Monday, October 8, 2012

Asta Receives Uplift

Just 15 months ago, shares of Asta Funding could be had for $6 and change. At that time, the stock was brought up on this site as a potential value investment. Since then, the shares are up some 50%, offering investors the opportunity to exit after a quick but monumental rise.

This was far from a perfect stock. Despite a large discount to book value, management appeared more intent on growing the company than generating shareholder returns. The focus was (is) on an acquisition, even though it was Asta's own shares that likely provided the best investment opportunity. Now that the price has run up, management has become more active with buybacks, in a glaring case of "too little, too late".

But the discount to book value was so large that an opportunity for investors was present despite the negatives. In addition, book value was likely understated, as previously discussed.

Now, however, the stock trades a lot closer to book value, but the risks of a large acquisition remain. Investors may wish to deploy the capital gained from this investment into other Stock Ideas, or they may wish to cash out and lie in wait until such time as the market offers better opportunities.

Disclosure: No position

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