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Barnes & Noble, Inc. Message Board

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  • datamatters2003 datamatters2003 Feb 1, 2008 12:45 PM Flag

    Charman Buys Even More

    Better research carefully before buying on this chairman's coattails. The last time he made big purchases was in Oct. 2007. The rough average price (not weighted) of his six days of purchases was $38.078/share, according to Yahoo Finance. Even if you adjust for a 15 cent Dec. 2007 dividend, BKS is far below the $38.078/share the chairman paid in October.

    Also, fundamentally, BKS's price/book ratio at last report was 2.09. This is worse than BGP (1.61), BAMM (1.83), and HIST (1.05). It also exceeds the metric used by value investors of the Ben Graham / Warren Buffett school.

    BKS is worth watching, but why buy right now?

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    • Why would you value BKS on price/GAAP book value? I recall reading somewhere that booksellers have artificially high depreciation charges, i.e., their book value is understated relative to intrinsic value. True?

      Also, it is my understanding that bookselling is not so capital intensive or at least risky in that unsold merchandise can be put back to the publishers. Also true?

      • 2 Replies to iwantwhatscomingtome
      • While returns to publishers are the norm, there is a growing segment of non-returnable books. Whether that is publisher led or buyer led, I am not sure.

        One should keep in mind that unsold and returned books generate shipping and payroll costs. The best booksellers buy carefully to push their sell-through and therefore their margin.

      • There's been talk in the past (there was a Barron's article some months ago) about the likelihood of an LBO. Most likely the reason Riggio is buying in such large amounts is that he knows he can't lose. Either the stock moves up and he makes money or the stock doesn't move up and he puts together a management led buyout thereby making the shares he picks up now cheap in comparison to the premium that will be offered when the buyout takes place. It may not happen for a year or so (particularly when you consider the current credit environment) but at these prices you have a pretty low risk way to play an eventual pick up in consumer spending. Also, don't forget that when people retire they tend to read a lot more books. Many of these baby boomers that are about to start retiring en-mass won't buy on Amazon, they'll buy at Barnes & Noble.

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