In an environment where value continues to be about as scarce as the Philadelphia Eagles at Super Bowl (let alone Eagles' victories), one of my favorite home-brewed stock screens continues to sporadically deliver a new idea or two. I wish it was delivering more, but beggars can't be choosers.
My "Double-Net" screen is designed to identify stocks trading cheaply relative to net current assets (current assets less all liabilities), more specifically between 1x and 2x net current assets. Recently, it's been heavily populated by semiconductor, electronics and retail names. Some have been on and off the list for several years. In that situation, I determine whether such a name is actually cheap, or whether an apparently cheap valuation is systemic to the company.
It's also been prime picking ground for takeovers: Over the past three months, both Ingram Micro (IM) and Rofin-Sinar Technologies (RSTI) have announced that they are being acquired. Their similarities include a low price-to-net-current-asset-value multiple, healthy amounts of cash and relatively low forward price-to-earnings ratios. While this does not mean that all double-nets with similar attributes are prime candidates for acquisition, it is an interesting picking ground, nonetheless.
One of the more recent additions to the list is Kulicke and Soffa (KLIC) --probably an unfamiliar name to many investors. It happens to be yet another semiconductor-related double-net. Currently trading at 1.57x net current asset value and just under 15x next year's consensus earnings estimates, the company put up better-than-expected second-quarter results in early May. In addition, company revenue guidance suggests that business is improving.
The company's best attribute, however, may be its balance sheet. KLIC ended the latest quarter with $482 million, or $6.85 per share, in cash and short-term investments, and just $17 million in debt. This is yet another cash-rich, low-debt double-net that operates in an out-of-favor industry. It also trades at just 1.4x tangible book value per share.
In March of 2015, this was a $16 stock that fell to $9 by the following August. It has since rebounded to the $13 range. While the path from here is unclear, it is a cash-rich smaller name to keep an eye on.
