Lowest or craziest valuations ever seen?

[DTEJD1997]

Hey all:

 

I'm interested in the lowest or craziest valuations you've seen on US listed stocks.

 

I would also limit the time frame to something like the last 30 years or so.  I know there were some real bargains back in the 30's!  This is stuff that you've either bought or very seriously considered buying.

 

Here are some examples I've owned at various times:

 

A). A restaurant stock that was briefly trading for about a 1x P/E and well less than 1x EV/EBIDTA.

 

B). A foreign company listed in the US that was trading for a 3X forward P/E and a 30% dividend yield.

 

C). Another foreign listed US company trading for SIGNIFICANTLY less than cash on the balance sheet, huge discount to book and a slightly higher than 10% yield.

 

I've seen some wild stuff over the years.  Interested in what others have come across.

[Morgan]

The first thing that comes to my mind is Peir 1 in March of 2009. It traded for $0.11/share at the low I believe. The high was ~$25/share. About a ~225x return. Not bad lol

[innerscorecard]

Hey all:

 

I'm interested in the lowest or craziest valuations you've seen on US listed stocks.

 

I would also limit the time frame to something like the last 30 years or so.  I know there were some real bargains back in the 30's!  This is stuff that you've either bought or very seriously considered buying.

 

Here are some examples I've owned at various times:

 

A). A restaurant stock that was briefly trading for about a 1x P/E and well less than 1x EV/EBIDTA.

 

B). A foreign company listed in the US that was trading for a 3X forward P/E and a 30% dividend yield.

 

C). Another foreign listed US company trading for SIGNIFICANTLY less than cash on the balance sheet, huge discount to book and a slightly higher than 10% yield.

 

I've seen some wild stuff over the years.  Interested in what others have come across.

 

Out of curiosity, how did the above investments end up working out for you?

[DTEJD1997]

Out of curiosity, how did the above investments end up working out for you?

 

The restaurant worked out very well for me...but I was foolish and sold too early.  I made about 5X return in a little over 2 years.  I would have made a LOT more if I held for just 3 months longer as they got bought out.

 

I am still in the 2nd position mentioned.  I was up well over 100% in just over a year, but now I am only up about 80% in just over a year.

 

 

So both worked well for me.

[Gopinath]

Would you mind sharing the foreign listed companies names that you have mentioned?

[west]

Obligatory self promotion!

 

There's some crazy cheap stuff in Japan if you don't mind looking abroad.  This post contains all the ideas I've posted so far (except Sapporo Labs):

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/1782-jp-joban-kaihatsu-co-ltd/msg188645/#msg188645

 

The Sapporo Labs thread can be found here:

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/9776-jp-sapporo-clinical-laboratory-inc/

 

EV/EBIT of 0.5x despite a historic ROIC of 27% anyone?

[DTEJD1997]

The first thing that comes to my mind is Peir 1 in March of 2009. It traded for $0.11/share at the low I believe. The high was ~$25/share. About a ~225x return. Not bad lol

At the time Pier 1 was trading at $.11/share, wasn't it losing money and in a dire situation?  I think the CEO was replaced and a lot of units/sold closed?

 

A great bargain, no doubt....but at the time it was trading for $.11/share, there was tremendous doubt of it being able to survive.

 

In contrast, "Mexican Restaurants" (CASA) had been making money for several quarters and had also cut their debt level over the prior years by a tremendous amount.  They were making about $.22/share in net earnings per share.  I bought shares around $.45/share, and the stock went down to about $.21/share for a few days.  Two years later I sold most of my position at just over $2/share.  They got bought out shortly thereafter at $4/share.

 

The crazy thing was that it was publicly disclosed that they had paid down debt and were earning money.  The market didn't care...it was selling at such low P/E's (1-2).

 

Another situation was Awilco drilling.  It was quite obvious that they were making money, and were soon to make a LOT more money (1 or 2 quarters away).  Further, management stated that they would pay out a majority of the cash flow in dividends.  You could have bought just about all you wanted around $14/share.  Two months later, they were paying a dividend of $1/share per quarter.  After declaration of the 1st dividend, Awilco rocketed up to $15/share....still could have bought all you wanted...They are currently paying $1.15/quarter.  P/E is under 5.  They don't have much debt either...

 

Another example has been Deswell Industries (DSWL).  Several times they have traded as a "net-net", selling well below cash holdings.  They have no debt, inventory, machinery, real-estate, etc.  At the times they've traded below $2/share, you would have collected a dividend greater than 10%.

 

Surely there are other examples out there, where the stock is CURRENTLY a great bargain....just that the market is not paying attention.

[yadayada]

AIQ comes to mind early last year. Bonds had rallied to a premium already. I think for 75m you could have bought a leasing company with stable long term revenue that had been turned around already with oak tree involved, that would generate a spread of about 30-50m fcf normalized. I like to study these things in hindsight and study the conditions where you can find these :) . Probably if you scan over old VIC write ups that did well you can find some insane bargains.

 

My favorite now is Texhong. if margins would get squeezed hard in bear case it is trading at 10x pe now. But I don't think that will be the case. if your more optimistic it is trading at 2.5x forward PE and underlying business is growing. Hard to lose on that one. I think next year margins will go back to normal and this will be a homerun.

 

as for case studies, I think Quilmes and NII holdings were both really really cheap bargains. Both write ups are on VIC by charlie479.

These are his holdings now, probably worth to keep an eye on him. Purely following him you will probably be guaranteed at least 1 homerun every decade :) :

http://www.j3sg.com/Reports/Stock-Insider/Generate-Institution-Portfolio.php?institutionid=10322&DV=yes

 

Picanol group in 2012. market cap of 194 mill. And business had been turned around already with about 55m in net earnings. and net cash of about 140m! And I think it was known already that management was pretty smart.

 

Conrad industries in 2012. And micron early last year. Trading probably at 3-5x FCF after industry would get rational. Who cares if it's tech at those multiples right :)

 

Another one of current holdings is macro enterprises. If they score some decent contracts, trading at sub 5x earning multiples and relatively safe because it's trading at tang book value.

 

Had a whole list of these historical case studies on my other pc.

 

\I think awilco could be a value trap though. A 4-5x multiple does not seem v low since they are already getting pretty high dayrates currently. If some capacity is moved 3 years from now, day rates could get crushed. You gotta be carefull into buying some of those low pe companies.

[randomep]

 

You mentioned US listed but others brought out their foreign stocks. So here is my foreign stock that I just posted: Putprop. The stock trades at 3x w/o any debt, albeit part of it is mark to market gains on property. But hey you can't say it deserves to be depressed because it is in russia, china or japan... this one is S Africa.

 

 

http://bovinebear.blogspot.com/2014/09/putprop-earnings-looks-too-good.html

[matjone]

I'd have to say CASA was the craziest I've seen.  I don't think Awilco or Deswell were at that level of cheapness.  I think of them as just regular cheap stocks, maybe a double or triple.  Of course they may turn out to be 10 baggers and make me look dumb but that is nothing new.

[west]

You mentioned US listed but others brought out their foreign stocks. So here is my foreign stock that I just posted: Putprop. The stock trades at 3x w/o any debt, albeit part of it is mark to market gains on property. But hey you can't say it deserves to be depressed because it is in russia, china or japan... this one is S Africa.

 

I'm sure people are starting to get sick and tired of me yammering on about Japan, but please don't say that Japanese stocks deserved to be depressed because they're based in Japan, like Russian stocks deserve to be depressed because they're in Russia or Chinese stocks deserved to be depressed because they're in China.  There is next to no political risk in Japan (unlike Russia or China) and it's my understanding that things like fraud and other financial shenanigens are more severely punished in Japan than in the US!

 

I'm not 100% sure you meant to lump Japan, Russia, and China together, but I just wanted to clarify.  Beyond being below the US in terms of corporate governance, I really see no reason why Japanese stocks "deserve" to be depressed.  I think they're depressed due to investor psychology, and nothing more.

[randomep]

You mentioned US listed but others brought out their foreign stocks. So here is my foreign stock that I just posted: Putprop. The stock trades at 3x w/o any debt, albeit part of it is mark to market gains on property. But hey you can't say it deserves to be depressed because it is in russia, china or japan... this one is S Africa.

 

I'm sure people are starting to get sick and tired of me yammering on about Japan, but please don't say that Japanese stocks deserved to be depressed because they're based in Japan, like Russian stocks deserve to be depressed because they're in Russia or Chinese stocks deserved to be depressed because they're in China.  There is next to no political risk in Japan (unlike Russia or China) and it's my understanding that things like fraud and other financial shenanigens are more severely punished in Japan than in the US!

 

I'm not 100% sure you meant to lump Japan, Russia, and China together, but I just wanted to clarify.  Beyond being below the US in terms of corporate governance, I really see no reason why Japanese stocks "deserve" to be depressed.  I think they're depressed due to investor psychology, and nothing more.

 

west, I never said I feel they deserved to be depressed, I am saying some third person generic third party retail investor can argue that when I push my Japanese holdings on them

 

maybe you've forgotten me but we discussed Japanese holdings many a time in another thread, I have a sizeable position in Japan, plus a small position in Russian, but honestly I am staying away from China......

 

 

[oddballstocks]

Hmmm, great question.

 

Conduril at 40% of NCAV and 2x earnings was good, so far I'm up 4x on that one.

-http://www.oddballstocks.com/2012/08/a-european-net-net-with-pe-of-2x-and.html

Randall Bearings at 25% of NCAV and .5x earnings was good as well, up 5x

-http://www.oddballstocks.com/2012/05/cheapest-stock-ive-ever-seen-and-why-im.html

Just profiled a company in a newsletter I write that's at 50% of BV and 1x EV/EBITDA

 

Have invested in a number of stocks selling for less than net cash.  The Japanese companies are great.  I think west is pointing out something very important, that valuation doesn't matter as much as psychology.  People are looking at 1x EV/EBITDA and saying "it should be that cheap, that's fair"  In what world is that fair?

 

Yes, cheap stuff is out there.  Nothing is perfect, both Conduril and Randall had quite a bit of hair on them.  But not enough that they were a pass.  Well I did pass on Randall sort of.  Only had a tracker position, but with a 5x gain that tracker has now become a small position.  They're still at about 50% of BV and a few times earnings.

[west]

You mentioned US listed but others brought out their foreign stocks. So here is my foreign stock that I just posted: Putprop. The stock trades at 3x w/o any debt, albeit part of it is mark to market gains on property. But hey you can't say it deserves to be depressed because it is in russia, china or japan... this one is S Africa.

 

I'm sure people are starting to get sick and tired of me yammering on about Japan, but please don't say that Japanese stocks deserved to be depressed because they're based in Japan, like Russian stocks deserve to be depressed because they're in Russia or Chinese stocks deserved to be depressed because they're in China.  There is next to no political risk in Japan (unlike Russia or China) and it's my understanding that things like fraud and other financial shenanigens are more severely punished in Japan than in the US!

 

I'm not 100% sure you meant to lump Japan, Russia, and China together, but I just wanted to clarify.  Beyond being below the US in terms of corporate governance, I really see no reason why Japanese stocks "deserve" to be depressed.  I think they're depressed due to investor psychology, and nothing more.

 

west, I never said I feel they deserved to be depressed, I am saying some third person generic third party retail investor can argue that when I push my Japanese holdings on them

 

maybe you've forgotten me but we discussed Japanese holdings many a time in another thread, I have a sizeable position in Japan, plus a small position in Russian, but honestly I am staying away from China......

 

Nah, I haven't forgotten.  I just wanted to clarify to make sure people knew that the risk of investing in Japan doesn't come close to the risk of investing in Russia or China.

 

Not. Even. Close.

 

Sorry if it came off as attacking...

[peter1234]

I'm not 100% sure you meant to lump Japan, Russia, and China together, but I just wanted to clarify.  Beyond being below the US in terms of corporate governance, I really see no reason why Japanese stocks "deserve" to be depressed.  I think they're depressed due to investor psychology, and nothing more.

 

First of all thanks for being a cheerleader and posting these great Japanese bargains!

 

I think there is a justified discount to many Japanese businesses since many are not truly capitalistic profit maximizing enterprises.

 

That being said, discounts are probably too high and cheap wins out in the end.

 

;)