Just over a year ago, InfoSonics was discussed on this site as a potential value investment. The stock promptly rose in the ensuing couple of months, but then got absolutely annihilated in the 3rd quarter of last year when double-dip and sovereign default fears reigned over the market. The stock has now bounced back, and while it may still be undervalued, value investors may want to take some off the table in order to pursue today's best opportunities.
The price action in InfoSonics over the last year reinforces a couple of lessons for value investors. First, be greedy when others are fearful. Shares of IFON fell from $1.12 earlier in 2011 to just $0.52 by October without much of a change in the company's business conditions (the company had positive cash flow but slightly negative earnings over this period). This kind of price volatility scares most investors, but should excite the value investor.
The second lesson is very simple: buy liquid assets when they are cheap and not being eroded. InfoSonics had net current assets of $19 million in October of 2011, and yet the entire company could be purchased for less than $8 million!
The company remains cheap on this basis even today (trading for $15 million), but the easiest, lowest-risk returns have now been achieved. There are now companies which much larger discounts (one example here) that investors may want to check out instead.
* Inspiration for the title thanks to a comment from loyal reader aagold
Disclosure: No position
4 comments:
Saj,
It's funny - I was about to send an email saying something like "No fair! That title was my idea!" and then I saw you gave me credit for it at the end! :-)
Thanks!
- aagold
P.S. I've had IFON on my watchlist a long time but never pulled the trigger. I've been kicking myself ever since it started its long slow move upward. Darn!
Having now fallen about 25% in the less than a month since this post, worth another look in light of a reasonably strong quarterly report.
Indeed, following up on my 3/29 post. IFON now has an NCAV of $1.34 per share, cash per share of $1.08, still no debt, just turned profitable on sharply surging revs and margin increases.
Incredibly, still below NCAV, debt free and profitable after, even after today's 50%+ spike. This is what it looks like when a net-net achieves an operational turnaround. Great upside potential from here, and obviously deserves to trade above NCAV ($1.34). $1.26 now as I type this.
I agree with you, Anon. Congratulations, by the way.
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