Three Ideas and an Award – April 2007
Ideas
Bancinsurance (BCIS): $6.05
Rex Stores (RSC): $16.55
Strattec (STRT): $43.00
Note: Despite the fact that I plan to update this post at the beginning of each month – these are not short-term stock picks. In fact, this particular group of stocks is likely to do little or nothing for long periods of time. Value investing is about buying an asset for less than it's worth; the shares of these businesses are now selling for less than the businesses are worth. That's why they are my three best ideas for the month of April. Expected short-term price movements have nothing to do with the selection.
Regarding BCIS – it trades very infrequently. If you decide to buy it (and you manage to find some shares) you'll do best if you forget it's a public company, ignore the daily market quote – and judge your investment by the quarterly updates on underwriting results and per share book value. Do not buy this company if you need a quote to sleep at night – fluctuations in market price are meaningless for such a small, thinly traded security.
Award
Best DIY LBO Candidate – Timberland (TBL): $26.05
Description: The Best DIY LBO Candidate Award is presented to the company I believe is in the best position to benefit (continuing shareholders) by taking on debt and repurchasing its own shares through a large tender offer.
A good do-it-yourself leveraged buyout candidate requires both an unduly low public market value (market cap/enterprise value) and the ability to consistently cover large interest payments from free cash flow – Timberland meets both requirements.
Disclosure: I and people connected to me both professionally and personally own some or all of the stocks mentioned in this post.
I'd appreciate hearing what you think about my plan to do a "Three Ideas and an Award" post at the start of each month. Feel free to give your opinion by commenting to this post or sending me an email.
Comments
I think this is a great idea. Being a relatively new "investor" I find it incredibly helpful to see how you approach finding stocks like these. That said I personally would find it extremely helpful to see how you actually find and value some, one, or all of the stocks you mention. Not that I think that you should have to provide this information...your time is valuable and giving free information to the masses may or may not be of value to you. Again...thanks for your time.
Posted by: joshm![[TypeKey Profile Page]](http://www.gannononinvesting.com/nav-commenters.gif)
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April 2, 2007 04:48 PM
"That said I personally would find it extremely helpful to see how you actually find and value some, one, or all of the stocks you mention."
I hope to discuss some or all of these stocks at some point during the month. But, at the beginning of each month, I'll just post the names of the three best ideas of the moment.
By the way, I don't expect much turnover from month to month. I wouldn't be surprised if the first three names are the same at the start of each of the next few months. Of course, the fourth name will change each month.
Posted by: ghg777![[TypeKey Profile Page]](http://www.gannononinvesting.com/nav-commenters.gif)
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April 2, 2007 08:11 PM
Rex stores hit a huge downturn after wal-mart pushed their $998 lcd screens over christmas, and I believe their selling off a lot of their stores. Their market cap may be less than their value, but long term prospects don't look so good in my opinion.
Posted by: camas22![[TypeKey Profile Page]](http://www.gannononinvesting.com/nav-commenters.gif)
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April 27, 2007 04:01 PM
They are selling off a lot of their stores – that's a big part of the appeal. The company has been closing stores for years. It did a sale and leaseback that allowed it to close even more. The stores performed poorly last quarter – but, the stock is worth more than it is trading at even if you assume the retail operations are worth next to nothing.
Personally, I think they are worth something. But, it is a terrible business to be in.
Rex Stores has been moving capital out of the retail business for years, and accelerated the pace recently with the land sale. As I'm sure you know, they have also been making investments in ethanol.
Posted by: ghg777![[TypeKey Profile Page]](http://www.gannononinvesting.com/nav-commenters.gif)
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April 27, 2007 04:08 PM
Hi,
Thanks for suggesting your expert picks.
I know these are not short term picks, but when you eventually decide to sell these stocks, perhaps you could tip us to that too.
Thanks for an interesting site.
Posted by: traeh![[TypeKey Profile Page]](http://www.gannononinvesting.com/nav-commenters.gif)
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June 8, 2007 01:53 AM