A couple net-nets. One old one and one new one.
I posted Lazare Kaplan, a net-net diamond cutter, in April when I bought it at an average cost of about 8. The rationale was that a) it is a net-net, b) the diamond business is turning (look at the charts of DBRSY and TIF, and c) the company is buying back shares. The stock ran to 11 in two months, but the latest quarter was miserable and the stock has fallen back to the price I paid. What have I learned? First, this is an even worse business than I thought it was. And second, when a net-net goes up 50% from your entry price (7) in two months, sell half at least. I got greedy after following my discipline on HYDEA and PSO and making good money, then watching one double and the other quadruple. LKI is a buy where it is (8 1/4). Just print out a chart of DeBeers for the last ten years and a chart of LKI and you will see why I think there is a catalyst here for this net-net.
And a new one. You should take a good look at Elder Beerman (EBSC) over the weekend. It is a department store chain in the midwest. I own this at about 6 1/2. It has gone up in the last few days, but let me just point out four things: 1) The company is profitable, 2) Net-net value is about $7.50 a share, 3) Book value is about $15 a share. 4) An investor filed a 13-D last week saying he owns 5% of the company and will take steps to get rid of management or sell the company. The stock now trades at 6 3/4. I think you're looking at $9-13 once the sellers get done selling (they issued shares above $20 about a year ago, and the IPO price in December 1997 was in the high teens.) Look forward to hearing any insights if others look into this one. (hint: before you tell me they have $140 million of debt read the 10-K. They don't.)
JJC |
