I agree with a lot of what you said. My comments are in the TSRI forum section. Floris also provided some excellent comments.

INSM is something I am very intrigued by, but TSRI seems to be a safer net net opportunity because any sort of significant appreciation in the stock price doesn’t rely on any major event (i.e. M&A, drug trial/approval etc.) All TSRI has to do is continue to do business as usual and in 12-18 months I would think it should be trading at $3.50-$4.00.

What do you think?

Yes the high inventory is why I discount it. It’s because the more specialized the inventory is, the more you have to discount it, not because the company is in a bad situation.

Im sure you are well aware that after 1 year, the current inventory will be sold at cheap prices even in retail stores. Golf equipment and styles change so quickly that the price is never sustainable.

So my argument is that while ADGF may have tangible assets, the margin of safety will erode even quicker.

INSM has cash which they could easily burn, but there is a chance that it could make a return. Can’t say the same about golf clubs though. The only direction club prices move is down.

It is due to the high inventory of ADGF that you measure the liquidation value being only 2,66. This assumes the company is in dire straits and will need to liquidate these assets at low prices. This is not the case for ADGF. The golf clubs are great and would most likely sell at or near cost.

The issue I have with ISM is that I have no clue about the business and the golf business is much easier to understand. Furthermore I personally know they make great golf clubs, which makes me doubt that they will go under (I am considering buying adams hybrids because they are better than the major brands).

The risks for ADGF are much more tangible whereas the risks for pharma are more difficult to understand. Pharma can have a tendency to waste cash and reduce cash exceptionally quickly. This is not the case for a consumer manufacturer, the expected outcome is much easier to estimate.

All in all the risk/reward ratio for is easier for me to understand and increases the confidence level (circle of competence)

reg,

Floris

Will have to look into it.

Yea I read that part as well but it isn’t specific about how much is in investment grade securities.

I agree that the company won’t go bankrupt anytime soon though. I just need to get up to date about the history of the company and the involvement of the Italian government.

@ Todd,

I found it really hard to even find a true net net but if you know of any, I’ll be very interested to know. Feel free to jot it down in the forums so that we can keep track.

@ Phil,

Thanks for the additional info. I’m not too familiar with what IPLEX does but your info helps.

I hope RBC will do something beneficial rather than just try to collect their own payment.

@ Floris,

I’ve known about ADGF for aquite a while but it was never an attractive net net for me. And using the same method I did for INSM, ADGF is still above the NNWC. Current price is $2.99 but the liquidation value is $2.66 so its over net net value by 33c.

I’ve been going through so many deep value stocks but INSM and TSRI are the only true net nets Ive found.

I think the net/net is great, but I see so many of these high cash biopharmas albeit INSM has sold assets to Merck.

Interesting idea.

1. SG&A seems to have doubled. Any idea what the reason is?

2. They seem to have answered your question about the short term investments they have:

“at June 30, 2009, had $122.8 million invested in money market instruments, treasury bills and municipal bonds. Such investments are subject to interest rate and credit risk. Our policy of investing in highly rated securities whose maturities at June 30, 2009 are all less than one year minimizes such risks.”

3. The special dividend and/or share repurchase sounds good, but I get the feeling they wouldn’t sell out the company to any bargain hunters, the anti take over provisions sound pretty good and it sounds like they want to grow the company through M&A.

Interesting stock for sure and if they are selling IPLEX for another 24 months that gives it some time.

4.
.-= Ken´s last blog ..IGOI: Should I stay or should IGO? =-.