Luby's Zero Debt and High Insider Ownership Make It Worth Sampling

Dec.17.09 | About: Luby's, Inc. (LUB)

I recently became a member of AAII (American Association of Individual Investors). The most appealing thing about membership is access to the various stock screens they track. One screen, the Walter Schloss screen, looks for stocks hitting new lows, trading less then book value, no debt, and high levels of insider ownership.

Luby's Inc, (NYSE:LUB) made the screen for December and is the only stock currently passing the screen criteria. From July to September no stocks made the screen, thus LUB caught my attention. Is the Schloss screen worth watching? The statistics are below and please note that trading frictions/slippage/commissions are excluded and of course past performance does not guarantee future results.

Schloss stock screen statistics:

  • Average monthly holdings: 13
  • Average monthly turnover: 54.8%
  • Year-to-date return: 51.9%
  • Cumulative return since 1998: 477.7%

LUB has an earnings announcement and conference call after the close today. The stock has 0 debt, as of Wednesday's close traded at a price to book of .62, insiders own 27.81%, and institutions 37.44%. The stock appears to have found support on two occasions in 2009 near $3.25.

One possible bullish strategy would be to enter a long position prior to earnings with a stop loss just below $3.25. You could also wait until after earnings and enter a long position if LUB moves higher on healthy volume. Depending on your time frame and objective, you could place a trailing stop loss if the stock takes off after earnings, or look for an exit at $4, $5, or near the book value of $5.82.

I have no projections on how the company's conference call will go, but the fact that LUB is the sole survivor of a value screen that yields very few results in (secular or otherwise) bull markets is worth noting.

Below is the business summary (from Yahoo) along with daily, weekly, monthly charts:

Luby’s, Inc., together with its subsidiaries, engages in the ownership and operation of restaurants in the United States. As of November 2, 2009, the company operated 96 restaurants located throughout Texas and 3 other states. It also offers culinary contract services comprising contract arrangements to manage food services for clients operating in healthcare, higher education, and corporate dining businesses. The company was formerly known as Luby’s Cafeterias, Inc. Luby’s, Inc. was founded in 1947 and is headquartered in Houston, Texas.




















































Author's Disclosure: No position