Wednesday, December 24, 2008

Goodfellow Or Greatfellow?

Goodfellow (GDL) is a wholesaler and distributor of wood products including flooring, exterior siding, and a broad range of other hardwood and softwood products. Because of the housing collapse, stocks in this industry have taken a beating. But Goodfellow has managed to cut costs and still turn a profit, including in its most recent quarter which ended November 30th. While many of its competitors deal with burdensome debt loads and reduced operations, Goodfellow stands to make market share gains.

But is the stock cheap? The company trades for $55 million. Let's compare this to some elements of GDL's latest balance sheet:

A/R: $75 million
Inventory: $47 million
All Liabilities: $53 million

Therefore, you're buying receivables and inventory for a 25% discount, ($69 million in net assets, on sale for $55 million) and you're getting the company's profitable operations and customer relationships for free!

Of special note for this company is that billionaire value investor Stephen Jarislowski is a substantial owner and Chairman of this company. Reyer has reviewed Jarislowski's book for this blog here.

Profitable small caps with low debt levels which operate in beaten up industries offer long-term investors the opportunity for great returns.

Disclosure: Author has a long position in shares of GDL

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