Bargain-Hunters' Faves

If you'd like to hear three more real fast, here they are: He still likes 3Com(COMS Quote), which has half its $4.20 per share in cash and no debt, along with a strong new chief executive in Scott Murray; New York Community Bancorp, a very well run thrift that pays a 6% dividend yield and makes loans only to apartment-building developers, not homebuilders; and drugmaker Schering-Plough(SGP Quote), whose hidden asset is its underappreciated joint venture with Merck and a hard-working, imaginative chief executive in Fred Hassan.

Riverboat Gamblers

Meanwhile, down in Florida, Matt Feshbach is making a similar set of judgments on a different set of stocks. Two decades ago, he and his brother were known as notorious and very successful short-sellers, but they subsequently had a change of heart and used their same tools of intense forensic accounting to become big buyers on the long side of the market. They have done very well by being the lead institutional owner of Midas(MDS Quote) and other formerly broken-down assets, and they are now looking to do the same with a new crop.

Feshbach's favorite idea for the past couple of years has been cruise- and travel-services provider Ambassadors International(AMIE Quote), and his firm is now the top institutional holder with 19% of the firm. Ambassadors is the investment vehicle of former major-league baseball commissioner Peter V. Ueberroth and is run by his son. Because of some incredibly smart, low-cost acquisitions, the company is cheaper now than it was two years ago. That's when Feshbach began acquiring it, in part because it held almost 80% of the value of the company in cash.

Ambassadors is now focused on becoming the leader in the niche luxury river cruise and marina business. It bought America West Cruises, which plies the Columbia River in northern Oregon, in a liquidation sale for almost nothing and did the same recently with Delta Queen Steamboat, which runs cruises on the Mississippi and was in distress over losses in the wake of Hurricane Katrina.

Feshbach says Ambassadors can earn $2 per share by 2008, which would be more than double its current earnings power. Slap a 20 price/earnings multiple on that, and you have a $40 stock, which is almost double the current $23.80 quote.

Feshbach is looking seriously at three beaten-up retailers and a reinsurance firm, but he would not let me publish their names. He just stressed that his formula is looking at companies with a lot of cash that are going back to basics and are focusing on a core, profitable strategy. "It's markets like this where you make your money," he said.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Audiovox and Ambassadors 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.