Focusing My LENS on Concord Camera
Several week’s ago a discussion broke out in the Fat Pitch Financials Contributor’s Corner forum regarding stocks selling below net current asset value. Geoff Gannon submitted several posts about stocks that were selling below net current asset value (NCAV). He even found one selling below Ben Graham’s 2/3 or less of NCAV criteria. This find was Concord Camera (LENS). Finding stocks selling below 2/3 of their NCAV is a fairly rare occurance in today’s market, but back in the Graham-Newman days this simple value criteria of buying stocks selling at 2/3 of NCAV had tremendous success.
Let’s take a closer look at Concord Camera’s net current asset value by going over the latest balance sheet for LENS:
Cash and Equivalents: $9,027,000
Restricted Cash: $6,200,000
Short-term Investments: $22,675,000
Accounts Receivable, net: $7,791,000
Inventories: $13,846,000
+Prepaid Expenses & Other: $2,115,000= Total Current Assets: $61,654,000
– Total Liabilities: $21,805,000
Net Current Asset Value: $39,849,000Shares Outstanding: 5,847,408 shares
NCAV on Shares Outstanding: $6.81/share
Source: Concord Camera 10-Q May 10, 2007.
Shares of LENS closed at $3.19 yesterday. That is 47% of Concord Camera’s net current asset value. If you just look at the amount of net cash per share, it alone is $2.75 per share. I don’t normally get interested in net/net stocks as a fat pitch investor, but I decided this one looked fairly promising and worth testing the waters with.
Concord Camera is a small company in the disposable camera business. They stumbled pretty badly in 2006 with a failed attempt at digital cameras. The company is trying to develop new products to help move it out of the declining market for disposable cameras. Their current attempt, OnGuard, a child safety alert system, doesn’t really look like a winner to me. However, hopefully there are other projects in the pipeline. Some form of financial restructuring could also help to unlock value.
Apparently, I’m not the only value investor that is invested in this stock. Fellow value blogger, Joe Cit, also has a position in this stock. He recently shared his thought on the declining stock price of LENS.
I added Concord Camera to the Fat Pitch Financials Port. I first placed an order for LENS on July 19, 2007 with a limit of $4.12. It took until August 14th for the position to actually get filled given that Marketocracy restricts buy orders to only be filled by a certain percentage of the daily trading volume. My average cost per share came out to $3.81. Hopefully, LENS will recover in price back up above my average purchase price soon.
Full Disclosure: I own shares of LENS.
First off, let me apologize for continuing to rag on you about management integrity in the companies you choose, but you really do know how to pick them! Did you read the Yahoo message boards about the behavior of CEO Ira Lampert? He draws a $1M salary, and holds about 0.5M shares, which at book value is worth $9.36 per share, or $4.68M in total. Effectively, he is yielding 20+% return on his 10% ownership in the company. Would YOU liquidate such an attractive investment just to see a $4.68M one-time return of principal? And this is not counting the $7.6M SERP distribution he took from the company in 2006. There is no way Ira Lampert is going to let this particular personal cash cow be sold anytime soon, and it looks to me that revenues will continue to decline, and no promising products are in the pipeline, and CEO Lampert has a penchant for presiding over failed product launches. Are you kidding me with this?
BTW, if MWRK hits $25 at any time over the next year, I’ll concede defeat on my value trap preposition.
Welcome back valuegeek. No need to apologize for ragging on me. I enjoy the feedback.
I’m fully aware that the CEO, Ira Lampert, is a big drain on Concord Camera’s cash. My hope is that some activists eventually get involved with this stock and make the CEO work to get this company productive again. This is a small position in the Fat Pitch port and really a learning lesson for me on net/net stocks.
I’m going to hold you to that MWRK $25 challenge. I think it could take 2-3 years to get back to $50 but I don’t think $25 is out of the picture for this coming year. Be prepared to have to post publicly your defeat that you were wrong on Mothers Work being a value trap. ;-)
Im not quite sure Ben Graham would have invested in this one. The thing is actually destroying value and an investor would have time working against him as a turnaround looks unlikely. I guess the thing to do here is to take a controlling stake and liquidate the company. If one lacks the financial resources for that one would have to hope that somebody else does it – so I guess the analysis needs to focus on the ownership picture and the feasibility of a change of ownership.