A sweater company—$5 per share in cash, $7 in equity, debt free. Traded $4 per share. Yes, probably would lose a bit this year.
A tiny company, though not tidy—a lot of stuffs going on. See the filings.
Anyway, 75c for $1, and then some last year’s sweaters.
Pink sheet. Illiquid.
First Industrial holds and rents a portfolio of industrial properties—factories, warehouses, etc. The book value of the properties was $2.7 billion, financed partly by $2 billion debt. The book equity was $1 billion, or 3X market value. There was unexpectedly no write-downs in assets.
Cheap as it is, what’s interesting is its profit model. As the I/S shows, in recent years it had scant gains from the renting business. Instead, all its profits came from selling properties for higher prices.
It rolled over 30% of its properties and made $250 million from price appreciations, and 20% for $180 million. Such an earning stream stopped in 2009 together with a single-digit drop in rent revenues, pulling the company down into read.
CRE usually lags and its bottoming is hard to predict.
If you want to buy its shares, it would be the very reasonable price. If the valuation recovered to only half of current book value—not a scenario unthinkable—the stock would jump 40%.
Cash from operations would be positive before the revenue is cut by half.
Buy this one for some short-term profits.
Baldwin Technology manufactures cleaning, fluid & temperature management hardware for the printing industry. It’s a global company—50% sales in Europe, 25% America, 25% Asia and Australia. It usually earns $6 or 7 million before the recession. In 2009, it lost $12 million. After a restructuring, it turned profitable again for the first nine months in 2010, earning $3 million.
Now the industry it serves is declining, since printing media is being replaced by the online. Still the stock is cheap—at $21 million in market cap, or 6X earnings—and its cost cutting has worked, at least for the short term.
Buy it at current price of $1.37 per share and sell at $1.7 later, for a crispy 30% gain in what could be several months. It may as well go down to $1—if so, hold on to it.
Here’s a good one.
AeroCentury is a leasing company that purchases aircrafts and aircraft engines and leases them to international regional airlines. It’s $125 million portfolio includes Fokker/de Havilland/Saab aircrafts, and some GE engines.
I used Net Income + Depreciation as a proxy for operating cash flow, and it leads to 8-10% return on leasing assets. After levering up with $72 million debt, the rate of return is around 30%.
The company has zero employees—it’s a first—since it outsourced the management to JMC.
It trades at about half book value and it’s profitable.
There’s some complexity in financing schemes.
Before buying, you need to figure out what would happen if there is an interest rate hike.
I’ve come across several “corporate pensioners,” whose sole providers are the government. Some are with the military industrial complex, others produce vaccines for stock-piling.
Here’s another one, taking care of the elderly and infirm on S&L budget and Medicare, putting the tax payers money into good use.
Out of the $259 million in revenue – the hourly rate for community center is around $16 – it profited a meager $5 million. It seems that the company doesn’t manage its SG&A cost very well.
It trades at $50 million market value. If you believe in P/S (price to sales), it’s a good pick.
How well will the company do? Hard to know, largely depending on federal and state budget, which is not at their best for the moment.
A. C. Moore is an art & crafts specialty retailers operating 135 stores on the east coast. It sells all kinds of materials and tools for scrapbooking, painting, sewing and quilting, needle works, knitting and crocheting mainly to middle aged women. The sales of 2007 was $560 million, or $4 million per store. The company earned $4 million that year.
When the Great Recession hit, sales dipped 5% in 2008, then another 16% in 2009. Consequently, it lost $26 million in both years.
The stock is very cheap right now, at $2, with a market value of $51 million. The balance sheet is quite healthy. With $31 million in cash, $19 million short-term debt, and $41 million in land and buildings, it seems a Ben Graham stock. In other words, the company is worth at least 20% more than the trading value and then some if liquidated immediately.
The problem is, of course, how to turn it profitable again. Lacking necessary information, I would not be able to judge the level of difficulty of doing so.
The gross margin is 40% though, meaning it has an unusually big overhead. Maybe it would help you make some sense of the operational efficiency. Is it a scale issue, or cost management, or any other standard retail problems? I have no idea.
However, if you are a customer who thinks the price in A. C. Moore’s store is reasonable, its product quality superior, store staff are helpful and knowledgeable, and the economy is getting better, you may consider buy some of its shares.
There is margin of safety. You cannot be far off.
