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Archive for February, 2010

October Net-Net follow-up

Posted in About, Liquidation Value, Net Current Asset Value, Net Quick Stocks, Net Quick Value, Stocks, tagged on February 2, 2010| 1 Comment »

In October I introduced a “monthly” net-net watch list based on the GuruFocus Benjamin Graham Net Current Asset Value Screener (subscription required). I haven’t updated it on a monthly basis, so now it’s a quarterly net-net watch list.

July Net-Net Screen

I was prompted to introduce the October net-net watch list because of the performance of a watch list created on July 7, 2009 using the July 6, 2009 closing prices. The performance of the stocks in that first watch list to October 13 was nothing short of spectacular. Here is a screen grab (with some columns removed to fit the space below):

GuruFocus NCAV Screen

The average return to October across the nine stocks in the watch list was 45.5% against the return on the S&P500 of 20.05% over the same period, an outperformance of more than 25% in ~three months. Pretty impressive stuff.

Here is the performance NCAV screen updated to today:

While a 16.38% return over ~6 months is a good return, given that the watch list was up 45.5% to October, the last quarter was, to say the least, a little disappointing. It’s also underperformed the S&P500 by 5.12%.

October Net-Net Screen

The stocks in the October watch list are set out below (again, with a column removed to fit the space below):

GuruFocus NCAV Screen 2009 10 13

Here’s the performance of the October crop to yesterday’s close:

36.85% is a fantastic return for a quarter, more so given that the S&P500’s return was so anaemic at 1.21%. It was obviously helped by the performance of NLST, up more than 428% for the period. If we remove NLST from the portfolio, the portfolio return drops to 10.7%, which is still a good return, but nowhere near as impressive.

February Net-Net Screen

I have captured the February screen which I’ll track over the coming months. If you want to see complete list online in real time, go to GuruFocus Benjamin Graham Net Current Asset Value Screener (subscription required).

[Full Disclosure:  I have a holding in FORD and TSRI. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]

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CombiMatrix Corporation (NASDAQ:CBMX) settles

Posted in CombiMatrix Corporation (NASDAQ:CBMX), Stocks, tagged on February 1, 2010| 1 Comment »

In August last year Wes Gray and Andy Kern supplied the first Greenbackd guest post on CombiMatrix Corporation (NASDAQ:CBMX). The thesis was as follows:

There are a number of undervalued micro cap companies in this market, but not all values are created equal. Combimatrix (Symbol: CBMX) is a small biotech company that is tremendously undervalued by the market and has catalyst in place to realize its intrinsic value in the near term (~6months or less). Management is smart, downside is limited, and upside is huge( 100-200%+). There’s a lot to like at the current stock price.

Valuation

a. Cash

The company doesn’t appear to even remotely be a net-net by glancing at the balance sheet, however, closer inspection of the company’s contingent claims suggest otherwise. In 2005 the company won a lawsuit against National Union Fire Insurance relating to its director’s and officers’ insurance policy and was awarded a $32.1 million judgment by the US District Court. It was later awarded an additional $3.6 million by the court for attorneys’ fees and has continued to earn interest since this time.

National Union appealed, at which point the court required it to post an appellate bond of $39.2 million with the court. This means that the creditworthiness of National Union is not an issue and the only thing standing between CombiMatrix and the current value of the judgment is the Circuit Court. It appears very unlikely that the ruling will be overturned based on our legal due diligence: the decision was a bench verdict by a federal judge, and there were $0 dollars in punitive damages so the appeal theory is very weak. All briefs have been submitted to the court by both parties and only the oral hearing remains, meaning that a disbursement of the funds could happen soon. A decision is expected to be finalized by Q4 2009.

The $36mm lawsuit money and $10mm supplement represent $46mm. After the 20% lawyer fee we are left with ~30mm plus the $10mm supplemental (which we would likely do a settlement for 7mm to expediate process). Add back the $11mm cash balance on June 30, 2009 and the company is sitting on nearly $6.4 in cash per share (based on 7.5mm outstanding).

If we assume $3mm in cash burn and $12mm in liabilities (convert debt+misc liabilities+liquidation costs) at December 31, 2009, we are still left with a cash balance of [~$4.4] per share ($33mm/7.5mm s/o).

Read the rest.

CBMX has lodged the following notice:

On January 27, 2010, National Union Fire Ins. Co. of Pittsburgh, PA (“National Union”), Acacia Research Corporation and we entered into a settlement agreement (the “Settlement Agreement”), pursuant to which National Union has agreed to pay us $25.0 million by February 12, 2010 to settle the dispute. Consistent with the Settlement Agreement, we have not issued a press release with respect to this event as is our normal custom upon entry into material agreements.

The settlement seems to be at a reasonably substantial discount to the award, but this is a positive development. It will be interesting to see where the stock trades today.

[Full Disclosure: I have a holding in CBMX. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]

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