"I don't look to jump over seven-foot bars; I look around for one-foot bars that I can step over."
-- Warren Buffett
If you're in the market for those one-foot bars Buffett loves, here's one of the best places to look: companies beaten to such a pulp that just their net amount of cash on hand represents a significant portion of the share price. In some cases, you're being handed the actual business operations for free -- or at least close to it. Doesn't get much better than that, does it?
Using our Motley Fool CAPS screening tool, I searched for companies fitting these bargain-basement criteria. Specifically, I looked for:
- Profitability over the past 12 months.
- No (or an immaterial amount of) long-term debt.
- A high level of cash in relation to current share price.
Pretty simple, eh? Among others, I came across these five:
|
Company
|
Market Cap
|
Recent Price
|
Cash per Share
|
Earnings (TTM)
|
CAPS Rating
(5 stars max.)
|
|
ChinaDigital TV (NYSE: STV )
|
$501 million
|
$8.69
|
$4.47
|
$0.65
|
****
|
|
GigaMedia (Nasdaq: GIGM )
|
$326 million
|
$6.01
|
$1.72
|
$0.76
|
*****
|
|
LoopNet (Nasdaq: LOOP )
|
$237 million
|
$6.92
|
$1.81
|
$0.52
|
*****
|
|
Sigma Designs (Nasdaq: SIGM )
|
$267 million
|
$10.10
|
$4.58
|
$1.91
|
*****
|
|
Volcom (Nasdaq: VLCM )
|
$277 million
|
$11.36
|
$3.00
|
$1.54
|
****
|
Data from Motley Fool CAPS, Yahoo! Finance, Capital IQ as of Jan.2; TTM= trailing 12 months.
You can run the same screen yourself, if you're curious. None of these are formal buy recommendations -- just a good starting point for more research, and a strong indication that these companies might merit your attention.
Is retail dead yet?
As a whole, perhaps, but that doesn't mean there aren't some stores that stand out from the pack. Volcom might be one of them. While other apparel veterans like Quicksilver (NYSE: ZQK ) and retailers like Macy's (NYSE: M ) are saddled with long-term debt, Volcom has kept its balance sheet spotless.
Nonetheless, the stock's been hammered, finishing 2008 down 50%. Yes, it's up more than 60% since bottoming out in November, but at $11 per share, there's likely still some value to be had in this one. Analysts expect the company to earn $1.36 in 2009. Strip out the $3 per share of cash, and Volcom trades at around six times forward earnings.
As CAPS member galwegian said way back in August:
Another company that's being battered by weak retail in a weak economy. It's got good management, strong fundamentals, strong cash with little debt and a strategy (acquisition while things are cheap with a focus on overseas expansion) that is one I agree with. Another one for the next 2-5 years as the economy (and retail) recovers.
Shares have of course crumbled since then, and the outlook for retail has been hellish. But with a bulletproof balance sheet and a well-known, powerful brand name, the main catalysts that typically shove recession-prone industries into the graveyard are nowhere to be seen with Volcom.
Going gaga
"Gaga for GigaMedia" is how fellow Fool Kristin Graham described GigaMedia's latest quarter. "Fundamentally speaking ... the company has done anything but deteriorate over the past year. With no net debt and over $100 million in cash sitting on the balance sheet, the financials remain clean." she said. Since then, shares have almost doubled.
So is the party over? Nah. At six bucks a pop, GigaMedia shares still hold nearly one-third of their value in cash. And how about its business model? True, consumers' willingness to gamble has plummeted lately, but the concept of "money for nothing" has never escaped people's ambitions for long. Gambling will make a comeback ... that much is practically guaranteed. As CAPS All-Star Alwayzwrong noted back in October:
Their product is as addictive and is marketed toward young people. This is the closest thing to crack in Asia. I cannot tell you how many hours I spent on the computer---not working---because of [GigaMedia].
As Warren Buffett once said, "Forget about share of market, I'm talking about share of mind." Mind, meet online slot machine.
Have at it
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