As I continue to screen for undervalued stocks, I am often surprised at what I find. As remarked earlier, small cap stocks generally present a lot of value investing opportunities. Even within small caps, net-net stocks have traditionally been quite rare. Perhaps it is the reflection of the investor uncertainty in the current environment, but I am finding quite a few stocks that fit the net-net criteria.
The following 4 are among a number of stocks that have more cash on their balance sheets than the market is valuing the entire company for. In addition, they have zero long term debt. This analysis is purely asset based – the company management may indeed destroy the value over time.
1. Smith Micro (SMSI): Founded in 1982, Smith Micro Software designs, develops, and markets software products and services primarily for the mobile computing and communications industries worldwide. The company’s market value is $61.8 M and it currently has $62 M in cash and cash equivalents on the books. With zero debt and continued patent activity, the company seems to be well prepared for future growth.
2. Heelys (HLYS): Heelys may be looking at the fervor for its signature product declining. The stock though seems to have been dumped in the bargain basement. With a market value of around $57 M and the company sitting on a cash hoard of around $62 M, the stock is definitely worth a look.
3. BroadVision (BVSN): An erstwhile dot com bubble darling, the company current trades at $8.45/share. In its heyday, the stock changed hands at as much as $10,000 per share (after accounting for two reverse splits, 1 for 9 and 1 for 25). As a software company, most of its assets are in cash amounting to $60 M. With a market value of $38 M, the stock seems ripe for a takeover.
4. Big Band Networks (BBND): BigBand Networks, provides network based platforms for digital video delivery. The pessimism in the company’s prospects is such that the entire company is currently valued by the market at $95 M. This seems to be an excellent price to pay to get to Big Band’s $127 M in cash holdings.
Update (Oct 11, 2011): BBND has been acquired by ARRIS Group at 76% premium
With an abundance of net-net stocks in the market today, this is a great time to spread your investment across multiple such stocks. As the investor confidence returns, some of these stocks will end up rewarding the investors handsomely.