By David Sterman of
Aeropostale (ARO)After a recent downbeat quarterly report released in early December, shares of this teen-focused retailer plunged nearly -15%. In the fickle world of teen fashion, this retailer has moved in and out of the spotlight so many times I've lost count. At times, teens flock to Aeropostale while shunning rivals Abercrombie & Fitch ( ANF - Get Report) and Hot Topic ( HOTT). Not this season. But in good times or bad, Aeropostale is nicely profitable: free cash flow hit a record $280 million in fiscal (January) 2010. And management has proven to be quite friendly to shareholders, reducing the share count by 25% in the past five years. Prior to the recent quarterly shortfall, management announced plans in late November to buy back another $300 million in stock, which would reduce the share count by an additional 12% to 15%. That's not enough to boost the company's stock price, which now trades for less than 10 times (downwardly revised) fiscal 2011 and 2012 profit forecasts. And that's led some to suspect that private equity firms have approached the retailer about going private. What's it worth? As a simple rule of thumb, it's hard to pull off a deal below the 52-week high, which in this case is around $32, around 35% above current levels. Is management inclined to sell? Perhaps not. They know that fickle teens could quickly return from rival retailers, and when that happens, shares could re-visit the 52-week high -- and then some. This looks like a solid value play regardless of whether a buyout materializes. But shares could languish for at least a few more quarters until same-store sales start to perk up.
Eastman Kodak (EK)With shares of this former consumer electronics giant languishing below $4 this summer, many investors figured it would soon be left for dead. After all, the core film developing business -- which has shrunken considerably but still throws off cash flow -- will eventually dry up. (Though some believe the legacy business may have found a floor, supporting demand for printing press plates, color negative paper and other old-school photography hardware.) The company has bought time by re-financing its debt burden, but it will eventually need to start paying off its more than $2 billion in underfunded pension benefits.
Broadwind Energy (BWEN - Get Report)The U.S. wind power business really hit the tank in 2010 as hope for federal support never materialized. So this company, which makes super-sized wind turbines, turbine gearing and other components, has seen its shares fall from $10 to $2 in the past year. With its cash balance at just $10 million, continued expected operating losses and an inability to raise much interest in a fresh sale of equity at this time, Broadwind's options are dwindling while it waits for the wind energy industry to rebound.
Enter GE ( GE - Get Report)? The industrial titan has been expanding its portfolio of wind power products and may be sniffing around, according to the rumor mill. Broadwind is already a supplier of gears to GE, although it also works with GE rivals such as Vestas (which could complicate any deal talks). Buyout rumors gained credence a few months ago when an analyst at Raymond James suggested the two firms may be talking. (That was an unusual move. As a former sell-side analyst, I was prohibited from ever writing about any such rumor gossip -- which is usually a big no-no with securities regulators).