Tuesday, February 5, 2013

TAT Technologies Rises

Stocks trading at discounts to their intrinsic values are harder to come by nowadays, but stocks rising towards their intrinsic values are more easily found. One example is TAT Technologies (TATT), which has traded at a discount to its net current assets for the better part of the last 5 years. TAT has been discussed on this site many times, most recently about 4 months ago. Since then, the stock is up more than 65%.

As a result, the company now has a market cap which is more or less equal to the value of its net current assets, offering deep value investors the opportunity to sell. The company may still be undervalued: TAT continues to trade at a significant discount to tangible book. Unfortunately, the company has been unable to generate returns commensurate with its level of assets, suggesting the assets may not be worth as much as their book value would otherwise imply.

Nothing has really changed with respect to the company's operations since it was discussed on this site four months ago. Instead, this appears to be another example of how Mr. Market's mood can change dramatically over a relatively short period of time. When Mr. Market's in a mood like this, you would probably do well to sell him some of your least favourite holdings, so you can add to your favourite holdings when (not if) his mood changes for the worse.

Disclosure: No position

3 comments:

David said...

I know you have previously touched on the RSH company and as a newcomer to value investing I would like to ask you two questions:

1/
I have picked up the RSH at net-net $1.95 in December. Is a reasonable price to sell at P/B=1 i.e. range $6-7?

2/
Would you consider this price RSH intrinsic value?

Anonymous said...

The court in Israel has approved the creditors request to sell the control stake in TATT. I am just waiting (hoping) for a 3rd party to bid for the entire company at a price in excess of today's price but probably below book. That is why I have not sold into this rally.

The company will be sold or liquidated. Either way, it must be at a higher price than $7 imo.

Saj Karsan said...

Hi David,

I generally do not discuss specific estimates of intrinsic values since they will vary considerably by person. However, my opinion remains that RSH is undervalued.

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