Monday, January 20, 2014

Refreshing Dip In The LAKE

Just 8 months ago, Lakeland Industries was brought up on this site as a potential value idea, with its shares trading at a massive discount to the company's net current assets. Today, that discount is no more, as the shares have increased in price by over 80%. As a result, Lakeland is the latest company to join the Value In Action page.

This was a case of overly negative sentiment (perhaps a panicked seller or three?) pushing a stock price well below the company's intrinsic value. A few bad events in a row caused negative earnings (and are still causing them to some extent, though not nearly as bad as before), which spooked the market in a big way. But this was/is a company with assets that were convertible into cash, which allowed value investors the opportunity at an assymmetric opportunity; the downside was protected by liquid assets and real-estate.

I actually still have a good feeling about this company. I suspect shares have room to rise as management continues to improve operations. However, I like to avoid letting feelings impact a sell decision. Because this company has hit my price target, I have forced myself to move on. If you're staying in it, best of luck!

Disclosure: No position

4 comments:

Gregg said...

I bought heavily after the stock dipped into the low 5's/high 4's after earnings in December. The earnings report was actually very encouraging. I'm surprised at how fast LAKE has moved up. The volume has been much heavier lately so someone is interested. I reduced my position by 25% last week and have contemplated lightening up some more, but I do believe the company will likely be sold sometime in 2015 after they finish turning around the Brazil operations. Of course the question is what will someone be willing to pay? They are still trading below book value which is around $8.50.

Anonymous said...

Hi Saj,

I hope you're well. Any hindsight analysis or thoughts on Lakeland given their significant rise since you exited your position?

In retrospect, did you (I also sold my position) exit too soon? Were their reliable indicators that the company was still undervalued relative to book value on a risk adjusted basis?

Your introspections would be interesting.

Thanks,
BF

Saj Karsan said...

Hi BF,

I think the stock is up on Ebola fears. Since it is very difficult to predict these kinds of things, I don't even try.

That said, I did mention in the article that I thought there was more upside to come, and not because I foresaw the ebola fears. But I'd rather play the odds by owning something even more undervalued, so no regrets for me on this one.

Anonymous said...

Thanks. I'm feeling the same way.

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