Geoff Gannon April 2, 2007

Three Ideas and an Award – April 2007


Bancinsurance (BCIS)$6.05

Rex Stores (RSC)$16.55

Strattec (STRT)$43.00

Note: Despite the fact that I plan to update this post at the beginning of each month – these are not short-term stock picks. In fact, this particular group of stocks is likely to do little or nothing for long periods of time. Value investing is about buying an asset for less than it’s worth; the shares of these businesses are now selling for less than the businesses are worth. That’s why they are my three best ideas for the month of April. Expected short-term price movements have nothing to do with the selection.

Regarding BCIS – it trades very infrequently. If you decide to buy it (and you manage to find some shares) you’ll do best if you forget it’s a public company, ignore the daily market quote – and judge your investment by the quarterly updates on underwriting results and per share book value. Do not buy this company if you need a quote to sleep at night – fluctuations in market price are meaningless for such a small, thinly traded security.


Best DIY LBO Candidate – Timberland (TBL)$26.05

Description: The Best DIY LBO Candidate Award is presented to the company I believe is in the best position to benefit (continuing shareholders) by taking on debt and repurchasing its own shares through a large tender offer.

A good do-it-yourself leveraged buyout candidate requires both an unduly low public market value (market cap/enterprise value) and the ability to consistently cover large interest payments from free cash flow – Timberland meets both requirements.

Disclosure: I and people connected to me both professionally and personally own some or all of the stocks mentioned in this post.

I’d appreciate hearing what you think about my plan to do a “Three Ideas and an Award” post at the start of each month. Feel free to give your opinion by commenting to this post or sending me an email.