The last week of April and first week of May are investor conference nirvana. We had the Milken Conference last week followed by the Ira Sohn Conference in New York early in the week followed by the SALT Conference in Las Vegas to end the week.
Of course, smack in the middle of all that is the Berkshire Hathaway (BRK.A) meeting that they so graciously hold every year on my birthday weekend. One of these years, I am going to go big and go to all of them and maybe throw in the Kentucky Derby for the Grand Tour of finance and sports. In today's world of tweeting and instant reporting, all of the juicy info and one-liners hit the tape before they are out of the speaker's mouth and it's a lot to take in.
I have tried to follow along and have stacks of presentations and transcripts set aside for weekend reading, but for today I just want to clear the clutter and stick to basics. I sat down earlier today and ran my basic Walter Schloss screen looking for cheap stocks. This is a simple screen that is based on the legendary investor's principles for investing success. It searches for stocks trading below book value with decent balance sheets trading near multiyear lows with a decent level of insider ownership. Like all value screens today, the resulting list is short but there are some very interesting ideas on the list.
Electro Scientific Industries (ESIO) has fallen in the past few months and is a Schloss bargain once gain. The company has been struggling and posted a loss and eliminated the dividend earlier this year, and skeptical investors have been dumping the stock. It's trading at just 88% of book value and insiders won 5% of the company, so they have a vested interest in seeing higher stock prices in the future. Nierenberg Investments and T. Rowe Price each own more than 9% of the company apiece as well. The company has no debt and about half the current stock price per share in cash on the balance sheet. Patient investors could easily see a double from this stock over the next few years.
Shares of old favorite West Marine (WMAR) have fallen back to bargain levels as well. The market didn't much care for the first-quarter earnings report, but CEO Matt Hyde was much more upbeat telling investors in the press release, "The 2015 boating season is off to a strong start and we are very pleased with our comparable store sales results in the first quarter. Our three key strategies performed well as a result of excellent execution by the entire West Marine team."
The stock is trading at just 80% of book value again and with insider ownership of 24%, management has plenty of incentive to see the stock price higher than current levels. West Marine has no debt and should rebound nicely when consumer spending on recreational activities begins to sustained improvement.
Fuel Systems Solutions (FSYS) makes products that improve efficiency, enhance power output and reduce emissions by electronically sensing and regulating the proper proportion of fuel and air required by internal combustion engines. Given that we will eventually need to see a much higher percentage of the nation's vehicle fleets run on things like propane and natural gas, the long-term future of the company should be pretty bright. In the short term, it has been struggling as lower oil prices and a sluggish economy have delayed the pace of fleet conversion. Fuel Systems Solutions has no long-term debt and plenty of cash on the balance sheets, so it should be able to survive until it thrives, and at 82% of book value, the stock is cheap. Management will be well rewarded once the turnaround is complete as they own 17% of the company.
Leapfrog (LF) makes the list as well. I have told the story of this stock many times recently, so I will spare you the details. At less than 60% of book value, the stock is cheap and the company has cash on the books with no debt. Insiders own 17%, but they have proved to me that they are fantastic at toy and game development and horrible at running a company. Leapfrog needs to be sold to a larger toy or electronics company or a private equity firm that will put more of an emphasis on things like sales, marketing and inventory management.
Just 37 stocks, or less than .005% of all the stock in my database, pass this screen. Just nine of them are larger than $100 million in market cap. It is not a long list, but there are some fantastic ideas worth owning regardless of current market levels or opinions.