A Noteworthy Thursday for 4 Value Names

 | May 26, 2017 | 10:00 AM EDT
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Stock quotes in this article:

bobe

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bh

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cbrl

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rell

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zoes

Yesterday was action-packed, at least in my corner of the world, although most of what I thought of as interesting news probably went largely unnoticed. That's par for the course in the underbelly of the investment world.

First, former restaurant name Bob Evans (BOBE) , which recently has transformed itself into a packaged foods business, appeared to take a 10% haircut yesterday. That was no haircut, but simply the stock trading ex-dividend from the $7.50 special cash dividend the company declared in the wake of the restaurant sale to Golden Gate Capital. The stock was on fire leading up to the deal and even after it was announced, more than doubling since October. The company has about a 50% market share of the side-dish business in the U.S.

Second, Biglari Holdings (BH) , which has been quiet on the acquisition front since it bought struggling magazine Maxim in 2014, announced that it will acquire McGraw Insurance and Western Service Contract Corporation, parent company of Pacific Specialty Insurance, for $299.5 million. The deal calls for $24 million at closing and $275.5 million in deferred payments. The fact that Biglari's latest purchase is in the insurance sector is not all that surprising given the company's solid experience with trucking insurer First Guard Insurance, which it acquired in 2014. Talk about a barbell approach to investing; Biglari is heavy in the low-margin, ever-competitive and challenging restaurant business -- owning Steak 'n Shake, Western Sizzlin and a 20% stake in Cracker Barrel (CBRL) -- and the higher-margin, more-stable insurance business.

Third, net/net Richardson Electronics (RELL) , which has been a disappointing performer, announced the sale of its picture archiving and communication systems (PACS) display segment to Double Black Imaging. No details, including the terms of the sale, were available. RELL currently trades at just 0.75x net current asset value and 0.64x tangible book value. It has $57.8 million, or $4.57 per share, in cash and short-term investments, no debt and yields 4%. However, the company has had trouble getting back into the black the past couple years, so it is at the very least a modest positive that Richardson is making a move, details notwithstanding.

Finally, Zoe's Kitchen (ZOES) , which I consider to be one of the freshest concepts in casual dining, reported first-quarter earnings per share in line with the consensus (one cent), but missed on revenue ($90.6 million versus $92.6 million consensus). Shares were hammered in after-hours trading, down nearly 11%, so today's trading should be interesting.

While same-store sales were down 3.3% during the quarter, Zoe's did open 10 locations and has added 37 over the past year, for a total of 161. It expects to add 38 to 40 stores during 2017. This is one that I want to own, but at the right price. Longer term, ZOES should have great appeal to consumers and investors. However, it's rough in restaurant land these days, and perhaps more dust needs to settle.

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