Cigar-butt stock - There may be a life in this dog yet
October 30, 2007
By: 
Arohan
Category: LENS
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Here is one for the Benjamin Graham disciples. Concord Camera (LENS)
Before I go into details, I would be first to admit that this stock violates my principal of long term sustainable business model. In fact, the investment thesis partly depends on the company liquidating and distributing its assets to the shareholders
The following data is from Yahoo Financials as of Oct 30, 2007
LENS
Market Capitalization: 20.05 million
Stock Price: $3.6
Book Value per share: $8.732
Cash on hand: $34.33 million or $5.871 per share
Total Debt: $2.76 million
Concord Camera manufactures and sells disposable single use film cameras under the Concord and Polaroid brands. It has some other businesses which are insignificant and not germane to this analysis
It is easy to see that the stock is trading far less than the book value. It is also trading far less than the cash on hand, even after you adjust for debt. So in essence, even if you ascribe zero value to its other assets, if the company is liquidated today in an orderly manner, and all debt is paid off, the cash returned to the shareholders would itself represent a 57% profit from today’s stock price
The stock price is depressed for multiple reasons. The single use disposable camera market is in rapid decline (although the company has shown good growth in the Japanese market for its wares, surprising to say the least). The company also had a disastrous foray in the digital camera market, which has been now shut down. The company seems unable to turn a profit in the recent times and its operational execution ability is suspect. There is very little following on the street. And finally, the CEO, seems to be highly compensated, not in keeping with the company performance, leading one to believe that the company is run solely for the CEO’s benefit.
On the positive side, the CEO has been buying stock aggressively over the last year
It would appear to me that if an enterprising individual or institution decides to turn a quick profit, this would offer a great opportunity to take control of the company, return the cash to the shareholders and liquidate. The company may not survive another 5 years in this business anyway as their products are quickly becoming irrelevant
I would just buy the stock at this price and let the market act
