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Deep Value Opportunities Few as 2014 Approaches


My favorite deep value screening technique, which involves the hunt for net/nets, or companies trading below their net current asset value had some interesting results during 2013. At the end of 2012, there were just seven stocks that qualified as net/nets; an all-time low in my umpteen years of researching and writing on the subject. That group, has had a decent but certainly not great run, considering the overall performance of the markets this year, and are up an average of about 40% year to date.

The best performers were Westell Technologies (WSTL) and Axcelis Technogies (ACLS), which were up 118% and 75% respectively. The worst performers were Imation (IMN), -2%, and Richardson Electronics (RELL),+1%. FormFactor (FORM), +35%, Trans World Entertainment (TWMC), +23%, and RadioShack (RSH), +27% round out the list.

If you thought that the net/net cupboards were bare last year, it's even worse as we end 2013. At this writing, and barring any major upheaval in the markets over the last week of trading for the year, we will enter 2014 with just two net/nets with market caps greater than $100 million.

Both of them are repeats from last year, Richardson Electronics, and Trans World Entertainment. Richardson currently trades for 0.95 times net current asset value, and has a solid balance sheet. The company ended last quarter with $132 million, or just over $9 a share in cash and short-term investments, and no debt. The company is currently profitable, marginally so, but also yields 2.2%. The company is followed by just one analyst, and gets very little attention.

RELL Chart
RELL data by YCharts

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