Tuesday, December 27, 2011

Lakeland Industries

Lakeland Industries' (LAKE) stock price has been declining for almost two years now. But it is a consistently profitable firm that now trades at a discount to its net current assets. For more on this company, see the write-up over at Whopper Investments, a great site for those looking for value investing ideas.

Watch out for a possible risk for this company, however: its reliance on Dupont as a supplier. As per the company's 10-K:

"In FY11, we purchased approximately 32.3% of the dollar value of our materials from DuPont"

If Dupont decides to use a different distribution model, or doesn't want to do business with Lakeland anymore, a major portion of the company's revenue could disappear. This risk mostly concerns the company's future earnings power, however. If the company can be bought at a large discount to its assets, this risk may not be such an issue.

For more on this risk, check out the Lakeland write-up at frankvoisin.com.

Finally, there may be a potential catalyst on the horizon, as another company in the same line of business as Lakeland has picked up almost 10% of the company's shares. The price went up on this news, unfortunately, but potential catalysts don't usually come free anyway!

Disclosure: No position

7 comments:

Whopper said...

Nice post, and thanks for the link. Lakeland actually already lost their DuPont contract and will completely phase their products out over the next year.

rayhaan said...

hi saj,
nice to see the blog still growing in leaps and bounds....its truly awsum to see that my daily dose of sanity being appreciated by the world at large...hope you ve checked out geoff gannon(truly closest to someone who can be called a "net-net guru" i ve ever seen) and bronte capital blog(the blogger is an austrailian hedgie incredible research ,distressed debt investing club quality if you know what i mean,willing to chase fat tails for eg.he wrote a coupla months ago his rationale for buying fannie mae bonds at 10 cents or so i think,occasionally shorts and displays an uncanny ability and willingness to discuss current issues in a very rational manner ).....and the best part is seeing you and rohit of valueinvestorindia following each other(yeah,yeah call it my own version of "herding" ,but i refuse not to be amazed at the power of the web in uniting like minded individuals....helps make investing a little less lonely ..and yeah me likes it)...i guess its been an "interesting" and voilatile year for both of us(i left law school,couldnt get anywhere into finance ,was 'drafted' into the family biz,ended up taking ba.english honors, not really relevant to making money but hey LOTS OF FREE TIME.....U 2 faced market voilatility,a real crappy 'scene' in RIM...im unsure if your thesis still holds, and maybe you picked up a fight or 2 with frank COZ I REALLY DONT SEE THAT MESSENGER POST as much as i d like to see it....lol...hope thats the extent of it)....anyways considering that this was my first value blog,it has continued to influence many of my investing decisions greatly and i guess im happier for it since 12thgrade(as a friend remarked its 'ruined ' me for other approaches...rofl)...i kinda remixed the approached-a concentrated portfolio of net -nets with remarkable risk-return characteristics along with strong growth possiblities(i.e we buy cheap and profitable net-nets)...have exactly 5 positions(some 'bad name'investments,microcaps,nanocapsetc)....JUST WONDERING HOW COME YOU HAVENT BOUGHT/MENTIONED MICROCAPS BEFORE?...IM PRETTY SURE THERE ARE SOME OPPURTUNITIES AVAILABLE THERE(pls check out the gurufocus net net newsletter if u can)
wishing u a merry xmas and happy new year
hope the citadel fellow is right in his prediction for 2012
best of luck
yours gratefully,
rayhaan
p.s sorry 4 d highly personal and unedited language,hope reading thru' inebriated'english wont be a problem(discovered it around the same tie i discovered your blog)
tc

Saj Karsan said...

Hi Rayhaan,

Thanks for the kind words.

Yes I read both Gannon and Bronte.

How do you define microcaps? I believe I do discuss some pretty small companies, but yeah I do tend to stick to the exchanges rather than OTC

rayhaan said...

I GUESS MICROCAPS WOULD BE COMPANIES LIKE GEORGE RISK OR MAYBE BERNER DENTAL MANAGEMENT TYPES IN CONTEXT OF UR MARKET.
BACK HOME IN INDIA SEEING SOME TRULY INCREDIBLE CASH BARGAINS LIKE TEESTA AGRO(ITS GOT LIKE APPROX.22 CRORES{1 CRORE EQUALS 10 MILLION IN THE INDIAN NUMERICAL SYSTEM] OF CASH AND 1.5 CRORES OF SECURITIES ,NEGLIGIBLE DEBT, AN OPERATING BIZ WHICH IS BARELY PROFITABLE,A HIGH MANAGEMENT STAKE UNFORTUNATELY FOR ME ACQUIRED THROUGH PREFERENTIAL SHARE ISSUES OF COURSE, ALL AT A MKT CAP OF 8 CRORES...P.S THEY ARE STARTING A DIVIDEND THIS YEAR{THEY SEEM TO HAVE A COMMUNICATION PROBLEM ,COULDNT FIND THE ANNOUNCEMENT ANYWHERE ON THE BOMBAY STOCK EXCHANGE WEBSITE,JUST GOT A DIVIDEND CHEQUE IN THE MAIL THIS MORNING..YIPPEE!) WORKING OUT TO A YIELD OF 6 PERCENT ),THEN THERES INDIAS LARGEST CASH BARGAIN AT AROUND 3 BILLION DOLLARS=PIRAMAL HEALTHCARE
HERES THE LINK TO AN EXTREMELY INTERESTING VALUE OPPURTUNITY
http://fundooprofessor.wordpress.com/feed/
ITS THE SECOND POST FROM TOP
I HIGHLY RECOMMEND YOU CHECK IT OUT
P.S GONNA START BLOGGING HOPE ITS HALF AS GOOD AS YOU
HOPE U LIKE THE ARTICLE
ON ONE OF THE BEST CASH BARGAINS AROUND
TC
HAPPY HOLIDAYS

Anonymous said...

Hi Saj,

Interesting post. I checked the ASX website and there is no disclosure of the 10% acquisition of LAKE by Annsel. If you see the managament preso of the 17 Oct they are keen on acquisitions.

Do you have any analysis on the sinergies between ANN and LAKE in case of friendly takeover??

Thanks and keep the good work mate!

Saj Karsan said...

Thanks, Rayhaan. Let me know the URL of your blog. I can't see the stock idea you linked to, what is it?

Hi Anon, I don't believe I have any value to add about the synergies between the two companies. You can see the Ansell disclosure here.

Anonymous said...

hey Saj,

Just wondering if you still own Lake?

thanks,

John

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