The following post was written by Saj Karsan. Saj regularly writes for Barel Karsan, a site dedicated to finding and discussing value investments, and applying logic to investment decisions (as opposed to falling prey to psychological biases).
LCA Vision (LCAV) is a provider of laser vision corrective surgeries. Demand for these non-essential, expensive surgeries is strongly correlated to levels of consumer confidence. As one can imagine, this correlation has resulted in the number of surgeries performed this year to be slashed in half as compared to last year. Combined with the fact that the company's cost structure is fairly rigid (medical/laser equipment, service locations and staff still have to be present even if not used to capacity!), and the prospects for this company look grim.
This business model would make most investors head for the exits at economic times like these. For investors who look to buy businesses rather than stocks, however, this company still hassome value. And it is precisely because most investors headed for the exits that value investors were able to buy into this company for far less than it is worth.
When we last looked at LCAV, it traded with a market cap of $64 million, despite the fact that it had $56 million in cash alone! When looked at from the point of view of a buyer of an entire business (as value investors like to do), one was essentially paying $8 million to purchase a business that had earned an average of $15 million in net income the last four years. Yes, it had lost $7 million in the last quarter, but management was closing unprofitable locations, reducing capital expenditures, and believed to have cut expenses such that the company's cash flow would break even in 2009.
Since the stock's low just two months ago, the stock is up some 250%! Investors who avoided the herd mentality, and instead focused on buying businesses selling for below their worth were handsomely rewarded.
At Barel Karsan , we try to find and discuss businesses that are undervalued. If this topic interests you, consider subscribing to the Barel Karsan feed .
Relevant Articles:
- Value Investing is all about finding market inefficiencies
- Taking Stock in Coca-Cola (KO):
- Dividend Investing Resources
- 40 Value Stocks that Graham Would Buy
Popular Posts
-
In order to succeed in dividend investing, you need to have a long-term focus , follow your strategy by making investments at regular inter...
-
I just learned that David Fish, who was the creator of the Dividend Champions, Contenders and Challengers list , passed away last month at t...
-
The consumer staples sector has been hated by investors over the past year or two. There are several headwinds that appear to have depressed...
-
The other day, I shared with you a list of four attractively valued consumer staples for further review. The companies had attractive valua...
-
I review the list of dividend increases weekly , in order to monitor existing holdings and review companies on my list for accumulation at t...
-
The dividend kings list includes the most elite dividend growth companies in the US. A dividend king is a company that has managed to incr...
-
Over the past week, there were two companies that raised dividends to shareholders. For my review, I included only those companies which hav...
-
As part of my monitoring process , I review the list of dividend increases every week. I use this exercise to check up on my holdings, and ...
-
As part of my monitoring process, I review the list of dividend increases every week. I usually focus on the dividend increases for compani...
-
For your reading enjoyment, I have highlighted several articles that the readers found of particular interest this month. I have included th...
