As usual, a few of the best value investing links from the past two weeks:

Alpha Pro-Tech (APT)

Alpha Pro-Tech (APT) stock has been on a tough run over the past several weeks as reported earnings continue to be rough.

These results were somewhat expected, as the company benefited from a one-time spike in revenue in 2009 that was unlikely to be repeated – Mr. Market often overreacts in such situations.

APT’s sales mix has shifted towards the lower-margin Building Supply segment, but as Barel writes, sales in this division have quadrupled since 2007, and management seems bullish on new product lines and future growth.

Assign a 10x multiple to this segment alone (and add back the net cash balance), and the stock price appears to be throwing in the other two high-margin divisions for free!

USA Mobility (USMO)

USMO is a stock that seems to appear on many of quantitative value investing screens – and has for many months – as the stock appears to be cheap based on most valuation metrics.

USMO sells pagers and the market doesn’t seem very keen on the business’s future prospects (hard to blame the market – it’s amazing that a profitable business still exists in this market with all of the other technology available).

Yet this dynamic may provide an opportunity, as the company continues to throw off impressive amounts of cash despite the decline in sales.

However, the recently announced $160m acquisition of Amcon Software completely changes the game, as USMO will lose much of the downside protection built into a solid balance sheet.

Arden Group (ARDNA)

Arden operates a number of Gelson’s supermarkets, a high-end full-service grocery store chain, throughout Southern California.

The business has produced steady profits in the past seven years, and the business model produces extremely high profit margins (ARDNA’s net margins are around 5%, compared to a company like Whole Foods at only 2%).

On the negative side, management has no plans to expand the current store base – meaning the potential for growth is extremely limited – and eventually competition seems poised to put pressure on margins.

Read the comments for a further quality discussion.

CSS Industries (CSS)

An impressive value investing blog that I’ve been following for a few months, Tenoeight makes a case for CSS Industries, a small-cap manufacturer of gift wrap, cards, and other seasonal items.

The stock trades right around net asset value despite earning positive free cash flow in each of the past ten years. At current prices, the average free cash flow per share works out to a FCF yield of more than 20%.

Management seems to be making the right moves in closing down its U.S. manufacturing plants and sourcing many of their products overseas, but the industry is very competitive and two retailers account for 36% of sales.

However, the stock pays a nice dividend and management has shown that it’s willing to repurchase shares, making for an interesting play.

Suggestions

If you have suggestions for detailed analysis examples 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

No positions.