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  • astral_tsar astral_tsar Mar 5, 2004 2:50 PM Flag

    Its amazing

    amsterbri -- Thanks for asking. I do have a few ideas.

    I'm reasonably confident about Michael Anthony jewelers (pink sheets, MAJI or yahoo MAJI.PK). This looks like a very deeply discounted asset play. The net value of liquid assets (jewelry inventory, receivables and cash) in excess of all liabilities is about three times the market cap. So the fixed assets are free and the net current assets are on sale 67% off. Buying unpopular stocks (remember NLS at $10?) always takes some guts, but this one is hard to pass up.

    All SEC filings have been complete so far, but since they have deregistered they will presumably not file in the future. They delisted voluntarily this month, citing filing costs (not unreasonable, they are a very small company) and poor share performance on AMEX. There are so few deeply-undervalued stocks right now imo -- even on the pink sheets -- that I think we can look forward to some upward correction. (W/r/t net current assets, Buffett's mentor Graham recommended buying below 2/3 and his firm Graham Newman made a lot of money that way. 1/3 looks too good to pass up. In 2003, the net current assets criterion worked well for me on Gateway in April and Metro One in November.)

    FWIW my own cost basis in MAJI is a little higher than the current quote. So there may be no rush to get in. But I'll be very surprised if it doesn't go to $2 to $3 sometime. Intrinsic is about $4, but it's not so liquid so I won't expect quite that much. As one conceivable cash-out scenario, a privately-held competitor (Aurafin-OroAmerica) has been consolidating the domestic gold jewelry manufacturing industry over the past several years. MAJ is one of the largest domestic independents left. Have heard no rumors on this and certainly no news, but you never know. Anyway the company is so small (market cap 8 or 9 million) that a hedge fund could easily buy the whole thing. A couple hedgies together own almost 20% already in fact.

    One that I know less about is The Boyds Collection (NYSE:FOB). That's a plain old income play. But I haven't looked so carefully for gotchas yet, fwiw. It goes for about 3 bucks a share, and that has some of the earmarks of a temporary dip: Four-trailing-year EPS is about 50 cents a share (for a 4ty P/E of 6).

    Twelve-trialing-month EPS is only 30 cents. I'm very comfortable with that sort of situation: many investors panic and sell on a down year. The question I don't understand yet is: has something permanent happened to margins (say competition), or was 2003 just a down year? Even if it was, the ttm P/E is only 10. So I'm still looking for a downside :-)

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