As usual, here are a some value investing links from the past few weeks:

DHT Holdings, Inc. (DHT)

Long Thesis. Shipping is an industry I usually avoid, but Whopper Investments makes a good case for DHT Holdings (DHT), a company that operates double-hull tankers in the highly-competitive crude oil shipping market.

The company has a new management team in place after struggling through the economic downturn (basically, by using most of their FCF to continue paying out dividends despite declining business fundamentals).

Based on a recent appraisal, DHT holds ships valued at approx $415m compared to an enterprise value of $440m, meaning investors are picking up the rest of the business and its guaranteed cash flow (due to long-term contracts) for only $25m.

RadioShack (RSH)

Long Thesis. RadioShack managed to survive the economic downturn reasonably well, and now sits on over $700m in cash, or approx. 1/3 of its market cap.

Management has been using this cash pile to buy back shares, repurchasing almost $300m in stock in the past quarter alone.

The company trades at a P/E level of 9 despite stable operating margins and high ROE (averaging almost 20% over the past several years).

Gaming Partners (GPIC)

A stock recently featured on ValueUncovered, Petty Cash provides additional insight into Gaming Partners International (GPIC).

The linked chart tracks GPIC’s improving business fundamentals (CROIC and operating margins) despite significant ups and downs due to the cyclical nature of the business.

The company benefits from a dominant position in its core market (casino chips) with decent tailwinds in the casino sector, which suffered through a sharp correction in 2008/2009.

Diamond Offshore (DO)

Long Thesis. While concerns over drilling in the Gulf of Mexico continue (with new permits unlikely until late 2011 or 2012), the official ban lifted in October 2010, and most drillers have rallied significantly in the past 6 months with one exception: Diamond Offshore (DO).

In 2009, 32% of Diamond’s revenues were from the Gulf of Mexico; that number is down to 21% through the first nine months of 2010. Only 5 rigs remain in the region, with 3 others repurposed to other parts of the world.

The company has generated annualized free cash flow of approx $850m in 2010, with shares priced at only 10 times these depressed free cash flow levels.

DO continues to return cash to shareholders via special quarterly dividends and management remains bullish on the long-term prospects for deepwater operations.

Primus Telecommunications Group (PMUG.OB)

Long Thesis. PMUG recently emerged from Chapter 11 bankruptcy protection (a good signal for additional diligence by value investors) with a repaired balance sheet but depressed valuation due to lack of liquidity and institutional coverage.

The stock is extremely cheap looking at the common valuation metrics: P/FCF – 3.3x, EV/EBITDA – 3.8x, EV/Revenue – 0.38x. PMUG throws off a tremendous amount of cash, with a FCF yield of 31%.

The company also hired a new CEO with tremendous background in the space, who is highly incentivized (via options and restricted shares) to increase the stock price.

Several upcoming catalysts include a relisting on a major exchange (probable in Q1 2011), refinacing of the existing debt load (saving tens of millions of dollars in interest expense), or the possible sale to private equity group or strategic buyer.

Comparable buyout transactions typically occur around 1x LTM revenue or 5x EV/EBITDA, significantly above PMUG’s current price levels.

Suggestions

If you have links or suggestions to detailed analysis from other value investors, please drop me a line using the Contact Form.

I’m always open to ideas from other investors, especially for a thoughtful and well-researched investment articles.

Disclosure

Long GPIC.

In addition to writing up my articles and analysis, I’ve tried to gather helpful tools and websites for other value investors. The Resources page has been one of the most popular sections of my blog.

While most of featured resources are free to use, I wanted to highlight one because, despite the nominal fee, it is one of the best values for other investors: the OSV Stock Valuation Spreadsheets.

Newly Updated

Jae from Old School Value recently released the 2011 version of his stock valuation spreadsheets.

For those who are unfamiliar, the package includes 3 components: a core valuation spreadsheet, a secondary financial statement analysis spreadsheet, and a stock watchlist tracker (brand new in the 2011 update).

Updates and enhancements – and there are many – are included with the package for the first year.

Value of Automation

With the entry of a single ticker, the spreadsheets pull in 10 years of financial data and run through a host of different valuation scenarios – DCF, EPV, NNWC, NCAV, etc. The inputs/variables can then be intelligently adjusted to determine the intrinsic value of a particular business.

Other common but time-consuming financial numbers such as the Piotroski score, Z-score, and Beneish M-score are calculated automatically as well.

In 30 seconds, it provides a quick glance into a stock’s financials to see if it’s worth a closer look, automating much of the tedious work of manually entering numbers for various calculations.

In the past two years, I’ve personally ran hundreds upon hundreds of stocks through these spreadsheets, saving untold hours.

While it will never replace digging through the SEC Edgar database, it does help determine what companies to focus on.

Conclusion

While there are certain capabilities I wish the spreadsheets included (support for OTCBB/Pinksheet stocks comes to mind), there are very few products that are capable of providing so much value at such a price point.

To fellow value investors, I think the risk/reward is pretty compelling!

Disclosure

I earn a referral fee if the spreadsheets are purchased through the links above. As a general rule, I only endorse products that I use (in this case, every single day!) If every one of my readers took advantage, it might even subsidize my next spreadsheet upgrade 🙂

Happy New Year! I have been on vacation for the past few weeks but am back and looking forward to 2011. I’ll have a few posts to recap the year shortly.

As usual, here are a some value investing links from the past few weeks:

Netflix (NFLX)

Long. Going back to the last Weekend Values post, Netflix was featured as a short thesis from noted investor Whitney Tilson.

If you haven’t seen it already, Reed Hastings, Netflix’s CEO, responded with an open letter to Tilson defending the company’s stock and business model.

The back-and-forth has caused quite an uproar. While I don’t have a horse in the race, I think it is very interesting to watch.

Phoenix Footwear Group (PXG)

Workout. Reverse stock splits and going private transactions can be a great source of profits for small-time investors. PXG is undergoing a reverse stock split in order to reduce its shareholder count below 300 – allowing them to cut the costly burden of SEC compliance.

Assuming the plan is approved in January, stockholders holding less than 200 shares will be cashed out at $0.75, far above the current market price.

Most major players will shy away from such a small absolute dollar gain, but it might be a nice (and nearly risk free return) for small portfolios. If nothing else, it is a good case study for future special situations investments.

Value vs Glamour: A Global Phenomenon

General. In 1994, a landmark study was published investigating the returns of ‘value’ stocks against their growth (or glamour) cousins. The original study covered a 26-yr period and determined that value stocks trounced the competition by a wide margin.

This new report by the Brandes Institute updates the original study through June 2010, while also broadening the scope to include non-US based stocks.

The findings are once-again consistent: value stocks consistently outperform.

I also found the closing quote  from Benjamin Graham to be very appopriate, not only for the study but my general strategy as we enter 2011:

“If we assume that it is the habit of the market to overvalue common stocks which have been showing excellent growth or are glamorous for some other reason, it is logical to expect that it will undervalue – relatively, at least – companies that are out of favor because of unsatisfactory developments of a temporary nature. This may be set down as a fundamental law of the stock market…“

Suggestions

If you have links or suggestions to detailed analysis from other value investors, please drop me a line using the Contact Form.

I’m always open to ideas from other investors, especially for a thoughtful and well-researched investment articles.

Disclosure

None