Stock Fair Value Updates
Fair value updates to Tandy Leather Factory, Netgear, EMCORE, Jewett-Cameron Trading Company, and Alico
This week I wanted to provide fair updates to some of the companies that I either own, or are on my watchlist. One goal of my Idea List series is to profile all the decent US net-net stocks, so 4 out of 5 of the stocks in this post are trading near their net current asset value. Alico is currently one of the largest holdings in my portfolio, so I updated their fair value estimate (which is also valued on its assets).
Tandy Leather Factory
Tandy Leather TLF 0.00%↑ was profiled in the first issue of the Idea List, where I estimated its fair value to be $4.70 a share. Based on Tandy’s latest balance sheet, I’m increasing my fair value to $4.90 a share. Current assets stand at $50.2M, the important items consisting of $12.3M of cash and $36.7M of inventory. TLFs total liabilities is $15.2M, producing a net current asset value of $41.7M. The stock has traded about 10% below fair value this year, but has not sold off to a deep discount level. I recently became aware that an activist shareholder is involved with Tandy trying to sell their headquarters. Apparently the real estate is worth more than what is stated on their balance sheet. Given this activist situation, I may be interested in Tandy at current prices instead of waiting for it to sell of.
Netgear
I wrote about Netgear NTGR 0.00%↑ in Idea List: Issue #5 and since then the company’s NCAV has declined by $25M. My original fair value for NTGR was $15.70 a share, but now their NCAV is $440.4M, which comes out to $15.00 a share. From their most recent earnings release, current assets declined, mostly due to reducing inventory levels, and liabilities slightly decreased. A good signal is that Netgear did some share repurchases last quarter, so the management must feel confident enough in their business to use their large cash balance to buy back stock. After the earnings release NTGR stock sold off heavily and was trading at a decent discount to its new fair value. However in the past couple of weeks it has regained a lot of those losses and is only modestly undervalued.
EMCORE
My original write up of EMCORE EMKR 0.00%↑ was in the Idea List: Issue #2, and this company has continued to struggle since then. A few months ago EMKR did a 100:1 reverse stock split so my original $0.697 a share fair value would now be $6.97. EMCORE’s net current asset value has declined by $8.6M, but the company has issue a lot of shares which has greatly impacted their NCAV per share value. Based on their current balance sheet, EMKR has a fair value of $4.15 a share, but the share price has declined down to about $1. The company is struggling reorienting itself from a maker of RF chips for cable TV, to inertial navigation units for the military. EMCORE recently announced they sold of chip fab equipment related to the legacy business for $3M. For good or bad, the company also announced the CEO was leaving and the board was focused on efforts to cut costs. The large share issuance of this company has turned me off from owning it. However as an electrical engineer, I thought EMCORE was a neat little business, so maybe if they ever get a solid enough footing where they aren’t diluting shareholders, then I would buy.
Jewett-Cameron Trading Company
Jewett-Cameron JCTCF 0.00%↑ was a member of Idea List: Issue #6 and has their fair value slightly reduced from $5.85 to $5.73 a share. From their latest balance sheet, JCTCF has $24.2M in current assets, of which $1.2M is cash and $17.6M is inventory. Total liabilities are $4.1M, which brings their NCAV to $20.1M. The stock has not moved around too much this year. Right now Jewett-Cameron is about 5% below its fair value, so still not at a level that I would buy at.
Alico
Alico ALCO 0.00%↑ is currently one of my largest holdings and here I’ll update my value of the company based on its reproduction value. Since the prior quarter, current assets are down $20M. Liabilities were pretty much unchanged, except for $8M in income tax payable. Alico expanded their grove operations by buying 500 more acres. Based on my estimated land value of $9,000 per acre, this new acreage increased the fair value of the company’s land holdings from $486M to $490.5M. My estimated net asset value for Alico declined from $456.5M to $433.2M, or $59.90 a share down to $56.90. ALCOs groves are still struggling with profitability, so I’m sure their net asset value is going to swing around a bit quarter to quarter. However, I have been adding to my position lately.
