LKI, JSTN (a new one)
Lazare Kaplan (LKI) - I think 100 share have traded in the last two days. I am starting to see reports about "Millenium diamond" sales taking off in Japan. This could be big news for DeBeers and Lazare. I hear that Lazare is buying its own shares at this level, providing some support. Now looks like a very good entry point if you were interested before. The stock is once again below net-net value, with a number of catalysts possibly ready to fire. If the bull case on Lazare is going to happen it will happen in the next three months. I will not own this stock in six months if the catalysts don't fire, but I don't think there is much downside from here given the net-net valuation. As for upside, I think the bull case target price is well into the 20s.
Another stock you might want to take a look at is Justin (JSTN). A sleepy Texas company - they are the most profitable brick producer in the country, and they have the top brands of cowboy boots. (yawn...) Cowboy boots have been unprofitable for the last few years after a big Garth Brooks run, but the brick business has been shooting the lights out. And its not just the housing cycle - these guys are really really good at making bricks, and they are even better at selling bricks. But of course the risk in the stock is the homebuilding cycle.
Take the $70 million of EBITDA for the brick business, and apply the multiple that other (arguably inferior) brick businesses have sold for in the last year - 6.5-7 times. 25 million shares outstanding. Subtract the debt of 60 million. I get about $16.50 a share.
There is also a boot business that is the undisputed leader in its market. About $160 million in sales. Currently unprofitable, but they are just starting a very interesting turnaround plan. Lets lowball this. Call it 1/3 of sales. That's about $55 million, or another $2 a share. (The CFO tells me they could liquidate the assets of this business for $3 a share.)
Here is one I should have posted two weeks ago, but I was conflicted (i.e. my firm was buying). It has run up to 15 which may not provide an adequate margin of safety to a very conservative buyer. The CEO was in New York the other day meeting with investors - apparently they liked what they heard. The stock is going up.
Recognize a few other things that the CEO is probably telling these investors. I really lowballed the boot business at $2 a share. If their turnaround works (their plan makes a lot of sense IMO), its worth a lot more than that. And second there has been a major change in management (Mr. Justin retired and the old CEO of Tandy took command - he can sell this story to Wall Street.) And one more thing. The company is planning to split in two as soon as they get the boot business going.
Weird company, but one I would do my homework on now to buy on a pullback to $14. The pictures in the annual report are funny - its worth ordering just to see the stupid pictures - but after you finish laughing look at the numbers.
JJC |
