Former net/net, and current member of my 2022 Double Net Value Portfolio Richardson Electronics (RELL) very quietly had a big day on Thursday. The company reported second quarter revenue of $54 million, up more than 27% year/over year, earning 30 cents/share, versus five cents for the same period last year. Shares rose nearly 14% on the news, pushing it to a 10-year high.
This is a name that has languished for years, looking good on paper, but having difficulty proving that it is not the dreaded "value trap". RELL ended the quarter with just under $3/share in cash and no debt, and now trades at about 1.67x net current asset value (NCAV). It has been a lesson in patience, as many smaller deep value names can be, but it is one that I gave up on after a long holding period in late 2019. Even the most patient have their limits, and that did not pay off in this case.
Elsewhere, the path for quality grill maker Weber (WEBR) , which went public in August, continues to be very interesting. Shares traded above $20 intraday days after the IPO, but have been unable to gain a solid footing, closing at $11.47 yesterday. I took a position in the name in mid-December in what I saw as an attractive entry point in the low $12 range. Shares are not off to a great start in 2022, down 11% year-to-date, which puts the forward price earnings ratio at just under 17.
The short interest ratio (percentage of the float that are sold short) is now at about 29%, which represents fairly substantial bearish sentiment. Those shorting are obviously paying up in order to borrow the shares in order to short them. One of the accounts where I hold WEBR shares is set up to allow lending of shares for those who want to short them. Not long after the position was established, those shares were indeed borrowed, and the current interest rate on those loaned shares is a considerable 12.5%. I am in no hurry here, happy to reap some cash while the WEBR situation plays out.
