As usual, a few of the best value investing links from the past two weeks:
Short. Northern Oil is an energy company that owns acreage in the red-hot Bakken Shale oil play in N. Dakota and Montana. The oil is recovered using a relatively new ‘fracking’ technique, where the rock is drilled horizontally and fractured, letting the oil seep out.
Oil & gas companies are generally outside of my circle of competence – one reason is the discretion associated with some accounting aspects.
NGO is finding a ton of oil, but according to the author, is accounting for depletion reserves in a different manner compared to other companies in the region.
If the depletion expense is accounted for like NGO’s competitors, the company would earn after-tax income of $3.3m – for a $1.7B market cap company!
Long. Syms is an off-price retailer currently selling at only 1/2 of book value. The company recently made a decent-size acquisition and is starting to benefit from synergies and cost restructurings.
The company is also sitting on a ton of real estate holdings, many of which are being carried on the balance sheet at a price much lower than market value.
One of their stores sits right in the middle of Manhattan in New York City, and the company even owns the air rights above the building to potentially expand.
SYMS has been the target of activist investors in the past, but it appears like management is prudently and deliberately trying to monetize some of these assets on their own terms – the CEO’s response letter to the activists is a must read.
Work-out. Hollywood Media is a stock that has decided to liquidate and return cash to shareholders, and is now selling off the existing business lines.
The Broadway Ticketing division was sold in Q3 last year, and the company announced a tender offer for $2.05 per share. After repurchasing 8m shares (and refusing 16m more), the stock price declined sharply, as investors looking for a quick profit moved on to other opportunities.
HOLL is in the process of selling it’s MovieTickets.com business, a potential catalyst that would simplify the balance sheet and help close the discount to the calculated liquidation value.
While the purpose of Weekend Values is to showcase write-ups on other sites, I’m going to make an exception and point out an excellent primer and introduction to bank investing from a recent guest post.
Banks are outside of my normal circle of competence, but they do offer the opportunity for outstanding returns, but only if an investor is performing careful due diligence.
While this write-up isn’t a short or long recommendation, it does show the type of analysis required when looking at these institutions.
My favorite quote regarding investing in banks:
“So we have a huge number of stocks that few people are analyzing or investing in, that are also cyclical, complex, boring, illiquid, and obscure.”
Read Part 2 as well.
If you have suggestions for detailed analysis examples from other value investors, please drop me a line using the Contact Form.
I’m always open to ideas from other investors, especially for a thoughtful and well-researched investment articles.