Buy American Greetings (AM)

B

BlueHorseshoe

The company is trading at only 0.5x tangible book value. Brand name also represents good, unbooked value.

Today it hit a new 52-week low - sweet! Closed at $6.4 but tangible book is $12.9. I expect a holding period of ~3 years for about 25% CAGR return. If it rises sooner, all the better.

ET: what an awesome contra-indicator.
 
Never looked at this stock before but looking at the 8k i would keep an eye on those current liabilities. Looks like they may need to sell some assets or lever up to overcome their current cash crunch.

I don't have time tonight but I would check how much cash flow they get from their retail ops because the latest 8k should cover the holiday sales for the manufacturing side. The ratios look great on the value side but you need to make sure they can attain the cash to operate.
 
From my opinion, and I do not know anything about this stock, but anyone can buy greeting cards ($1.00 for 2), wrapping paper and calender at a dollar store. So why pay american greetings price of 4x's that?
 
Quote from trendlover:

From my opinion, and I do not know anything about this stock, but anyone can buy greeting cards ($1.00 for 2), wrapping paper and calender at a dollar store. So why pay american greetings price of 4x's that?
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If you are selling greeting cards in the mall, or you are Walmart and selling in bulk, who are you going to rely on to keep your selection fresh, and complete across all themes and genres? AM dominates shelf space. Always has, always will.

Wonder how many people will forgo gifts this year and just send a nice card? What a great way to save ...
 
Quote from AAA30:

Never looked at this stock before but looking at the 8k i would keep an eye on those current liabilities. Looks like they may need to sell some assets or lever up to overcome their current cash crunch.

I don't have time tonight but I would check how much cash flow they get from their retail ops because the latest 8k should cover the holiday sales for the manufacturing side. The ratios look great on the value side but you need to make sure they can attain the cash to operate.
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Absolutely, always do your own work. I find assurance in that they've bought back ~$200-mil in stock over the past 4 quarters. Their market cap is only ~$290-mil now ... Damn! I also strongly suspect cards are a low fixed-cost business, and that cash will be fine. Hell, manufacturing is probably outsourced. But if you do find interesting details on these points let us know.
 
Quote from BlueHorseshoe:

Absolutely, always do your own work. I find assurance in that they've bought back ~$200-mil in stock over the past 4 quarters. Their market cap is only ~$290-mil now ... Damn! I also strongly suspect cards are a low fixed-cost business, and that cash will be fine. Hell, manufacturing is probably outsourced. But if you do find interesting details on these points let us know.
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I will take deeper look over the next few days. On thing though, it may seem great that they bought back stock but they also acquired some companies also most likely the the combination put the company in the bad shape it is today. The acquisitions are the reason for that large goodwill write off due to asset impairments. The buybacks should not really matter now and the impairment is just an accounting charge and should already priced in somewhat already as equity holders usually recognize bad acquisitions before they do on the books . So no matter how bad the company has been mismanaged lately the big question is if they can generate the cash flows over the holidays and refinance their current debts to maintain their operations. If they run low on cash they may have to dilute the equity or refinance at a penalty rate.
 
Quote from BlueHorseshoe:

If you are selling greeting cards in the mall, or you are Walmart and selling in bulk, who are you going to rely on to keep your selection fresh, and complete across all themes and genres? AM dominates shelf space. Always has, always will.

Wonder how many people will forgo gifts this year and just send a nice card? What a great way to save ...
More...


My thinking is cards, wrapping paper, calender is something that goes to the trash, so why spend money for that? Dollar store cards have birthday, christmas, religious themes too like ag.
Walmart has dollar cards too. Maybe people who have last minute cards to buy and are in the mall go there, but to me it is a waste of money. Save that money and buy something of value like education, down payment on house, good shoes, fresh wholesome food, investment money, savings for a bad time, warm blankets.
 
Quote from trendlover:

My thinking is cards, wrapping paper, calender is something that goes to the trash, so why spend money for that? Dollar store cards have birthday, christmas, religious themes too like ag.
Walmart has dollar cards too. Maybe people who have last minute cards to buy and are in the mall go there, but to me it is a waste of money. Save that money and buy something of value like education, down payment on house, good shoes, fresh wholesome food, investment money, savings for a bad time, warm blankets.
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I hear you Trend. To be honest, I'm not a big card-buyer myself. It doesn't help that I live in Asia - nobody buys cards out here like they do stateside. But many Americans do. And they do so religiously, year after year on the same occasions: Xmas, Graduation, Wedding, Birth, Death, Valentines, B-day ... Actually many of my relatives send cards to us as a way to keep in touch. Esp. the older generation that are less likely to use a PC. And with more and more people using e-cards, a well-crafted AM or Hallmark really stands out.

I think people have always bought high quality cards for certain occasions, and cheap alternatives for others. As you say, that might also pick up a bit during the current economic environment as well. (I believe AM also sells discount cards in bulk - something to look into. Their gross margin is ~56% so they certainly have room for a discount line!)

Anyway, I'm confident that card demand is not going to vanish overnight, and that AM will have plenty of time to realize BV at least. It is not a terribly exciting growth stock for sure. But AM is great value for money right now, I have no doubt.

Another investor said something once that really rings true for me: 'I like to pay 50 cents for something I know to be worth a dollar.' Yup.
 
there are lots of stocks for sale.

problem not enough cash to buy them all.

Quote from BlueHorseshoe:

The company is trading at only 0.5x tangible book value. Brand name also represents good, unbooked value.

Today it hit a new 52-week low - sweet! Closed at $6.4 but tangible book is $12.9. I expect a holding period of ~3 years for about 25% CAGR return. If it rises sooner, all the better.

ET: what an awesome contra-indicator.
More...
 
Quote from tradersboredom:

there are lots of stocks for sale.

problem not enough cash to buy them all.
More...

You are so right, in the general sense. I think people ought to be rethinking how much they trust their funds to pension, mutual fund, and HF managers who consistently underperform the indices, and every once in a while go completely bust. If more of us learned how to pick quality stocks at cheap prices, like AM, we'd all be better off.
 
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