More Cheap Graham Stock Ideas


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Here are some additional Graham style stocks that I consider cheap and potentially rewarding. As with all cheap Graham stocks, the businesses are usually broken and unprofitable which means mechanically investing in a handful may not yield the best results. What I look for are companies or business models that are not burning through cash and still have some revenues to support the business operations.

I am still trying to make positions of 5-10 cheap Graham stocks that I feel have been beaten down for temporary reasons. I only have two cheap stocks so far.

For new readers, consider the use of the free net net Graham spreadsheet that is available. It has seriously helped in speeding up the elimination and valuation process. I can go through 15-20 companies within minutes to decide which stocks are worth a second look.

Some Cheap Graham Stocks to Consider

Peerless Systems Corp (PRLS)
Licenses, develops and sells imaging and networking technologies and components to the digital document markets, which include manufacturers of color, monochrome printers and multifunction office products.

  • NNWC Price: $2.36
  • Current Price: $1.81
  • Discount to Current Price: 23%

Tegal Corp (TGAL)
Designs, manufactures, markets and services plasma etch and deposition systems that enable the production of integrated circuits (ICs), memory and related microelectronics devices used in portable computers, cellphones, personal digital assistant (PDA) and radio frequency identification devices (RFID).

  • NNWC Price: $2.25
  • Current Price: $1.15
  • Discount to Current Price: 49%

Soapstone Networks (SOAP)
Developer of resource and service control software. Previously, the Company was a provider of core router products and during the year ended December 31, 2008, transitioned to being a developer of emerging, software-based service and control solutions for service providers’ next generation networks.

  • NNWC Price: $5.78
  • Current Price: $3.37
  • Discount to Current Price: 42%

This is an interesting stock. Yes it is cheap but it also has no revenues and cash burn is close to neglible. It is basically an empty shell at the moment. The company and stock is made up of mostly cash and is seeking strategic alternatives. If I purchase SOAP, it is for a liquidation or buyout purpose only. Their business operations are dead.

Limco-Piedmont Inc (LIMC)
Provides maintenance, repair and overhaul (MRO) services and parts supply services to the aerospace industry. The Company’s provide aircraft component MRO services for airlines, air cargo carriers, maintenance service centers and the military.

  • NNWC Price: $3.18
  • Current Price: $2.35
  • Discount to Current Price: 26%

LIMC is an interesting situation. There is still a 35% upside to the estimated liquidation price but they are being completely bought out by T.A.T. Technologies (TATTF) who owns 65% of the company. The condition of the merger is that TATTF will give ½ of its stock for each stock of LIMC. This equals a $2.37 payout for LIMC shareholders. Seems like TATTF is getting a huge bargain on this one but there was an announcement on April 9 that a law firm was investigating the merger conditions citing the conditions are unfair to LIMC shareholders.

My feeling is that TATTF will increase the offered price.

View the embedded pdf below for detailed numbers of each business.

Ben Graham Cheap Stocks Below Asset Value 0413

Disclosure

No positions in any stocks mentioned

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