Bombed out stocks

[ratiman]

Following any stocks that have been utterly killed, beneath any reasonable standard of value? Don't include oil stocks that need oil to get back to $50.

 

Here are two that aren't great companies but are unreasonably cheap:

 

Cowen (COWN): $2.80  - poorly run investment bank, book value of $4, asset management Ramius is worth $1.50, Linkem + health care royalty is worth $1 = $6.50

 

Transglobe (TGA) - $1.05 - Canadian oil producer in Egypt, net cash and working capital of $1.50, produces 10,000 barrels a day

 

I'm sure you guys know of some better opportunities out there.

[Jurgis]

Don't include oil stocks that need oil to get back to $50.

...

Transglobe (TGA) - $1.05 - Canadian oil producer in Egypt, net cash and working capital of $1.50, produces 10,000 barrels a day

 

???

[ratiman]

I can't even follow my own instructions? I suppose you're right but I figured it's selling for less than cash so on that basis alone it's undervalued, plus the 14,000 barrels a day.

[Jurgis]

I figured it's selling for less than cash so on that basis alone it's undervalued, plus the 14,000 barrels a day.

 

Yeah, but is it losing that cash on current production? I'd guess it is - though I have not looked.

 

It's likely it won't recover unless oil goes up (a lot?).

 

Anyway, IMO there are tons of cheapish companies right now. But I don't think there's a lot of superbombed out companies ala 2009 yet. We'll see what others suggest.

[augustabound]

Just curious as to why Cowen would be interesting if you think it's poorly run?

[ratiman]

There's a huge pile of assets at Cowen. The bank franchise is a pretty big asset. It's the premiere biotech bank and look at the price Evercore paid for ISI. Ramius is a big asset. The healthcare royalty trusts are going to start paying out. Lots of real estate that is probably  not being carried at market prices. Huge tax asset. The $100M on the balance sheet that is, incredibly, in a merger arbitrage fund. 32% of Linkem, which could be a huge asset. So it wouldn't be that hard to get a NAV of $10. So at some point the discount to NAV just becomes too big to ignore.

[scorpioncapital]

COWN looks alot like LUK balance sheet. I'd say LUK is beaten down just as much if not more and is much bigger and has some slightly better (though not great) assets too.

[ratiman]

How much of LUK is in bond trading and meat packing? Like $3B? It's hard to imagine two businesses less attractive than bond trading and meat packing unless it's LNG and oil&gas. Until LUK can get out of those businesses it will be dead money. There really isn't any business at Cowen that is that unattractive.

[eclecticvalue]

Colfax corp- Trading under $20, Look at the thread to see the discussion. It has gotten very undervalued imo.

[LC]

Airlines, auto manufacturing, groceries, brick and mortar retail, consumer electronics, All probably worse businesses than bond trading or meat packing

[randomep]

 

 

Are you talking about US only? I am buying KCLI, stock hit about 50% of book today

 

In HK and Japan it is a bloodbath on profitable and high-book-value companies.....

 

 

 

 

[ratiman]

Don't life insurers usually trade at big discounts to book? Life insurance is right up there with meat packing.

[ratiman]

Airlines, auto manufacturing, groceries, brick and mortar retail, consumer electronics, All probably worse businesses than bond trading or meat packing

 

But there are some decent companies in all of those industries - airlines have been doing well, Tesla, Lululemon, Apple, etc. Meat packing is finished once they start growing meat in vats. LUK had better hope they get out before that happens. I'd be surprised if that wasn't in the risk factors section of the next 10K.

[SwimmingNaked]

Concordia Healthcare is on like ~4-4.5x '16 earnings which is an insane valuation for the quality of cash flows this company can generate. The selling that happened post Amco acquisition was one of the most irrational things I've seen in the marketplace. Maybe you can argue they slightly overpaid for the acquisition but it made a lot of strategic sense. There is leverage but when you study the biz model, it has the exact characteristics of the kind of company you'd look for in an LBO candidate. Think this is a double+ by this time next year.

[ratiman]

Concordia Healthcare is on like ~4-4.5x '16 earnings which is an insane valuation for the quality of cash flows this company can generate. The selling that happened post Amco acquisition was one of the most irrational things I've seen in the marketplace. Maybe you can argue they slightly overpaid for the acquisition but it made a lot of strategic sense. There is leverage but when you study the biz model, it has the exact characteristics of the kind of company you'd look for in an LBO candidate. Think this is a double+ by this time next year.

 

Sounds like a VRX acquisition candidate. Are the earnings melting, is that why the PE is so low?

[randomep]

Don't life insurers usually trade at big discounts to book? Life insurance is right up there with meat packing.

 

Well, I don't think you can find many that trade at 50% of book.... it pays a 2% dividend too.

 

 

I also own a meat packer (SEB) LOL

 

[Patmo]

KRN.TO, MCR.V, ESI

 

 

[Broeb22]

PAH - Platform Specialty Products was down 65% peak to trough last year, and is highly levered. It's a busted "platform company". Specialty chemical company with Martin Franklin of Jarden fame as Executive Chairman and new CEO with good track record from Sigma Aldrich. Mgmt. has estimated $750MM EBITDA - CapEx next year. Subtracting $200MM in interest expense, and assuming FX headwinds continue with a $200MM impact, you have ~$350MM pre-tax income on a market cap of under $2BN. It's a highly levered equity stub so to speak, and is probably more like an option.

 

I've been digging around container lessors for a bit since they seem priced to go out of business. Down 70% in the last year.

[ratiman]

Isn't the problem with serial acquirors that there are probably hidden operational problems after the multiple acquisitions? Often the problems are swept under the rug while the acquisition spree is underway. Afterwards the truth comes out. I don't know anything about PAH but there could be hidden problems.

 

[aws]

I bought up a good amount of DSWL in the past couple of days.  Traded as low as $1.10 with a book value of about $5, a NCAV of $2.65, and a 14 cent annual dividend.

[SwimmingNaked]

Concordia Healthcare is on like ~4-4.5x '16 earnings which is an insane valuation for the quality of cash flows this company can generate. The selling that happened post Amco acquisition was one of the most irrational things I've seen in the marketplace. Maybe you can argue they slightly overpaid for the acquisition but it made a lot of strategic sense. There is leverage but when you study the biz model, it has the exact characteristics of the kind of company you'd look for in an LBO candidate. Think this is a double+ by this time next year.

 

Sounds like a VRX acquisition candidate. Are the earnings melting, is that why the PE is so low?

 

Earnings are growing (there will be solid organic growth). P/E is low because of the high leverage + out of favour sector + trading in lock step with Valeant for nonsensical reasons + lot of uneconomic selling (margin calls + equity raise handing shares to weak hands at a time when sentiment turned sharply). CEO bought a million dollars worth of stock several weeks ago. This would not be an acquisition candidate for VRX, it's pursuing a different strategy/biz model and VRX doesn't have the balance sheet capacity to acquire them. Free from many VRX issues (like price gouging), something the market doesn't seem to understand yet.