Thursday, December 21, 2006

Concord Camera (LENS)

This company is terrible. Their stock is abysmal. I just bought $2K of shares. Basically they sell single use cameras, traditional 35mm cameras and digital cameras. They are losing money not gaining it. However what makes them a buy is that they have little debt and lots of cash and they are selling for less than the cash on the books. Somewhere around half the tangible book value.

A company like this should be liquidated for its assets. Unfortunately that isn't going to happen. They may get bought out but probably will attempt to return to profitability. That might happen. I am just hoping that they will stop burning cash and stabilize so that the market starts to value them at something close to book value.

I think there is a decent chance of that happening. They are ditching the digital camera sales which is good because they had negative gross margins. They also must have required more R&D to keep up with the trends. They will be left with one time use cameras and traditionals which should be fairly easy to produce for a profit. Lets hope. I don't need to large profit to make me a profit. I just need them to stop bleeding cash. I think that is happening now. Last quarter they had break even cash flow.

Another positive is that the terrible CEO is buying shares. He seems like a greedy bastard but at least I can count on him to look out for himself. If he is buying he probably sees good times ahead or at least sees the company as being undervalued. With all of their assets, that is not hard to believe.

Then there is their new product, the OnGuard Kids Safety Watches.
Basically they are watches for which kids can set off an alarm if they are grabbed by a stranger. These will sell for $39 and probably will make a decent gross margin. Sounds rediculous but then again so are paranoid american mothers. I think these will augment the operating margins and so I see this as a good thing.

If all goes well this company may double within the year. If all goes to hell, I think the major holders will force the company to liquidate while it still has assets. I don't think the downside is so bad and it has quite a bit of upside. Overall I think this is a good bet.