The view from net/net land (companies trading below net current asset value or NCAV) is downright depressing these days. This Ben Graham-inspired deep-value screen, which at times has revealed dozens of potential "cigar butts with one last puff," and perhaps a handful of diamonds in the rough, is not showing much at all these days.
I count a dozen names with market caps in excess of $100 million in this category, but most are not investable for one reason or another.
Near the top of the list in terms of market cap, however, is construction name Tutor Perini (TPC) . The company, which has become a perennial net-net, trades at 11.5x 2023 consensus earnings estimates. The shares are up 17% year-to-date, but are a long way from Apollo Group's late February 2020 (just prior to the pandemic) $17/share bid for the company. TPC currently trades at just 0.66x NCAV, and 0.36x tangible book value.
There's also Acacia Research (ACTG) , which purchases businesses, and owns a portfolio of patents. Currently trading at 3x trailing 12-month earnings (there are no analysts covering the stock, hence no estimates) and 0.88x NCAV, the company ended its latest quarter with $242 million in cash and short-term investments, and $61 million in debt. Earnings for ACTG, are, in a word, lumpy due to the nature of the business.
In late October, Starboard Value agreed to invest $245 million in the company, in a transaction that would simplify what was a complicated capital structure and balance sheet. We've not yet seen a post-deal balance sheet, but should in late March once the 10-K is issued. That may bring more investor interest in the company, but we'll see. ACTG is up 11.5% year-to-date.
Further down the market cap spectrum is Harbor Diversified (HRBR) , which is actually the holding company for Wisconsin Airlines. Back in August, the company inked a deal with American Airlines (AAL) , which will see the regional carrier flying under the American Eagle name out of Chicago. Service was to start this month using 40 of HRBR's 63 Bombardier CRJ200 jets. The company ended its latest quarter with nearly $150 million in cash and short-term investments, and $70 million in debt; the market cap as of Friday was just $95 million.
HRBR shares currently trade at 3x trailing earnings, and 0.9x NCAV, and are down less than 1% year-to-date. They have faded 30% since the August deal announcement with American. Interestingly, HRBR has been actively buying back stock, and reduced shares outstanding by 15% between the third quarter of 2021 and 2022.
I am anxiously awaiting results once the company has a quarter or two under its belt flying for American.
(Please note that due to factors including low market capitalization and/or insufficient public float, we consider ACTG and HRBR to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.)
