I leveraged my success as one of the country’s top analysts to launch this publication, Wall Street Daily.
I did it directly into the teeth of the Financial Crisis, knowing that the potential for outsized returns existed in any market. That is, as long as you’re willing to dig for them.
Our growing nation of readers, now over a million strong, is proof that it’s working.
Today is the latest example.
In my usual sweep of billionaires’ portfolios, I discovered that David Abrams just bought shares of beleaguered retailer, Barnes & Noble (BKS).
Abrams is the self-made billionaire hedge fund manager of Abrams Capital Management, which has $8 billion under management.
His recent purchase of a downtrodden retailer is significant, because Abrams is crushing the benchmark indices.
Since launching his fund in 1999, Abrams has posted an average annualized return of about 15%. A $1-million investment in his fund would now be worth nearly $8 million.
Perhaps most impressively, though, is the fact that Abrams built his fund with no leverage or borrowed money. That’s unheard of in this age of finance!
So why Barnes & Noble?
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When I dug into Barnes & Noble’s latest quarterly report, I found exactly what I expected to find. That is, a struggling company.
Remember, I’ve worked as an analyst to one of the largest academic endowments on Earth – and the lead analyst to one of the nation’s biggest private corporations. So this is the farthest thing from an unqualified opinion.
Nonetheless, if Abrams is a buyer, there must be a damn good reason, right?
In the SEC filing, management says that it’s benefiting from consolidation in the box-retailer niche of the book industry.
The numbers, however, don’t bear that out.
Even though competitors like Borders have long since shuttered their doors, Barnes & Noble’s same-store sales notably declined yet again.
In fact, in the first quarter, sales decreased by another $228.2 million, or 10.3% – clocking in at $1.996 billion.
The slow death of its e-reader, the Nook, was the chief culprit in the sales decline of over 1,300 stores.
Oddly enough, though, Barnes & Noble’s balance sheet is impeccable.
Cash is up over 129% to $489.6 million. Accounts payables are down by $9.1 million. And the company shrunk its outstanding loan balance by nearly $1 million.
With a turnaround more unlikely than the Cubs winning the World Series, Abrams must smell a takeover. I sure do!
Now that I’m listening, I can confirm that a serious suitor has already emerged.
A potential deal would likely be priced in the $1.5-billion range, representing a 34% premium to Barnes & Noble’s current share price of $18.82.
What’s your take on this emergence of Barnes & Noble? Join me on Twitter to discuss this.
Onward and Upward,