Yesterday was an uncharacteristically solid day in small-value land, at least for a handful of names in my 2017 Double-Net Value Portfolio. It isn't the kind of day you get used to as a value investor, especially in this market environment, but we'll take it.
FreightCar America (RAIL) , which has been bouncing back and forth between net/net and double-net land, was up 23.5% after blowing away consensus estimates. Little was expected from this out-of-favor name (the consensus was for $100 million in revenue and a loss of nine cents a share), but instead RAIL delivered revenue of $139.5 million and positive earnings of five cents a share. The balance sheet also improved; cash and marketable securities grew to $109 million, or $8.89 a share, from $93 million at year-end.
Even after yesterday's bump, FreightCar America still trades at just 1.22x net current asset value and 0.82x tangible book value. Management cited cost cutting and operational improvements as reasons for the better-than-expected quarter, but still is concerned about weakness in rail car orders. A debt-free balance sheet and nearly $9 a share in cash should provide RAIL with a fairly long runway.
Fitbit (FIT) , which many will argue is not a value name, actually put up a better-than-expected quarter, giving its shareholders a small ray of hope. Revenue of $299 million beat the consensus by $18 million, while a loss of 15 cents a share was three cents better than the consensus. Revenue was down 40% in the quarter, so this is still early and not pretty, but as I mentioned in Monday's column, Fitbit needed a win, however small.
I was pleased to see some cash generated during the quarter, and Fitbit ended it with $726 million, or $3.21 per share, in cash and marketable securities. Shares were up 12% on the day; a nice gain, but a drop in the bucket if you take a look at a price chart. You gotta start somewhere, though.
Finally, Kulicke and Soffa (KLIC) was up 5%, but this move is a bit more confusing, and not necessarily a win. On Wednesday, KLIC released second-quarter earnings, which looked good. The company beat the consensus on both earnings per share (40 cents vs. a 32-cent estimate) and revenue ($199.6 million vs. the $191 million consensus), but shares fell 6%, and the reasons are unclear. Yesterday's move just about made up for Wednesday's bizarre activity.
Kulicke and Soffa ended the quarter with $574 million, or $8.10 per share, in cash and marketable securities and $16 million in debt. It now trades at 2.31x net current asset value. As mentioned previously, with much of the cash held offshore, a favorable repatriation tax rate as part of tax reform could be beneficial to Kulicke and Soffa.
All in all, not a bad day, and I'd be happy to have a few more like that.
