I can't remember the last time recently that there was a trio of available net/nets (stocks trading below their net current asset value) with market caps above $100 million - as there is now. Years ago there were several dozen at times. That's pretty sad for deep value investors, but perhaps testament to the notion that markets are not cheap now, and that the rising tide of the markets has lifted all boats, even those with holes. Or, perhaps investors are on to the potential opportunities net/nets sometimes offer, and bid them out of net/net land, or maybe a combination of the two
When these rarities pop up these days, I take notice. Not all are investable; some end up trading at such seemingly low valuations for very good reasons, and may be value traps, or worse. However, the most recent addition, VOXX International (VOXX) , which distributes automotive, premium audio and consumer accessories, was compelling enough for me to recently take a position.
In a different form years ago - Audiovoxx - it seemed to be a perennial net/net, until, I recall, it acquired high-end speaker name Klipsch Group for $166 million back in 2011. Relatively speaking, that was a big acquisition for the company at the time. The following year it acquired Hirschmann Car Communication for $199 million. No longer a net/net, the company fell off of my radar screen.
The company had a couple of good years (2012 and 2013), then the wheels started coming off. Debt grew, and profits disappeared. Then last June, the company sold Hirschman for $166 million, a deal which was completed in August. The sale both liquefied VOXX, and allowed it to pay off most of its $115 million in debt. However, a declining stock price - shares are down 44% since September - has magnified the company's current discounts to net current assets, and tangible book value.
VOXX currently trades at just .89 X net current asset value, and ended its latest quarter with $46.5 million or $1.91 per share in cash and securities, and just $17 million in debt. In addition, it is trading at just .49 X tangible book value per share.
Perhaps not surprisingly, the company garners very little analyst coverage; just one analyst currently follows the name. That analyst, a consensus of one, has the company losing 35 cents per share this year, but earning 44 cents in 2019. That puts the forward price earnings ratio at 11, although with such scant coverage, you have to take that estimate with a grain of salt.
Lack of coverage can be a good thing, that is, if you are willing to deal with a low level of information. It leaves more room for earnings surprises, but you are more or less on your own, to do your own research, and let the chips fall where they may.
The other two net/nets with market caps over $100 million are Richardson Electronics (RELL) , which has been a net/net for as long as I've been studying them, and Gulf Island Fabrication (GIFI) , an on and off net/net that has recently returned to net/net land (the place no companies go by choice) after reporting a very rough fourth quarter.
