Barnes & Noble Worth a Look, But Wait for Weakness

| About: Barnes & (BKS)

Not much has gone right for Barnes & Noble (NYSE:BKS) shareholders recently so maybe we should celebrate the recent strong move in the stock price. But while I believe there is upside to the stock price at these levels, I would urge others to wait for a better opportunity to initiate or add to their positions.

When a stock price rises on strong volume amid an otherwise flat day in the market, shareholders understandably get excited. When it's a company like Barnes & Noble, this sort of action can fire up the rumor mills and ignite the speculative animal spirits.

At NakedValue.com, we have previously discussed our contrarian view that investors should give Barnes & Noble a closer look. More recently we wrote about why hedge fund legend Eddie Lampert might consider Barnes & Noble as an investment.

But investors should keep in mind that despite the potential for upside, there are many hurdles standing in the way of a potential acquisition or turnaround in the company.

Bloomberg reported last week that Barnes & Noble was likely to unsuccessfully conclude its search for a buyer in a few weeks.

Barnes & Noble, which began exploring a sale in August, will likely end its search without a buyer as private-equity firms and strategic bidders backed away from the auction, five people with knowledge of the process said this week.

Some potential bidders balked at a purchase because of how long it may take Barnes & Noble to generate more digital sales, said two of the people, who asked not to be identified because negotiations aren’t public. Still, the auction isn’t over and will probably last a few more weeks before Barnes & Noble officially calls off the search, one of the people said.

It would seem strange if today's activity was supported by the emergence of a buyer so shortly after Bloomberg reported otherwise in a well sourced article. Barnes & Noble is worth a closer look, but investors would be wise to wait for stock weakness.
Disclosure: I am long BKS.