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3 D Forests And Other Delights
Now we got some good stuff for you tonight, but computer connectivity issues is causing a bit of strife for me at the moment so let me entertain you by telling you more about my wonderful life. Woke up this morning, that is always a good start. Took the dogs out. Fixed man child his lunch. Took man child to school. Brought wonderful wife and wonderful daughter their morning fix of diet Coke. Had breakfast. Went to the office. Got to the office about 8:30 am. Cleaned up about 312 e-mails. Weeded through April ending financials, all 118 pages and made notes for the CFO on variances. Had lunch in. (Subway if you were wondering.) Reviewed up and coming meeting exhibits. Picked up Man Child from physical therapy. Had a wonderful dinner at Hanna's. (Pasta with a fresh bruschetta sauce and a fine CdP Rhone Red Wine.) Helped Man child prepare for vocab finals.
Did you notice? Didn't mention the C word once. We did not have to see, meet, fight, sue, pay, a single contractor today? Way cool. I just read the previous paragraph and it is boring as all hell. I love it! It is almost like a normal person's day.
Our furniture arrives tomorrow; the audio will be complete hopefully by Friday. Our kitchen will have a gas leak free range installed on Friday. We may actually cook on our stove and enjoy the backyard this long weekend. If so I will be drinking the 18 years old stuff.
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It's Time For Your Close Up
You all know we have been on this IBD CANSLIM strategy and it does actually work. It is a little challenging in the quirky market we have been enjoying since February 18, but still a sound investment strategy. In the little time we have had to look at the portfolio and look for the next core investment, we went back in time a bit to a more value based set of guidelines. Now don't freak out because we have been selling you on the attributes of CANSLIM and now changing gears. The strategies and concepts of William O'Neil, CANSLIM, and the IBD are as relevant and important as ever, but there is still wisdom in respecting good old fashion "crunch the numbers" and find a value. Keep in mind that Buffet and Munger at Berkshire have made their fortune finding companies that are worth $2.00 and selling for $1.00, buying them and waiting for the rest of the world to figure out what they already knew. Focus and patience is all it takes to be a billionaire.
Well we may have found a couple we would consider you take a look at. We did and started positions in almost all the portfolios on one of them.
BTN Ballantyne Strong, Inc. designs, develops, manufactures, services, and distributes theatre and lighting systems. The company operates in two segments, Theatre and Lighting. The Theatre segment offers digital equipment, such as cinema projectors; and motion picture projection equipment comprising motion picture projectors, xenon lamphouses and power supplies, a console system combining a lamphouse and power supply into a single cabinet, and soundhead reproducers, as well as related products, such as sound systems. This segment also provides film handling equipment, cinema screens, replacement parts, and digital and film projection lenses, as well as offers cinema services, including film and digital projector maintenance, repair, installation, and site survey services. This segment sells its products directly to end users, and to theatre exhibitors through a network of dealers. The Lighting segment offers followspots; promotional searchlights and lighting systems for the motion picture production, television, live entertainment, theme park, and architectural markets; and LED products. This segment sells its lighting products directly, as well as through commissioned representatives to arenas, stadiums, theme parks, theatres, auditoriums, and equipment rental companies. Ballantyne Strong, Inc. markets its commercial motion picture projection equipment under the Strong and Simplex trademarks; followspot products under the Strong, Super Trouper, and Gladiator trademarks; high intensity promotional searchlights under the Sky-Tracker and Strong Britelight trademarks; and LED products under the Litetude brand name. It offers its products and services primarily in the United States, Canada, China, the rest of Asia, Mexico, South America, and Europe. The company was formerly known as Ballantyne of Omaha, Inc. and changed its name to Ballantyne Strong, Inc. in June 2009. Ballantyne Strong was founded in 1932 and is headquartered in Omaha, Nebraska.
Here was our reply:
"Good observation. My guess is a double by this time next year. They are a predominant player in the 3 D market. Regal and others are converting or adding 3D screens and projectors to many (if not all of their theaters) because the per ticket income is higher and studios are embracing the technology. So even if audiences are flat or down, this segment of the theater market is growing. REAL 3D takes a very special silver flat reflective screen for it to be REAL 3D. BTN is one of the key players (who are publically traded.) in the game.
This is small simple company, well managed, a clean balance sheet, stable earnings, and the selling at a price to book of 1.55. In essence if you sold all of their assets and paid off all of their bills the company is worth about 3.80 a share. That is based upon NO Future Growth, NO goodwill, No market share, no inherent value what so ever. There is also no major coverage of this stock so it is relatively below the radar.
Unlike a lot of my earnings, growth, inertia plays, this is a longer term value play."
During the lunch hour today we sent a note to the people who we work with on their portfolios and this is what it said
"This is too my gang of "believers". I ran across this one this morning in the "Stocks under 10 dollars" category and really liked what I saw. They BTN makes projectors and screens for movie theaters and arena lighting products. The are very active in the REAL 3D format. From everything I could read, they are very undervalued at the moment. The stock is selling for $5.85 and has an intrinsic value of about $9-10 a share. This might not pop real quick because of the overall market. We have taken a sizeable position in the main Salve Lucrum portfolio but have got all of your accounts in as well. Attached is a PDF with some earnings evaluations as well as the SEC link so you can see their May 10, quarterly filing. I am looking for a double on this by this time next year. I may be a bit more flexible with our stops since an 8% stop is only a 60 cent move in price. I will be telling more about it in detail in the blog tonight.
If you have any questions, let me know.
WE ARE LONG BTN. PLEASE DO YOUR HOMEWORK. If you would like a copy of the PDF in question, drop me a note and I will send it to you. If you are a Schwab customer, you can access it on the stock research page.
Now one of the people we manage a portfolio with pointed out, "Even though it is undervalued do you see it taking a while to move up considering the economy is likely to head into inflationary period and less people going to movies and ball games???" | |
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TIMBER!
A couple of weeks ago one of our regular readers (Hutch) sent me an idea that I kinda poo pooed. Here was his original note.
"This is just a gut call. I have bought some Weyerhauser recently. WY is the symbol. The stock has been a dog. But when you consider Japanese Earth Quake, Flooding and Tornado Damage in the South, and yes fewest NEW HOME starts in the longest time. You give this situation at least 1 year. Timber might take off like Silver did a few months back.
Eventually they are going to start to build new houses and someone somewhere is going to be needing a 2 by 4."
Here was my unempathetic response:
"Bob;
I like the play and have been watching lumber and timer and paper. Ted M. got me interested in this sector a year or so ago. I have watched WY Weyerhaeuser, PCL Plum Creek, PCH Poltach, IP Int'l Paper, to name a few. Most of these have converted to REIT organizations as their inherent value is the Real Estate they own. Regardless, you really have to look at your timeline on this one as the total value is directly tied to the Housing Market. I am convinced the housing market here and in other countries are headed to a second bubble. Look for 5-20 down in home values. This week's housing numbers are terrible. Permits are terrible. It is estimated that Japan will be building about 25,000 temporary houses, we lost that many permits just last month.
If you want to play the Japanese Tsunami Earthquake model, look at CAT, DEER, KUB Kumato, CNH group, and other industrial equipment plays. They are benefiting from the infrastructure build out in Japan and the US as well as the universal need for agricultural development. The Timber-Paper Sector is cheap for a reason. If you are willing to hold WY for 3-10 years that 2.80% yield looks attractive at a 6.2 multiple.
Hope that helps.
Thanx
Brian P. Cronin"
He came back with this edited reply:
"Hi Brian,
On the timber front I agree with a lot what you wrote. But I think there were some items missing. Housing Units destroyed vs. New Housing coming on line. The price of housing is tied to wages and unemployment. You can make the argument these issues are not very good. But there have been so many houses destroyed through neglect or disasters over the past years. I can see even with lousy wage numbers a person can't live in a cave. So this lumber might go into multifamily housing. Only time will tell.
Bob"
That whole time issue got me thinking about Value Investing again. I came back to him with a little different point of view.
"Agreed that time is the issue. If your time line is well beyond 18 months to 3 years these are incredible values. WY at a P/E of 6.2 is great. Most people have a very hard time being patient for 3 months none the less three years. I am reading yet another good book called The Most Important Thing by Howard Marks, much of his message is exactly what you are saying. If you can find a value (WY estimated to be about 28 a share) at a discounted price (Selling at $21.84 a 22% discount) AND that discount is not threatened by any KNOWN issues (that is questionable because of the dismal housing market, on the bight side the pine beetle in Canada is killing that crop and the Asian -China and as you say Japan- demand should position WY well.) AND you have the patience to wait out the acknowledgement of Mr. Market to see the current and future inherent value (at least 28 and as much as $47) than you are a successful investor. You also get a nice 2.70% yield.
You also have me thinking about this as a long term core asset. I might be watching this much closer. If it takes me 5 years to get to 47 a share that would be about 4.4% a year with a 2.00% yield, gets me real close to my annual goal of 7%. I am liking this? This is the kind of stock Buffet would be clamoring at the bit for."
So Boys And Girls, WE ARE LONG WY. Please Do Your Own Homework.
Salve Lucrum
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BAGAKOAA;
I am not a professional investment advisor. Anybody reading my blog and investing accordingly must be out of their minds. I have made more money than I have lost. There are many more qualified people than I to actually tell you how to invest your money.
BAGAKOAA=Boys And Girls And Kids Of All Ages
Salve Lucrum=Latin for Hurrah for Profit. |
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