.37% of the TSO(total shares outstanding).
VTAL has A+ financial health with a solid balance sheet supported by ample cash flow from operations. But they’ve been reporting negative net income since December 2007.
One of my main concerns was the SGA expenses at 69% of revenue. The outstanding share balance has increased to 15,711,000 on 9/08 from the 09/8/2005 balance at 13,337,034.
But they have been buying back shares over the past year. For the 3 quarter period ending 12/31/08 they expended $36,114,000 to reduce the share outstanding from 17,364,000 to 15,711,000 09/30/08. Did they over pay for those share buybacks?
Additional points
Enterprise Value/Revenue = .44
P/S = 2.29
P/S 2008 = 3.50
P/S 2006 = 4.50
P/S 2005 = 6.90
Valuation based on P/S has been improving.
Revenue growth quarterly year over year = 4.40%
EV/Price = 2.07/10.71 = .1933
Cash rich with negligible debt
Per share data
Cash per share = 6.86
AR per share = 1.23
NTA = 11.66
CFFO = .48
Total Liabilities = 2.08
FCF = .09
GP = 3.58
Cash – Total Liabilities = 8.76
Industry = Business Software and services
ROA = -2.67
EBITDA/EV = -10.69
SGA_TtlYr / Rev_TtlYr = 0.6996
Shorts as a percentage of float = 3.40%
My introduction on this stock is only for informational purposes.
I have no position in VTAL.
http://finance.yahoo.com/q?s=VTAL
The closing price on Tuesday 03/24/09 was $10.71
Director Peet Greg purchased 5,000 shares on 03/05/09 for $9.15 and 5,000 at $9.00 on 03/09/09. Institutional investors have been reducing their positions based on the reported balances on 12/31/08. But value shop Royce and Associates still had the largest position although reduced at 8.37% of the TSO(total shares outstanding).
VTAL has A+ financial health with a solid balance sheet supported by ample cash flow from operations. But they’ve been reporting negative net income since December 2007.
One of my main concerns was the SGA expenses at 69% of revenue. The outstanding share balance has increased to 15,711,000 on 9/08 from the 09/8/2005 balance at 13,337,034.
But they have been buying back shares over the past year. For the 3 quarter period ending 12/31/08 they expended $36,114,000 to reduce the share outstanding from 17,364,000 to 15,711,000 09/30/08. Did they over pay for those share buybacks?
Additional points
Enterprise Value/Revenue = .44
P/S = 2.29
P/S 2008 = 3.50
P/S 2006 = 4.50
P/S 2005 = 6.90
Valuation based on P/S has been improving.
Revenue growth quarterly year over year = 4.40%
EV/Price = 2.07/10.71 = .1933
Cash rich with negligible debt
Per share data
Cash per share = 6.86
AR per share = 1.23
NTA = 11.66
CFFO = .48
Total Liabilities = 2.08
FCF = .09
GP = 3.58
Cash – Total Liabilities = 8.76
Industry = Business Software and services
ROA = -2.67
EBITDA/EV = -10.69
SGA_TtlYr / Rev_TtlYr = 0.6996
Shorts as a percentage of float = 3.40%
My introduction on this stock is only for informational purposes.
I have no position in VTAL.
3/22/2009
Material positive insider activity during March 2009
The list compiled is mostly value stocks
Click here to download the fundamental data or view
Give me some time but I believed the information had value for some investors to pass along at this time.
Click here to get the list of ideas sorted by EV/Amount of insider purchases for March
If possible, can you let me know with a simple yes or no if this insider monitoring with fundamental data and the ability to download into Excel has any value to potential readers. Thanks!
your reply can be sent to
John@shadowstock.com
The results and data for March positive activity is listed here
Click here to download the fundamental data or view
Give me some time but I believed the information had value for some investors to pass along at this time.
Click here to get the list of ideas sorted by EV/Amount of insider purchases for March
If possible, can you let me know with a simple yes or no if this insider monitoring with fundamental data and the ability to download into Excel has any value to potential readers. Thanks!
your reply can be sent to
John@shadowstock.com
The results and data for March positive activity is listed here
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