Greenbackd is a value investing blog focused on “Identifying undervalued asset situations with a catalyst.”

From my own perspective, the importance of a catalyst is something I often overlook in many of these deep value situations, but it is an important factor in avoiding ‘value traps’ along the way to substainable long-term returns.

I was honored when I found out that my article on AMCON Distributing (DIT) was to be featured today.

Background

AMCON Distributing (DIT) is a micro-cap company with a market cap of only $34m and yet annual revenues of almost $1B.  This is an amazing relationship, and I would hazard a guess it’s one of the most lopsided market cap to sales ratios in the investing universe.

The company has made significant progress in the past two years in turning around the business financials and prospects, and has recorded two consecutive years of record sales, profits, and FCF.  2010 is shaping up to be another banner year.

The stock suffers from extremely low float, providing an opportunity for the individual investor to profit from its mispricing.

Read the full article over at Greenbackd.

Google Finance as well?

Also, I was a bit startled to find that my post was linked directly from Google Finance’s stock page for DIT!  See screenshot below:

Check out the bottom line!

Value Uncovered Portfolio

I’m adding DIT to my Value Uncovered portfolio at today’s closing price of $57.50.

Disclosure

Long DIT

One of the best sources of ideas for possible investments is other value investors. If nothing else, an initial writeup and investment thesis is a good starting point for further research.

Here are a few potentially undervalued stocks picks from this past week:

HAWK

Guest post: Seahawk Drilling Inc (NASDAQ:HAWK) and the Hacienda – Greenbackd has written several nice write-ups for HAWK (See here and here), an undervalued driller that is trading for less than the price of its assets. The stock was a spinoff from Pride International in 2009.

In this guest post, a tax lawyer explains some of the circumstances surrounding Seahawk’s tax disputes with the Mexican authorities. Tax situations can be a key catalyst for unlocking value in other investments, which makes the post an interesting read.

QXM

Qiao Xing Mobile Communication (NYSE: QXM)‎: Waiting for A Catalyst – QXM is a stock that has shown up on NCAV and NNWC screens for quite some time. I’ve looked at the stock several times myself, but never pulled the trigger.

ValueHuntr does a nice job of breaking down a range of liquidation values. If an activist investor or catalyst presents itself, the stock has the potential for excellent returns.

NOOF & TIXC

Is Mr. Market being too harsh on these stocks? – ShadowStock is a blog that always churns out a number of opportunities in the smallest of small stocks – nanocaps are a major focus. TIXC and NOOF are both detailed, with several other possible value plays.

NOOF is a stock is a current holding at Value Uncovered (see my posts on NOOF here and here). Insiders have started to aggressively buyback shares over the past week after the stock hit new lows, a good sign for prospects going forward.

YNGFF

Investment Analysis: Yukon Nevada Gold (YNGFF.PK) – This was actually a post from a week and a half ago over at Above Average Odds but I just came across it, and it was too interesting to pass up.

YNG is a turnaround story currently trading on the Pink Sheets. The gold miner has a long string of catalysts for the second half of 2010 and into 2011, and some analysts seem to be pick up the story as well.

Disclosure

Long NOOF

Advant-E Corp (ADVC) is a tiny software company that has flown under the radar during 2010 despite outstanding financial performance and near term catalysts in the form of a special dividend.

The stock remains significantly undervalued at current prices.

Financial Highlights

ADVC reported a 6% improvement in second quarter revenues compared to the second quarter of 2009.

Net income also jumped by 28% in the quarter, due to a pickup in sales on the Merkur side of the business, along with strong cost controls across the board.

Merkur Group – Enterprise Software

The traditional software side of the business has struggled throughout the recession, posting revenue declines over the past several quarters. Impressively, the company has managed to squeak out a profit over that time period due to lower commission rates and cost controls.

The latest release shows the first glimpses of a turnaround for Merkur.

Quarterly revenues increased 2% from the same period last year, and 54% compared to the first quarter of 2010. This is an encouraging sign that ADVC’s customers are returning after pushing off purchases throughout 2008 and 2009.

Edict Systems – SaaS (Internet-Based)

The steady growth in the Edict Systems business has been amazing, considering the economic climate over the past 2-3 years.

Going back the past 14 quarters, this is the first quarter where the company didn’t produce sequential quarterly revenue increases:

The company has no debt and an unused $1.5m credit line. ROE and CROIC come in at 21.6% and 25.6% respectively, both outstanding.

Overall, the company reported record quarterly income, the 28th consecutive profitable quarter, and is on track for the highest FCF year in company history.

Special Dividend

In November 2009, the board of directors voted to approve a 10-for-1 stock split and corresponding special dividend of $0.03 per share, a 21% ROI based on the stock’s closing price at announcement.

The dividend would be paid in 3 quarterly installments due in December 2009, June 2010, and December 2010.

Although I missed out on the Dec ’09 dividend, $0.02 per share in dividends during the course of 2010 is an 11% return at current prices.

Valuation

Even with the near term catalyst and impressive financials, the stock is trading well below its normal multiples in a number of categories:

Current vs 5 yr Averages

P/E – 9.7 vs 13.7

P/B – 3.0 vs 3.8

P/Sales – 1.4 vs 1.9

Based on both DCF and EPV valuation methodology, ADVC should be trading closer to $0.30, providing substantial upside (and dividend) at its current price.

Conclusion

So, we have a stock that is paying a cash dividend, setting record net income & cash flow levels, increasing revenues each quarter during the worst economic downturn since the Great Depression, and yet is trading well below its 5 year averages?

Seems cheap to me – what do you think?

Disclosure

Long ADVC