There's a possibility that value tree is about to be shaken, that is if we see the downside market volatility related to coronavirus fears continue. You've heard it before: during sell-offs the smaller, more distressed, more under followed, lower volume names typically suffer the most damage. They are the first to be sold if investors want to raise some cash, and selling pressure on lower volume names that typically have larger bid/ask spreads can mean some pretty wide swings.
I for one believe that the virus fears are just noise for the market. That is, given my advanced medical degree and great knowledge about pandemics (I have neither). In all seriousness, I do believe that this too shall pass, but in the meantime, markets may be very volatile. We'll see down days when the number of cases rise, and up days when they fall. The market does not like uncertainty.
In the meantime, a former deeper value name that used to cross some of my screens quite frequently years ago then rose and fell a couple of times is back in value land. Watchmaker Movado (MOV) , which rose from $10 to $46 between 2011 and 2013, then fell back into the teens before eclipsing $50 in 2018, now finds itself trading below $16. The company has experienced earnings misses for two consecutive quarters, a curious fact given that just one analyst covers the name.
In fact, MOV is once again a double-net (company trading at between 1x and 2x net current asset value or NCAV), currently trading at 1.93x NCAV. It also trades just over tangible book value per share (1.07x), and at about 10x next year's "consensus" earnings estimates (that is if you can call one analyst a consensus). MOV ended its latest quarter with $116 million or $5 per share in cash, and $51 million in debt. In addition, it currently yields 5%
The big question is whether MOV, not exactly in a great industry, has the wherewithal to recover, yet again. Following two disappointing quarters, the company's next progress report should come in late March upon the release of first quarter earnings, with the "consensus" calling for revenue of $185 million (down from $199.4 million for the same quarter last year) and earnings per share of 21 cents (down from 67 cents last year).
