Tuesday was a very big day for a handful of lesser-known and/or distressed names, all of which suffered through 2018. It's the kind of action that makes the markets interesting in a New Year.
First, Blue Apron (APRN) was up 45% on a company announcement that it expects to be profitable on an "adjusted EBITDA" basis for the first quarter and full year. That move lifted shares to $1.51, so clearly the stock is trading more like an option on whether the company will make it or not. Back in September we tested out the product at home as part of my due diligence on the stock, which was then trading around $1.80/share. Always interested in the down and out stories, where investors have given up, I wanted to like the story (the food was great), but just could not get there. It's too expensive, too much packaging, not sticky enough with the customers after the discounts dry up, and too much competition. By late December, shares fell all the way to 65 cents, so the ride back above $1.50 is a nice one. I still can't get interested, however. The avenue out here may be for a bigger fish to take out the name, which has an enterprise value below $250 million, but I'm not sure if that is a high-probability outcome.
Big 5 Sporting Goods (BGFV) rose 14% after they reported that same store sales rose 1.1% in the fourth quarter. That may not sound like something to celebrate, but it reflects the fact that December sales - which were in the mid-single digit range - were enough to overcome negative same store sales in October and November. In addition, BGFV increased fourth quarter earnings guidance from a loss of 15 to 25 cents, to a loss of 15 to 17 cents. Even after yesterday's nice gain, BGFV remains a net/net, and trades at just .81x net current asset value.
Valhi (VHI) jumped 26% on no news and more than four times normal average volume. The stock slumped badly after rising to the $8.50 level last April, falling to $1.63 in December. My second go around with Valhi was underwater so I elected to harvest the tax loss late last month. As Lloyd Bridge's air traffic controller character Steve McCroskey in Airplane! might say, "Looks like I picked the wrong week to", in this case, sell Valhi for the tax loss. I did not expect a quick uptick so early in 2019, but I am a value investor, and my short game is lacking. I will be looking for another entry point into these very volatile shares.
