The sad truth is that "net/net" land, comprised of companies trading below their net current asset value (or NCAV) remains a lonely place. It's been one of my favorite hunting grounds for small deep value names over the past 20+ years, but the number of qualifying candidates remains extremely low by historical standards. There are currently just four net-nets with market caps above $100 million, and a total of eight with market caps in excess of $50 million. In my July column there were six with market caps above $50 million, so I guess that's progress, unless of course you are one of the companies that is on the list. It's not a place that you'd want to be voluntarily; you don't get there by being successful. It's a junk heap of sorts, where a small subset of deep value investors hunt for something of value among the wreckage.
From the last column, VOXX International (VOXX) , Richardson Electronics (RELL) , Acacia Research (ACTG) , and Key Tronic (KTCC) remain. VOXX, which currently trades at .79x NCAV, has been all over the map year-to-date. Shares fell 33% between late January and early June, and have risen 31% since. VOXX, which closed Tuesday at $4.63, ended its latest quarter with $63 million, or about $2.60 per share in cash and investments, and $15 million in debt. Shares trade at less than half of tangible book value.
RELL, which is a perennial net/net, has had a very disappointing year overall, but has stabilized over the past several months. Currently trading at just .63x NCAV, the company ended last quarter with $50 million, or $3.83 per share in cash and short-term investments, and no debt, and yields 4.1%. I am convinced that the only way shareholders will ever see value is if the company is sold. That won't happen without the blessing of management; RELL has a dual share class structure, and CEO Ed Richardson, through ownership of most of the Class B shares with superior voting rights, controls nearly 65% of the voting rights. Incidentally, Richardson, 77, earned $1.263 million in fiscal year 2019; great pay considering that RELL lost $7.3 million for the year.
New net/nets since the last column include Gulf Island Fabrication (GIFI) , Mammoth Energy Services (TUSK) , and Flotek Industries (FTK) . We've seen GIFI here in previous years; it currently trades at .87x NCAV, and has $4.59 per share in cash and short-term investments on the balance sheet.
TUSK, which has not been here before, trades at .95x NCAV, but has seen its shares fall 90% year-to-date. In August, the company suspended its dividend after second quarter revenue fell 66%. This is a classic net/net situation; losing money, business in decline, and priced as though it will not recover. Since this one is so new to me, I'd have to dig deeper in order to determine whether it appears as though there's any potential value left. One interesting tidbit is that unlike all of the other names mentioned in this column which have little or no analyst coverage, there are nine analysts covering TUSK.
FTK trades at .93x NCAV, and after selling its Florida Chemical Company business earlier this year, is flush with cash, to the tune of $97.5 million or $1.66 per share. That's not all that far below yesterday's closing price of $2.13. The company is not expected to be profitable this year or next, at least that's the opinion of the sole analyst covering the name.
