Yesterday's Eagles Super Bowl Parade and celebration did a pretty good job of masking a fairly ugly day in the markets, at least for some of us in the Philly area, as the S&P 500 officially hit the "correction" stage.
This essentially wiped out the gains the broad markets have seen since late November, putting the S&P 500 down 3.5% year to date. In smallville, the Russell 2000 and Russell Microcap Indexes are now down 3.9% and 4% year to date, but are still not showing a large divergence from the broad markets.
This move, as much as it hurts the psyche of some investors who may be having premature flashbacks to 2008, is still minor in the scheme of things. I don't know where things go from here, but it is clear that volatility has returned, and do expect a fair amount of it to the upside and downside on a daily basis. (You can call me Captain Obvious if you want.)
Meanwhile, I am starting to see some minor changes to my deep value screens, namely a couple of new double-nets (companies trading at between one and two times net current asset value) that qualify as a result of declining stock prices.
Furniture name Flexsteel Industries (FLXS) is a now a double-net, trading at 1.95 times net current asset value (NCAV). The stock has had a difficult run, down more than 30% since topping out in July; it is also down 18% year to date.
Currently trading at about 12 times trailing earnings, the company has no analyst coverage. That may not be comforting to some investors. What it does have, however, is a fairly solid balance sheet, with $4.78 per share in cash and short-term investments, and no debt. It currently yields 2.1%, and recently raised the dividend 10%. This name is new to me, but firmly on the radar.
The other newcomer is oil and gas equipment services name NOW Inc (DNOW) , which trades at 1.98 times NCAV after yesterday's 3.4% haircut. The company ended its latest reported quarter with $99 million in cash and $163 million in long-term debt. This is another name that has been hammered over the past year -- down 56%, and is also down about 11% so far in 2018.
DNOW, which is not currently profitable, is covered by a dozen analysts, and consensus earnings estimates ($0.14 for 2018) put the forward price earnings ratio at about 71. However, estimates for 2019 jump considerably, to $0.48, which implies a PE of 21.
It is indeed nice to see some new names in double-net land, although I suspect we may see some additional newcomers if the market begins to chew up and spit out some of the smaller, more distressed companies.