Thursday, October 2, 2008

Stock Ideas

Here are some of the stock ideas we have recently discussed on the site:

Outerwall
Alloy Steel
Tesco
Best Buy
IBI Group
Reitmans
Rocky Mountain Dealerships
Data Group's Debentures
Torstar
Gafisa
Strayer
PineTree Capital's Debt
France Telecom
Lakeland Industries
Hammond Manufacturing
Education (basket)
Telefonica
Staples
hhgregg
Universal Power Group
Universal Security Instruments
ADDvantage Technologies
Aeropostale
Taitron Components
Smith Midland
Research In Motion
Genesis Land Development
Sport-Haley
Gencor

205 comments:

1 – 200 of 205   Newer›   Newest»
Anonymous said...

check out Hartco ...HCI

Saj Karsan said...

Hi Anon,

I've talked a little about HCI here: http://www.barelkarsan.com/2010/01/show-buybacks-ignore-options.html

Anonymous said...

Opinions on QXM?

Phil said...

Hey Saj,

Hoping you can help me out on something...

I've been spending a lot of time looking at ALC, Algoma Central, a shipping company and I can't for the life of me figure out why it trades so cheaply.

It trades for 280M, but has net income of around 40M and book value of 420M.

What am I missing?

Saj Karsan said...

Hi Anon,

I've written about QXM here: http://www.barelkarsan.com/2009/09/xing-mobile.html

Hi Phil,

Yeah ALC does look allright. It was discussed briefly in the comments section here: http://www.barelkarsan.com/2010/01/babies-in-sea-water.html

Jimmymac said...

Are you concerned about PARL's decision in December to authorize management to authorize the increase of outstanding shares from 30M to 40M. Why do you think they would choose to do that? Is there an imminent danger of existing shareholders being diluted soon?

Saj Karsan said...

Hi Jimmy,

I believe they did that to accommodate the exercise (if it should become possible) of the warrants they issued to the singers under whose names the fragrances were designed. The warrants become dilutive at a much higher price than the current price, however, so it will become an issue if the stock price appreciations.

Jimmymac said...

Thanks Saj,
BTW, you might want to look at NUHC, which has dropped precipitously this past week after losing one of its major suppliers. Lots of risk, but it has a good balance sheet and is trading around 50% of NCAV. Biggest problem, I think, is that it is in the computer/semiconductor industry, so there is always the danger that inventory values could become obsolete.
Keep up the good work; the blog is really great.

Saj Karsan said...

Thanks, Jimmy!

NUHC has been on my radar for a while actually. I've written about it here: http://www.barelkarsan.com/2010/03/profits-on-horizon.html

Jimmymac said...

Vicon (VII) is hitting interesting levels around $5. Selling at around 80% of NCAV and is still cashflow positive despite what has been a tough past year for the company. There is a problem of an outstanding patent lawsuit taken by a competitor, but all the lower courts have rejected these patent infringement allegations up to this point. There is also a lot of competition in the security/CCTV markets and VII is one of the smaller players in the space. May be too much risk and too many uncertainties in this stock for some people, but I think it looks interesting at these levels.

Anonymous said...

Hi Saj,

Any thoughts on MIRANT (MIR)? It is trading nearly at a 1/3 of BV and has shown high profitability, is cash heavy and debt-lite.

tt

Saj Karsan said...

Hi Jimmy,

Looks interesting! I may write about it soon.

Hi TT,

I'll take a look, thanks.

-Saj

Rob said...

Hi Saj,

Great site! Wanted to know if you've ever looked at I.D. Systems. Trades below NCAV (and NNWC.

Saj Karsan said...

Thanks, Rob. I haven't, but I'll let you know if I see anything there.

Anonymous said...

This is a somewhat random question but have you ever been tempted to abandon investing in any commodity (e.g. oil) or financial stock? I sometimes feel that way.

-Ryan

Saj Karsan said...

Hi Ryan,

I have already abandoned investing in most such companies. Did you mean something else by your question? i.e. Do you mean you are tempted to BUY such companies?

Ryan said...

No, not tempted to buy those companies so we agree. Ever looked at GTN or HIMX? HIMX is getting a lot of traction in the value community.

Saj Karsan said...

Hi Ryan,

I have not. I'll take a look and let you know if I have an opinion.

Jimmymac said...

Any thoughts on HQS? I'm not keen on investing in Chinese companies, as I'm not entirely comfortable with the accuracy of their financial statements. I'm also concerned that this company had also changed auditors recently (that usually raises flags for me), it has a large number of outstanding stock options/warrants, and the accounts receivable is increasing greatly over the past year (a sign that the company is making sales at any cost?). Still, the valuation is interesting at these levels. Market cap of about 70M, but 38M in cash, 100M in current assets and total liabilities of only 7M. Lots of risk - as with most Net Current stocks - but it has a good asset base and decent earnings power.

Saj Karsan said...

Hi Jimmy,

I'll have a look and let you know if I have an opinion.

Saj Karsan said...

Hi Rob,

I've now written about I.D. Systems here.

Saj Karsan said...

Hi Ryan,

I've written about GTN here.

Saj Karsan said...

Hi Jimmy,

I've written my thoughts on HQS here:

http://www.barelkarsan.com/2010/06/are-those-really-sales.html

Anonymous said...

Hi Saj,

I enjoy your site, thanks!

TIKRF may be of interest to you and your readers.

Manish said...

Hi Saj
I thoroughly enjoyed your post on IMN.Very good analysis .I have been holding IMN for some tine.

Have you looked at Ebix.It has a CF Yield of 13%.It is growing at >30%/year.80% of the revenue is recurring.

ak said...

hey saj you should look at NE. 87% of their business is outside theGgulf of Mexico so any spillover effect from BP incident should not have any material effect on their revenues. They are less leveraged then RIG but still maintains competitive margins compared to RIG.

Also they have room to expand, they are currently expanding and building ultra deep oil and trying to get the Petrabrasil contracts. They have a billion dollars worth of back log every year for the next few years as well.

Their stock price has been unfairly beaten down due to BP/Rig incident but with most of their operations outside that area, i feel they have room to bounce back and expand. What do you think?

Saj Karsan said...

Thanks Manish,

I'll take a look let you know if I have anything worth saying on ebix.

Hi AK,

I stay away from companies that are largely dependent on the price of oil, as per this.

Saj Karsan said...

Hi Manish,

Looks like a successful company. However, as a growth stock operating as a software company serving the insurance business, it is rather outside of my circle of competence. As such, I can't really offer a useful opinion on it at this point.

Anonymous said...

Hi Saj

I would like to know what tou think about SureWest Communications (SURW). Price/TangBook at 0.43

Saj Karsan said...

Hi Anon,

I've written about TIKRF here: http://www.barelkarsan.com/2010/08/business-selling-for-free.html

Hi Anon2,

I'll take a look and if I have an opinion on SURW I'll let you know here.

Saj Karsan said...

Hi Anon2,

While the P/B is low, they do have a lot of debt. Yet they don't seem to have the earnings over the last few years that it would take to pay off that debt. I'm not sure how they will pay it off without anticipating better operating results, so it makes me weary of the equity.

Manish said...

Thanks and keep up the good work.

james said...

what do you think about CEU? strong earning and revenue growth, and lots of cash and no debt. i am cautious of management bc they have repeated diluted shareholder value - thanks!

Epic Ahab said...

Saj,

Awesome work the last few months, as always. Been here since your first post.

Have you ever been tempted to rank these ideas according to conviction or expectation of capital appreciation?

Thanks.

Epic Ahab said...

Thoughts on AEA? Div 7%, P/E 4, roe25-22-21 last three years.

Saj Karsan said...

Hi Epic,

Thanks for the kind words.

I definitely have some favourites on the list, but I'm not sure I have the ability to determine which will return the most the fastest! As such, I'll let the reader pick his own favourites, so that I don't lead anyone down the wrong path!

I'll take a look at AEA and let you know if I have an opinion on it. However, what immediately comes to mind is the regulatory environment...aren't state governments bent on shutting this service down?

Epic Ahab said...

You make a great point but I would expect that to be a slow process. Also, this recession might have paradoxically created more customers.

Anonymous said...

How can I be part of your fund ? Can you send me your email so that I can get in touch with you to know the terms and conditions for it ?

Regards
Nitin

Saj Karsan said...

Sorry, Anon. The fund is not available to the public. Should that change in the future, there will be an announcement on this site.

Saj Karsan said...

Hi Epic Ahab,

I discussed AEA here finally

Anonymous said...

HI Saj,

Could you please check ARP? I find it very interesting. Big FCF, creating a big franchise and controlling its debt (although high). Stock might suffer in the short term but I think it is a big opportunity for value investors

Saj Karsan said...

Hi Anon,

I've now written about ARP here: http://www.barelkarsan.com/2010/10/reprographers-rejoice.html

Amit said...

Saj,
Have you covered IESC? Looks like something worth looking at.
Amit

Saj Karsan said...

Thanks, Amit, I'll have a look

Saj Karsan said...

Hi Amit,

I've now discussed it here

NCAV said...

hrg

NCAV said...

Saj,
Have you discussed Neurometrics (NURO) on this site?

It looks like a nice NCAV discount, and the CEO himself bought $100k worth of stock yesterday.

Saj Karsan said...

Hi Ncav,

I have not. I realize it trades at a discount to its assets, but I have no idea how to value its product pipeline.

Adam said...

Hi Saj,

Can you share your thoughts on UVV? Here's what I see:

Positives:
- It trades slightly above BV (25% of MV in cash)
- 4.41% div (increasing dividends)
- Increased EPS over the past 5 yrs - Company has repurchased shares and has authorization to buy back more
- Market leader

Negatives:
- Revenue is reliant on a few large customers such as Phillip Morris (28%), Japan Tobacco (23%), Imperial Tobacco (10%)
- 70% of debt is based on variable rates
- Currently involved in two lawsuits. They'll likely lose the first worth $14.9M and they are confident that they'll win the second worth $41M + $6M interest.

Other:
- Stock options on 830k shs exist at an average exercise price of $48.36 (Current price = $41.83)
- Management owns <1% of company.

Thanks!

Anonymous said...

Could you take a look at BEV, bennett environmental? Thanks,

enjoy your blog!

Saj Karsan said...

Hi Adam and Anon,

I'll take a look and post if I have any thoughts on UVV and BEV

hellboy said...

hey saj, take a look at HAST I posted on SA on it... Liked your call on HRB! nice... VLO covered calls, LEE? also VOXX is good, TBAC, NWLI still cheap, AWX... always on the hunt for a TRUE NCAV stock with positive earnings and cash flows.

Saj Karsan said...

Thanks, Hellboy. I'll take a look and post here if I like any of those.

Saj Karsan said...

Hi Adam,

UVV had had good earnings, but I'm not sure what their advantage is that protects them from competition. If they have no advantage, I would expect them to trade at not much more than book, with strong ROE being only the result of leverage. Thoughts?

Hi Anon,

It seems like BEV will have difficulty running its plant at capacity, after a very strong last year because of a special contract. On top of that, it looks like they are acquiring something but info on what is limited. I'll wait for more news.

Rob said...

have you taken a look at hammond manufacturing (hmm.a)? bloggers seem to be interested in its former sub hammond power (hps) but this looks cheaper to me atm.

Saj Karsan said...

Hi Rob,

I have not. I'll post here if I have an opinion on it.

Saj Karsan said...

Hi Hellboy,

I do still like VOXX and HRB.

On HAST, I'm a little scared of their business model combined with debt and large operating leases, so I'll stay away.

On LEE, NWLI and AWX, they are a bit outside of my circle of competence, especially with LEE because of the high debt.

I took a very cursory look at these though; if you think I'm missing something major on one of them, I'll go back and have a look.

Anonymous said...

Hi Saj,
Have been looking at SPRO: 11M market cap, has 6M in cash, and cashflow of approximately 2M over the past 5 years. It's in a fairly competitive industry, but the stock is trading at a 52 week low (below book value), has large insider ownership, and might a potential candidate for takeover by an industry competitor. Any thoughts?
Jimmymac

Saj Karsan said...

Hi JimmyMac,

I usually don't like to buy on potential for a buy out. This one does look interesting with the high cash balance, but I do worry about its ability to earn, as you brought up about the competitiveness of the industry. If you look at just tangible book, it trades much higher than that.

Hester said...

Saj,

I noticed you have written a few old Seeking Alpha articles on Tat Technologies (TATT), and you were long at one point. Are you still long?

I am just starting to look at the company. They have sold off heavily recently, to the point that they're now solidly a net-net, which is enticing considering thir long record of revenue growth and profitibility. They also seem to be good capital allocators, buying back stock when it's cheap and they opportunistically IPO'd a subsidiary and then acquired it back MUCH cheaper.

They are doing goodwill and some inventory writedowns, but NCAV is stable. Their biggest shareholder is a company that seems to be violating their debt covenants and they may be panic selling, but I don't know. Maybe I'm missing something. Your thoughts?

-Hester

Saj Karsan said...

Hi Rob,

I think I would have liked this one in October, but since then it is up about 50%. Not sure if I'm still interested...what do you like about it at this price?

Saj Karsan said...

Hi Hester,

I agree that it is attractive at these prices. In my view, not too much has changed since I talked about it previously.

Anonymous said...

Saj,
I agree, the recent run up has taken a lot out of the MOS, although at an ~8x PE and half book i still think it has some room to grow. it is on my watchlist.

btw, love the site. i'm fairly new to this and with no finance/business background it is really helpful to see how you analyze companies, particularly the valuation aspect. Keep up the good work!
Rob

Saj Karsan said...

Thanks, Rob!

Yeah it looks cheap on book value, but its returns on capital have not been great. While it looks cheap on a P/E basis, it's perhaps not so cheap on an enterprise value basis because they do use debt to finance their earnings.

Anonymous said...

Have you taken a look at UVI ? Interesting write up on SA today...

Anonymous said...

^^^ UVE i mean...

Saj Karsan said...

Hi Anon,

Insurance is not really in my circle of competence right now. I'm working on it.

Anonymous said...

Lorex Technology (Lox.h) has staged an impressive turnaround during one of the worst economic downturns in U.S. history. The company has now generated 6 consecutive profitable quarters and indicated that it will be 7 with the recently completed quarter (September 30/2010). For the last 12 months, the company has generated EBITDA of $2.8MM and fd eps of 4 cents per share. the current stock price of 13 cents (3x p/e) is no where close to representing fair value. FD market cap of $5.7 million. Revenues of $45-$47 million.
The company fell out of favour with investors 3+ years ago due to high inventory obsolescence, quality issues, customer concentration and high debt relative to cash flow. All of these issues have been corrected. Inventory is at half the prior levels despite similar revenue, quality has improved, largest customer approx. 12% of revenues vs. 35-40% in the past. Debt is now at a very manageable 1x ebitda and the company is generated strong cash flow -- paying down $2.5 million in debt thus far this year. Operating costs have also been reduced markedly.
Insiders own a significant amount of the company. The main challenge today is investor awareness. There is no research coverage and the stock trades on the NEX. Liquidity is very low.
Bottom line -- there are very few micro/small caps in canada generating consistent profitability. This company appears on the right track for consistent profitability and cash flow generation. The shares have significant upside potential in my view.

Anonymous said...

hello everyone,

i'm have a question regarding stocks. if you earn 15% every year for 20 years, you get 1.15^20 = 16.36 i.e. 100,000 dollars becomes 1.636 million. if you do 17% for 20 years, 100,000 dollars becomes 2.3 million. so just 2% can make a difference of about a third over 20 years (probably at least how long most of us will invest). So, how do we justify cigar-butt investing which requires sending in 20-35% in taxes to the government every year v/s phil fisher's style of investing? reducing 20-35% of your return by sending the checks to the government can easily make the difference in the compounding more than the 2% shown above. i think john malone has stated this very well... "in every transaction, you have three parties, but the government doesn't get to attend all the meetings." Following his own advice, if you notice how his debt is structured in liberty media, you'll see that he pays very little cash taxes. Of course as individual investors we won't have that choice. So are the advantages of the cigar-butt approach that much higher to justify sending so much in taxes? Please let me know what y'all think.

Anonymous said...

Saj,

I have been skimming your website and have noticed that you only utilize long (ideally buy-and-hold) investment strategies.

Have you considered using your analysis skills to profit from fundamentally distressed companies trading at a large premium to value? i.e. shorting or buying puts. Why or why not?

Tyler

Saj Karsan said...

Hi Anon1,

I think you are right that you can have more wealth over time if you can buy great businesses at decent prices. However, I think it requires a lot of skill to do this correctly, whereas the returns on cigar-butts may not be as high, but it can be done by anyone.

Hi Anon2,

I don't really feel comfortable on the short side at the moment. I'm not sure the same identifying factors involved in finding undervalued companies (which is what I spend most of my time doing) are easily reversed to become applicable to identifying overvalued companies. Maybe my opinion will change some day, but for now I'm just a spectator.

Philbert said...

any thoughts on Logistec Corporation and Glacier Media Group? I like both and own Glacier Media.

Saj Karsan said...

Hi Philbert,

They both seem like consistently profitable companies, but I don't see the stock prices as abnormally low or anything. My initial analysis suggests they are both trading within the ranges that they should. Am I missing something?

Anonymous said...

Were you able to look at Lorex mentioned earlier? Just posted another strong quarter today. trading at approx. 2x ebitda. TTM EBITDA now $4MM vs. $2.8MM at last Q.

Anonymous said...

Saj,

Take a look at PSD on the TSX... Its gone on a run lately but i think there is still a lot of upside here. thoughts?

Saj Karsan said...

Hi Anon,

I don't really get it about PSD. They trade for $140M+, but haven't earned more than $3.5 in any of the last few years. They also have tens of millions in debt. Maybe I am missing something; where do you see the value?

Anonymous said...

income statement earnings are misleading as amortization wipes out profits. the industry focuses on cash edbitda instead, which shows a fcf margin of ~25% on gross margins of ~60-90%. they seem to be using cash flow to pay down debt after acquiring a competitors data library which should increase cash earnings significantly as they have very few fixed costs. they have also indicated that their next priority is to reinstate a dividend.

they also have a small moat as well as mapping land is capital intensive. Once the land is mapped it makes more sense for exploration and production companies to license data from psd than to map the region all over again. whichever company owns the data for a region (either psd or a competitor) gets the contract.

Saj Karsan said...

Hi Anon,

Okay, makes sense. I don't really know much about their industry tho, so while you might be right about their moat, I couldn't comment much about its sustainability. Good luck!

Saj Karsan said...

Hi Anon,

Lorex looks interesting, but I personally don't have a lot of confidence projecting their earnings going forward with any degree of accuracy. Good luck with it!

Anonymous said...

Hi Saj,

i stumbled across (LOAN) recently and wondered if you had any thoughts. From my rough calculations it looks as if it is trading below its NNWC with positive earnings and an f-score of 9...

Rob

Saj Karsan said...

Hi Rob,

I've discussed LOAN here.

Anonymous said...

Hi Saj,

do you have an opinion on China Ceramics (CCCL, also good write up at vic, look under CCLTF)? Seems very undervalued, mainly due to the fear surrounding Chinese small caps and construction spending/boom in China. Also, the recent registration statement seems to create a large overhang, so certainly a negative. Any opinion would be much appreciated.

Saj Karsan said...

Hi Anon,

It looks like it has generated strong returns on investment, so I would suggest that you determine whether they have an advantage that can sustain this before jumping in.

I'm weary of companies like this with large amounts of dilution/warrants etc and that don't purchase shares at what appear to be attractive prices.

Anonymous said...

Do you have any opinion on KTCC?

Saj Karsan said...

Hi Anon,

That stock has been discussed a few times on this site, actually.

Anonymous said...

Hi Saj,

Do you have an opinion on CDCS?

Phil said...

Hey Saj,

If you're interested, have a look at MOD - they look like a great value to pick to me.

Phil

Assaf Nathan said...

Hello Saj!

Gravity is a Korean computer game publisher.

They published in 2002 a game called "Rangarok".

They are about to come out with the sequel, after 8 years of reaping revenue from the first one.

Not long ago they were net-net and they do not seem to burn through cash, so i believe that downside here is limited. Also, they have some more revenue sources like other games and games for mobile phones.

Have you got an opinion about it?

Saj Karsan said...

Thanks Anon and Phil, I will post back here if I have any opinions on those.

Saj Karsan said...

Hi Assaf,

Gravity may well be a good one, but I just don't feel like I have a very good grasp of the industry to get in there myself.

Saj Karsan said...

Hi Anon,

CDCS is pretty much out of my circle of competence at this price. I can't really tell if those intangibles/Goodwill are worth it, so I have no opinion.

Hi Phil,

In its capital intensive industry, I'm not sure Modine has been able to generate any meaningful cash flow relative to its current valuation. Am I missing something? What do you like about it from a value point of view?

Taylor said...

Saj,

I may have an addition to your "value in action" page.

BSET (Bassett Furniture)

The company just entered into an agreement to sell its 47% interest in the IHFC (International Home Furnishings Center) for $73-75 million (pretax). A few months ago the company's market cap was under $50 million.

Saj Karsan said...

Hi Taylor,

Unfortunately, we need to have seen the value in this before it appreciated. If you got any others you think might become "value in actions" in the future, I'd be happy to hear them! :)

Taylor said...

I guess I should have brought that one to your attention when I found it a few months ago. Haha

Onto another company...

What do you think about Tuesday Morning (TUES)? No potential catalyst like BSET. It's an offprice retailer that specializes in upper end housewares. The company has over 800 stores and has over $800 million in revenue. Current market cap is about $193 million. No debt, $17 million in cash, tangible BV of $264 million, positive operating cash flow throughout recession. It is also cheap based on 10yr average earnings. My primary concern is whether or not the company will ever see those earnings again. Operating margins remained consistent until 2006, and then fell off due to the declining housing market. This leads me to believe that it is more of a cyclical issue.

Saj Karsan said...

Hi Taylor,

I think the company is fine, but I just don't see it as extraordinarily cheap. Like you, I'm not sure if it can return to the earnings glory days of years past.

Ryan said...

Hi guys…still reading your posts via Google Reader.

I have a couple more for you in addition to GTV and AEA which I previously noted.

Maybe this time you'll bite!

They are: EDUC, AGNC, ADC, and PHI.

Thanks much,
-Ryan

Saj Karsan said...

Thanks, Ryan. Took a quick look at EDUC and PHI and they look pretty fairly valued to me at the current P/E...what am I missing?

I also see that AGNC and ADC trade at quite a premium to book value. Do you have a reason to believe they should trade at even higher levels?

Let me know if I'm missing something and I'd be happy to take another look.

Anonymous said...

Hey Saj,

I think you will like this video!

http://www.ted.com/talks/lang/eng/laurie_santos.html

Alex

Anonymous said...

Any thoughts on BAMM? Trading at about 60% of book value, at a 52 week low, and at about three times CFO.
Problems with it being in a declining industry, and it having substantial debt including store leases. Still, it loks pretty much hated at these levels.

Saj Karsan said...

Hi, Alex. I did, thanks!

Saj Karsan said...

Hi Anon,

I'll post my thoughts on BAMM early next week, probably.

Taylor said...

An offer was just made for Genesis Land Development at 5.80/share. Trading was halted at 4.38/share.

Matthew said...

Saj,

This is a wonderful site, and a truly great resource for the value investor. Have you looked at Nokia(NOK) recently? Your articles on CSCO and MSFT show that you don't have an aversion to investing in tech names, and NOK seems to be an interesting opportunity right now. The net value of the company has been reduced to ridiculously low levels relative to their free cash flows and there is a very healthy dividend that is well covered. Additionally, while current sentiment regarding MSFT and CSCO is certainly negative, NOK is truly shunned. They are almost universally seen as the perpetual punching bag for Apple and Android. It seems like the combination of strong bearish sentiment and a healthy margin of safety should make NOK appealing for a long-term value investor. I'd love to hear your thoughts.

Saj Karsan said...

Hi Matthew,

Thanks for the kind words.

I agree that NOK may be undervalued, but I don't feel like I have a good enough grasp of their business to buy it myself.

kap said...

Can u please shed some light on BSET basset furniture. They recently got 70 plus millions from the sale real estate they sold and they have only 10plus millions in debt. Even if they put all the money the got from the sale company can make lot of money and the business. Is the street is insane or anaware of this.They had kitchen sink quarter to avoid the taxes on procedes from the sale.BAssed has 75% of the market cap in the cash and above 50 stores and lot other.

Saj Karsan said...

Hi Kap,

I'm not familiar with the company, but I'll check it out and post back here if I have any thoughts.

Taylor said...

Saj,

I mentioned the BSET situation on March 1st on the stock ideas page (scroll up).

Not long before IHFC acquisition was announced, BSET's market cap was under $50m. BSET owned approx. 47% of the center announced a sale of the center for $275m. The worst part is...I was looking at the company when it was trading at $44m, and I didn't take advantage of it. I even stumbled upon an article stating that the loan on the IHFC was refinanced at $103m back in 2010, which gave me confidence that there was significant value there. I figured the center was worth over $200m assuming a LTV ratio of 50%. Oh yeah, and the company has $18m of NOLs to offset the proceeds...

Interesting situation to say the least.

Saj Karsan said...

Hi Taylor and Kap,

I've written my thoughts on BSET here

Taylor said...

Saj,

What do you think about Duckwall-Alco(DUCK). Its a niche retailer that operates mainly in small towns (population <=16,000), where they do not face significant competition from national and regional retailers. DUCK is over 100 years old. The company recently closed down all 44 of its Duckwall stores and reduced headcount at its distribution facility from 240 to 160. During the early to mid 2000s, the company was profitable, but began losing money during the recession. The company is now trading for less than the NCAV. Value investor Michael Price owns nearly 7% of the company.

Thanks for any input,
Taylor

cn said...

http://www.bespokeinvest.com/thinkbig/2011/4/26/sector-and-stock-performance-since-the-prior-bull-market-hig.html

GME SVU HRB

bravo et merci

Saj Karsan said...

Hi Taylor,

I'll have a look and let you know if I find anything interesting.

Anonymous said...

Hi Saj,

Have you taken a look at ACE (ACE Aviation) or CWG (Craig Wireless)? ACE is going through liquidation and trades slightly below liquidation value, while CWG trades for less than net cash.

Love the site.

Saj Karsan said...

Thanks, Anon. For me, the discount on ACE to its assets is not enough. I'll get back to you on Craig

Anonymous said...

hi, any idea on Command Security Corporation?
thanks for your teachings...

Saj Karsan said...

Hi Anon,

Command looks like a decent company, but I don't find it very cheap. Am I missing something?

Taylor said...

Saj,

Have you had a chance to look at DUCK yet?


BTW, you may also want to check out Gyrodyne Company of America, if you haven't already. Its a nice "special situation".

Saj Karsan said...

Hi Taylor,

I don't feel that I could develop an idea of the litigation probabilities for GYRO to invest responsibly. My thoughts on DUCK will be in tomorrow's post.

Anonymous said...

SPMD looks interesting - at all time lows, trades at about 4 times cashflow. It does have an awful lot of debt though and is in a declining industry. Might be cheap enough to have a punt on though.
Jimmymac

Saj Karsan said...

Hi Jimmymac,

Yeah that is a heck of a lot of debt. Too scary for me!

Anonymous said...

Saj,

Any thoughts on CWG?

Saj Karsan said...

Hi Anon,

The discount to net current assets on CWG is nice, but the cash burn worries me. At the same time, I have a hard time valuing the company's intangibles, so for me its a risky investment.

payday loans said...

Most of all people are take a payday loan for investment in stock market. Take loans and invest in stock market.

Anonymous said...

Just came across this site, very interesting. Any thoughts on Sprott Resources, I heard about and would value your opinion? Thanks

Saj Karsan said...

Hi Anon,

Because commodity prices are so volatile and (at least for me) unpredictable, I don't have any opinion on Sprott. Sorry!

Saj Karsan said...

Hi Anon,

Because commodity prices are so volatile and (at least for me) unpredictable, I don't have any opinion on Sprott. Sorry!

Anonymous said...

Take a peek at AXTI.
I think I see some opportunity here.

Anonymous said...

I just posted re AXTI but neglected to add RFIL. The company just reported positively and deserves a decent look.

Mitchell said...

Saj, I try to focus my time on micro-cap value, and can't help but see all of the dirt cheap Chinese micro-caps that have collectively been thrown under the bus by the fraud of a few in the segment. I see current valuations as an emotional departure from this segment as a whole by retail investors. As emotions tend to change quickly, it would seem there are some great opportunities to buy low here. I personally like CADC and TRIT. How do you go about sifting through the wreckage of this segment in the market?

Saj Karsan said...

Hi Mitchell,

I agree that there is likely some opportunity here as the whole sector has been hammered. However, to properly investigate these companies and separate the proper ones from the fraud, one may need to speak a Chinese language. I'm not sure I have the ability to sift through them and determine which are for real.

Trade Forex said...

Wow!! This is a nice blog and i am very impressed with your blog content. You have shared a nice information with us. I appreciate your work.

Anonymous said...

Saj,

I am wondering what your thoughts are on PAP.A? I know you have written about it in the past, but it has been a while since you gave an update!

Thanks!

Carolyn said...

I suggest that you take a look at Societe FFP in France. In particular, look at the adjusted book value per share vs. the stock price.

Then look at the quality of some of their private minority shareholdings.

Saj Karsan said...

Hi Anon,

I still like it at this price. I don't have too much to say on it. Hopefully their distribution expansion is going well at the hardware stores this summer!

Anonymous said...

Saj,

Do you have any thoughts on MMI? It seems to have hit a floor after the initial sell off after spinning off earlier this year.

Saj Karsan said...

Hi Anon, MMI isn't really in my circle of competence. Sorry!

Taylor said...

Hi Saj,

What do you think about BAC? Bruce Berkowitz recently laid out an intriguing analysis in favor of the company.

http://www.fairholmefunds.com/pdf/amaii2011.pdf

Unfortunately, large megabanks are a little complex for me to understand right now and I don't think I have an advantage over others in this situation (I'm more of an underfollowed, small cap guy), but Berkowitz' explanation made a lot of sense and it is very similar to his Wells Fargo analysis in the early 90's.

Thoughts?

Saj Karsan said...

Hi Taylor,

I share your opinion. I think BAC is likely quite undervalued, but I just don't have enough of an understanding of the company's assets to make that call. I would rather buy a basket of several banks at BAC's discount to book.

Taylor said...

Saj

I tend to agree with you there. Another option may be to purchase bank warrants. A lot of the warrants currently have a unique feature whereby the strike price is reduced by the amount of the quarterly dividend (over a specified limit). BAC currently has a warrant (BAC.WS.A) with a strike price of around $13 with about 8 yrs left to expiration. The strike price is reduced by the amount of the quarterly dividend over $0.01(which is the rate the company is currently paying).
The BAC warrants are currently trading for $4, and the stock price is a little over $9. Pre crisis (from 2001 to 2008), the average quarterly dividend was $0.44. Once the company deals with all of these mortgage issues, its not unreasonable to assume that they will increase their dividend. 8 years allows plenty of time for this to play out.

BTW, I remember you discussing Premier Exhibitions (discount to artifacts) not long ago. Have you taken a look at that company's performance recently. They seem to be doing better, although there is a *possibility* that more shares may be issued. The court is supposed to make their decision by Aug 15 in regards to how the company will be paid...monetary or in specie.

Taylor

Saj Karsan said...

Hi Taylor,

I follow PRXI a bit, but I worry that any positives from the court case won't be felt by shareholders. Hopefully I'm wrong!

Anonymous said...

any concerns about URB.A with its decreasing BV? MOS seems to be eroding...

Saj Karsan said...

Hi Anon,

I wish the MOS were eroding, but because the price keeps falling, its as if the MOS is getting bigger!!

Taylor said...

Saj,

Have you heard about Marriott's spin off of its timeshare business?

It has a few interesting characteristics:

1) Excess property inventory
2) Management has stated that development expenditures will be low in the future due to the excess inventory.
3) Management has expressed interest in selling off some assets.
4) The timeshare segment makes up 13% of Marriott's total revenue, so its not really a big portion of the company. Could lead to careless selling.
5) According to newspaper accounts, the Marriott family is expected to own 21% of the new company.

And some interesting commentary from analysts and Fitch ratings regarding the spin off:

Fitch says "the transaction will be a credit positive (for Marriott International) in terms of business risk if completed as expected...the timeshare business will be a materially more leveraged company that will maintain a non-investment grade credit profile".
http://www.businesswire.com/news/home/20110215007250/en/Fitch-Affirms-Marriotts-Ratings-Announcement-Timeshare-Spinoff

An analyst says:
“There has been investor pressure for many years to sell that business,” he said. “If you want to grow the timeshare business, you have to invest heavily in real estate and development and build things from the ground up. Marriott shareholders aren’t keen on that.”
http://www.bloomberg.com/news/2011-02-14/marriott-international-to-spin-off-timeshare-business-into-public-company.html


So the obvious downside here is high leverage, so that will need to be considered. However, the company does seem to deliver decent cash flow, with EBITDA of $227m on revenue of $1.5b in 2010. Based on the information I mentioned, there is a good chance that institutional and individual investors will be running for the exits.

Sorry for the long post...

Anonymous said...

Hi Saj,

Have you looked at RBCN (rubicon technology), with the margins and no debt wonder why the stock is so shorted. Just based on chinese competition?

Saj Karsan said...

Hi Taylor and Anon,

I have not looked at those but if I have an opinion I will post back here.

Saj Karsan said...

Hi Anon,

RBCN appears to sell some very commoditized products, the prices of which are down substantially from where they were previously. Shorts may be expecting poor upcoming results.

Saj Karsan said...

Hi Taylor,

This could definitely be an intriguing value situation. I, too, would be worried about the debt level, and also about the fixed royalty payments the timeshare business will have to pay Mariott. However, the high insider ownership is a good sign.

Taylor said...

I'll definitely be keeping an eye on it. Hopefully, the finalized form 10 will be released soon.


Another one you may want to look at: Supermedia


A lot of risks here, but it is trading at $30m despite operating earnings of more than $200m over the past 2 quarters. Highly leveraged, emerged from bankruptcy at the end of 2009.

Saj Karsan said...

Hi Taylor,

I'm just too scared of SuperMedia's debt, especially considering the declining industry.

Anonymous said...

Hi Saj,

Any thoughts on recent first-ever dividend payer Primary Corporation (TSE:PYC)?

Saj Karsan said...

Hi Anon,

I don't think I'm the right guy to ask. To invest in this type of company, I would want a massive discount to book value.

Anonymous said...

Hey Saj,

Ever take a look at INTG? Own great real estate (which you get basically for free) and a holding in miner LODE - worth a good portion of the company's market cap.

Thanks

Saj Karsan said...

Hi Anon,

That is a lot of debt to service without a lot of cash flow. That said, I haven't looked deeply at the company. What gives you reason to believe they will generate more cash in the future?

Anonymous said...

Good site that gives a lot of information.

Anonymous said...

Saj,

IFON was a stock that was covered in the past on your blog and I was wondering what your thoughts were on it at this point in time?

Saj Karsan said...

Hi Anon,

Not much of a change in my opinion. Still cheap on an asset basis, and hopefully they can continue to make progress on becoming profitable

renting said...

Lots of risk, but it has a good balance sheet and is trading around 50% of NCAV. Biggest problem,

Anonymous said...

Saj, have you looked at OSG?

Saj Karsan said...

Hi Anon,

Don't think I have. That is a lot of debt, though! Why do you like it?

Anonymous said...

I suggested looking at Lorex Technology (Lox.v) around this time last year and it still remains a top pick. Its moved up from below 15 cents to approx. 50 cents, but more importantly is showing tremendous operating momentum. Organic rev. growth to FYE Sep 30/2011 was 34% . Full results out later in January but operating income should also have grown north of 70-75%. As it turns out, this company was trading at a little over 1x eps at this time last year. at 50 cents, i believe it is still trading at 3-4x eps despite growing well above market. I've done a lot of due dili and spoken to mgmt many times. very conservative and very capable team. Due diligence is worth it here even though its not a net net and not trading below TBV.

Taylor said...

Saj,

Where do you stand on PRXI now that management is auctioning off the artifacts?

Given that I own some shares, I am happy to see that management is attempting to monetize the artifacts; however, I have a few concerns.
1)The artifacts must must be sold in one lot, rather than piecemeal. This may depress the price of the lot.
2)The artifacts are salvaged items. After browsing the web, I noticed a fair amount of opposition to sales of salvaged titanic artifacts. This may also act to depress the price.

Saj Karsan said...

Hi Taylor,

It certainly looks undervalued on the surface. I'm just not sure what the 2007 appraised value is worth. Good luck!

Anonymous said...

I know you had an earlier position in TSRI, but it seems to be approaching an interesting price again, selling at close to its cash balance and with no debt.

kovy said...

Hi Saj

You wrote about Hallwood Group (HWG) a while back in 2010. Just wondering if anything of the lawsuits and their business contracts with the military changed. Thanks

Saj Karsan said...

Hi Anon,

Yeah TSRI is looking cheap again

Hi Kovy,

I haven't followed it, to be honest. In your opinion does it look interesting now?

kovy said...

Saj, my computer was down this past week, but I am in middle of a detailed analysis of HWG now. I'll get back with my opinions

Damo said...

Check out SPPR. The stock is about to be diluted.

However there might be an opportunity with the preferred stock which are trading below par.

The structure of the REIT is a bit complex but it is worth having a look.

Regards

Damo

Saj Karsan said...

Thanks, Damo. I'll have a look and post here if I have any thoughts

Saj Karsan said...

Hi Damo,

The discount doesn't look that compelling to me considering there are no accumulated dividends outstanding, and $30 million in new pref shares are being created. Do you own these? What am I missing?

Damo said...

Hi Saj,

I've got a combination of the 2 preferred @7.5 and 21.2. and also a bit of the common in the low .90c before the 31st Jan.

I thought that after the equity injection the preferreds should trade at par given the new ones have a much lower coupon (although you don't have the option to convert at 1.20 in the future)

I got out yesterday of the common and will wait until the reach par the preferreds. In the meantime I get paid 10% plus per annum to wait.

That was my thought.

Thanks anyway for taking the time to have a look at it.

PS Do you have a view on DSM? It is similar idea to URB and trades at a significant discount to NAV

Saj Karsan said...

Hi Damo,

DSM looks interesting, nice find! I would like to see a bigger discount though. It looks like it did have a sizable one when there was a lot of fear in the muni market last year, but it has appreciated quite a bit.

Damo said...

Hi Saj

i was referring for the DSM in Canada I think in America is DCHAF

Dacha Strategic Metals

Sorry for not being more specific and waste your valuable time

Best Regards

Damo

Saj Karsan said...

Hi Damo,

Pretty incredible that there's a company that does this! Looks very cheap, I'll put my thoughts on it in a post.

Gerry said...

Saj:

Not sure if you got my previous post, but what do you think about DDS Wireless International (TSX:DD)Given the Company's growth rate and debt-free balance sheet, it seem still very undervalued? What do you think?

Gerry

Anonymous said...

Hi Saj,

Wanted to know whether my thinking regarding operating leases is correct. If one were to capitalize future operating leases as debt, would one have to add back rent/lease expenses from the past into normailized earnings (since in the future one would be considering the opearting leases as debt outstanding) when determining equity value? Thanks for any thoughts.

Saj Karsan said...

Hi Gerry,

I don't usually like to count on growth rates continuing. Why was this company losing so much money until recently? I haven't looked at it in-depth.

Hi Anon,

Some of the rent expenses would constitute "principal" payments. So I would say you should add back (to ebit) the interest component of the capitalized leases if you're trying to calculate a normalized ebit.

Gerry said...

Hi Saj:

The DDS Wireless turned profitable in Q4 of 2009 and has had 14 consecutive quarter of year-over-year quarterly revenue increases, demonstrating sustained growth. The Company did give guidance on revenues for 2011 $45 million which will equate to a very profitable year for 2011 too.

Gerry

Gerry

Anonymous said...

Any thoughts on PRLS?

Anonymous said...

Gerry. Can you send me an email regarding DDS Wireless. I'm intrigued by the situation after some initial work. eclark33@hotmail.com.
thanks

Saj Karsan said...

Hi Anon,

Not really. PRLS cash close to market value, without much in the way of clear business prospects from what I can see from a quick glance. What do you think?

Anonymous said...

Re: PRLS, my concern is with the Value Fund they intend to setup. Couldn't figure out if it would be dilutive.

Anonymous said...

I suggest looking at Lorex Technology (Lox.v). Continues to execute extremely well as evidenced by their recent q1 results. consistently profitable and growing organically north of 20%. CEO has tremendous experience and the quality of which can not be found at any similarly sized company. Shares have moved up to 80 cent level but company should do 14-16 cents in eps for 9/30 year end. 4 cents in q1. No research coverage and completely underfollowed as they don't need to raise money, etc. High insider ownership and active investors.

Anonymous said...

Hi Saj,

What do you think of SNY? It looks pretty cheap at a forward p/e of 9. It's balance sheet looks pretty stable and it has a great dividend yield at 4.7%

Saj Karsan said...

Hi Anon,

It's difficult for me to evaluate. Obviously, they have some drugs that are coming off patent, and I don't think I have a good grasp on how much these will be replaced through the company's pipeline and through acquisition. Too tough for me!

Saidal said...

Hey Saj,

I'm interested to see your view on LXK after the recent drop. I've been attracted to their policy of using their 50% FCF to up the dividend and buy back shares. Pverall, it seems like they could work out as a decent LBO target.

Saj Karsan said...

Hi Saidal,

I still like the company, though I have no insight into whether it is likely to be an LBO target. I like the cash flow of the supplies business, and I like the strategy of shifting to pages rather than printers (i.e. exiting the low-margin printer businesses). But I am a bit concerned about overpays for acquisitions to grow the MPS...we'll see if it works out!

Anonymous said...

Wonder if you've ever looked at Transat. They have no debt and approx $8 cash per share, and each quarter generally have positive FCF. The stock trades at around $5.50, so for less than cash on BS. Only issue maybe off balance sheet debt in the form of lease commitments (for planes) to the tune of $20/share. Would be interested to know how you evaluate lease commitments in this case.

Saj Karsan said...

Hi Anon,

Will take a look and post back here if I have any thoughts

Anonymous said...

Saj.....Recently, most of the Stock ideas have become more attractive...HGG, RSH, BBY, RIMM, SVU, LXK.Please suggest which among them are most attractively priced to add/start a new position or a new post which touches the market situation and most attractive among the list of ideas.
Thanks!

Saj Karsan said...

Hi Anon,

I do like the ones you've mentioned, but I couldn't possibly order them for you! You've got to make the decision for your own portfolio based on your understanding of these businesses and what makes sense for your portfolio!

Saj Karsan said...

Hi Anon,

I've now written about Transat here: http://www.barelkarsan.com/2012/05/mailbag-transat-at.html

Anonymous said...

what do you think about SGMA's latest acquisition?

When NCAV company burns money acquiring a target, don't you think that is less attractive and should likely be unloaded?

The prospects of an NCAV acquirer remaining NCAV seem dim.

Saj Karsan said...

Hi Anon,

I don't know that company, but yeah I agree with the sentiment

Taylor said...

Saj,

What do you think about George Risk Industries?

-Taylor

Anonymous said...

do a post on radioshack.

radioshack is almost in net-net territory but seems to have value trap written all over it

Saj Karsan said...

Hi Taylor,

I've now mentioned it here: http://www.barelkarsan.com/2012/06/george-not-that-much-risk.html

Hi Anon,

I already have a few times, actually: http://www.barelkarsan.com/search/label/RadioShack

C Chartrand said...

Hi Saj,

I've been receiving and reading your posts for some time now. I appreciate the information you provide and commend you for the open and honest evaluations of your investment decisions over time. It is rare in what I see on-line and what keeps me reading. I am a fellow Ivey alumni and although I have the theory / background on value investing, I wouldn't say that I have practical experience or a successful track record.
However, I would be interested to know if you have looked at Tellabs recently and what your opinion is of them. They have attribues of a value play with a stock price ~$3.35, cash & equivalents of ~$3.05/share and almost no debt. After going through a rough period and losing their CEO, they may have just stabalized revenue declines and turned the corner to start generation cash from operations again. The macro / industry trends are still a concern but there appears to be some value and investors starting questioning management / the board on returning that to stockholders the most recent call.

Saj Karsan said...

I appreciate it, C! I'll have a look and post back here if I have any thoughts on it

Anonymous said...

I discovered H.Paulin because of this site. It is probably the first day in 40 years of listing that they are actually not ''under the radar''

They were opening the TSX a few days ago:

http://www.youtube.com/watch?v=-PHYhA1IFaM&feature=player_embedded

Keep up the good work!
Ponton

Saj Karsan said...

Hi C,

I posted by thoughts on Tellabs here: http://www.barelkarsan.com/2012/08/show-and-tellabs.html

Adreno said...

Wasn't Trans World Entertainment once on this list? I noticed it's not on the value fail or value in action pages either. Do I remember wrong or what's up? What do you think about the stock as of now?

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