Seven months ago I wrote about three very different net-net stocks. My point was, although Western markets were soaring there’s always something to do and you can find single bargain stocks if you dig deep enough.
Like I mentioned those three stocks in my collection were very different originally. The price of FreightCar America was exceptionally dropped below the NCAV. The company has been mostly profitable and paid regular dividend. It was one time opportunity for bargain hunter without much special risk. Discoveries like this are gems for bargain hunter because in recent years you’ve been able to find mainly perennial net-nets from US market. Therefore regular screening is important for deep value investor.
After 3Q 2017 report RAIL stock plummeted again about 25%. Not yet under the NCAV level. The railcar industry and the coal market remain challenged. Despite of company’s cost reduction program restructuring charges of $1.8 million, primarily of employee severance and other employment termination costs, will have a direct impact on the result of this year. RAIL expects that in the future annualized cost savings resulting from these actions will be approximately $3.0 million.
Because industry wide railcar deliveries are expected to fully rebound not until 2020, it could be bumpy road ahead for RAIL. Deep value investor should follow the stock closely and take advantage of situations where the price falls under the NCAV and financial fundamentals remain the same.
My second candidate was Manning & Napier. They have been hit by a long bull market and a trend toward passive investments, such as index funds and ETFs. Asset under management (AUM) has decreased further to $26.55B, but now at a slowing pace. A long as bull market continue it can be a tough ride for MN. They have completed adoption of the Rainier International Discovery Fund into the Manning & Napier Fund complex, decreased their fund fee structure and created Custom Solution program to gathering and retaining client assets. Making a quick turnaround can still be challenging.
Manning & Napier is not net-net anymore. However, the company is still profitable and pays dividend (even though it cut dividends in June). It might be interesting deep value play again when market sentiment change.
Finally was STR Holdings. It is still strongly net-net company although stock price is advanced significantly. STRI is pure asset play and their business ventures have been more or less lost in recent years. After their solar panel business problem in china they have changed to india. So far, the business has been more promising in India. Customers have generally been more reliable in terms of payment and pricing than customers in China.
In September 2017, STRI made a completely new launch. They decided to make a significant investment to enter the high-end food packaging business through their wholly-owned subsidiary in Spain. Subject to the timely purchase and installation of equipment, the company expect to begin to generate revenues from this investment by 2019. The food packaging business is highly competitive and the experience and resources of STRI are limited. In any case it is a new effort and you never know if they will success.
I was happy to success with FreightCar America earlier this year and I’m looking again possible entry place if their price falls under the NCAV level in the near future. At the moment Manning & Napier is too dull for me. A stagnant situation without any visible catalyst not interest much. When I first wrote about STR Holdings I saw their enormous asset value, but I was too afraid to do anything. Now the stock price is advanced, although the price is still outrageous under company’s NCAV and net cash value – maybe I continue my thumb sucking!