A collection of value investing ideas from the previous two weeks:

Contraction Expansion

Barel Karsan lays out the risk/reward for SIFCO Industries (SIF), a stock recently featured here at Value Uncovered (See: SIFCO: A Contrarian Investment). The stock appears to be very cheap, but management is rolling out an expansion strategy during a cyclical downperiod for the company.

The question remains whether the business is back on the upswing (and management is correctly anticipating) or whether the company will experience another down year or two (and potentially struggle by not conserving  cash).

Risk Arbitrage: The Battle for 3PAR

Hunter over at Merger Arbitrage Investing has a nice writeup on the bidding war between Dell Inc (DELL) and Hewlett-Packard Co (HPQ) for 3PAR Inc (PAR), the global provider of utility storage systems.

In a little over a month’s time, the bidding war increased the purchase price for 3PAR from $1.15B to $2.35B, as the mega-tech giants battled over control of the company.

While many special situations investments try to capture a thin, ‘risk-free’ spread, a good portion of long-term value arises from bidding wars between potential acquirers.

InfoSpace Inc.: Cash + Cash Flow + Big NOL = Cheapness & Change Agent

Featured at GuruFocus, Infospace (INSP) is a meta search engine that has suffered greatly since the dot-com bubble (the stock hit a split-adjusted price of $1,190/shr in March 2000 compared to a current price of $7.19/shr!)

From an value perspective, the company has $6.25/shr in net cash on its balance sheet, generates solid FCF, and has a huge ($815m) pile of Net Operating Loss (NOL) tax carryforwards that could potentially be valuable to a strategic acquirer.

Acquirer Buys Cash at a Discount

Barel Karsan has another great post on Qiao Xing Mobile (QXM), a mobile handset manufacturer in China. QXM has appeared on every Graham, NCAV, or NNWC screen over the past several months, as the company is sitting on over $265m of net cash.

A recent buyout offer from majority shareholders (usually a great situation that unlocks potential for value investors) values the company at only $206m, well under the net cash balance.

The situation shows how difficult it can be to unlock value for minority shareholders, even in a buyout/liquidation situations.

Class #1 – Introduction to Value Investing

While I usually feature specific stock recommendations on Weekend Values, I came across this series of class notes that was interesting enough to pass along.  The notes were typed up by an anonymous student at a graduate business school during various lectures from 2002-2007.

Browse through the related Scribd documents for even more insights.

Disclosure

No positions.

Here are a few interesting value investment ideas from the past two weeks:

KHDHF.PK

Investment Analysis: KHD Humboldt Wedag International Ltd. (KHDHF.PK) – Purchase A Pile of Cash And Get A Competitively Entrenched, High Quality Cash Cow With Good Growth Prospects For Free

This is a thoroughly research post from AboveAverageOdds regarding a spin-off business, one of the special situations investment scenarios that has historically provided outstanding returns.

KHDFHF is an industrial business specializing in proprietary technologies for cement and mineral processing.

The company is obscure, and other factors (including only reporting financial results twice a year, located in Germany, etc) might serve to deter investors.  Despite the obscurity, the company appears to have a strong competitive position and a solid cash position to take advantage of future growth opportunities.

FURX

Furiex Pharma: Spinoff Trading at Net Cash – Continuing the spin-off theme with an analysis of Furiex Pharmaceuticals (FURX) over at OozingAlpha. FURX is a company in the drug discovery business and was recently spun-off from PPDI back in June.

Within weeks of the spin-off, the stock dropped from $18 to below $10, and has traded around there since.  Although the stock is currently trading around net cash, the business requires a high rate of cash burn while researching new drugs.

Several promising drugs in the pipeline could lead to future gains.

STRL

When All Problems Are Short-Term – Barel Karsan has a post on small-cap infrastructure company called Sterling Construction (STRL).  The company is in a very cyclical business, and appears it depends on budgets of state governments (many are struggling with tax & budget issues), resulting in margin pressure and revenue swings.

STRL doesn’t have the typical ‘value-oriented’ balance sheet, but has earnings potential for investors unconcerned with short-term results.

Net/Net List

Top Net/Net’s By Market Cap – In the spirit of Graham and other deep value investors, net/net investing has proven profitable over many years. Several recent investments here at Value Uncovered, including CHBU & ELST, were based on this methodology.

Cheap Stocks has a nice list of stocks trading at less then NCAV.  Several names on the list, such as VOXX, have been on these lists for awhile, so it is important to find those with some sort of catalyst.

Disclosure

Long CHBU & ELST

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