The Dirt Cheap Value Portfolio: One Man's Trash, Is Another Man's Treasure

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Includes: BRID, JVA, KKD, LUB, SVU
by: Mark Krieger

Summary

Has lost 7.5% in its value in just five weeks, for a thumping at triple the rate of the DJIA's loss.

A 30% decimation of SuperValu was the main culprit.

Solid earnings beats, by three components, fail to impress the street.

Luby's is on the cusp of landing a major hospital culinary service deal that could move the needle.

In the last five weeks since my last update, the Dow Jones Industrial Average has fallen a mere 2.5%, from 16,346 to 15,925 (Friday's huge rally helped the cause tremendously), yet the "DCVP" fell a staggering 7.5% from $37.41 to $34.59. The only winner of the esteemed list, was Luby's, with a 15% gain. The biggest loser of the group was by far SVU, as a disappointing earnings report, caused an unrealistic 30% markdown, as hate selling accelerated.

The stocks in the portfolio were basically punished beyond reason, and literally thrown in the trash heap. It is definitely time to go treasure hunting, as prudent bargain seekers realize that it is right to be greedy, when others are fearful-how else are you supposed to buy low, unless you are prospecting in the junk yard?

The line up:

Bridgford Foods (NASDAQ:BRID): The company posted a impressive fourth quarter report, and ended up earning $1.70 vs a loss of 48 cents on the year. This was quite impressive, considering they managed to do so on a 2% drop in sales, from $133 million to $130 million. Their cash position rose from $192,000 to $5.80 million and the company possesses no debt.

The snack food maker has just 150,000 shares remaining, on its 2,000,000 share authorized stock buyback plan, while management owns almost 80% of BRID's total shares outstanding. The possibility of the company being taken private remains high.

Price target: $12

Luby's Inc. (NYSE:LUB): They reported first quarter results that revealed same store sales gains in all three brands (Luby's Cafeterias, Fuddruckers and Cheeseburger in Paradise). Other highlights include: (1) EBITDA rose 66% form $3.3 million to $5.7 million (2) store level profit jumped 200 basis points from 12.8% to 14.8% (3) expenses fell in food, payroll and occupancy cost categories. (4) debt was reduced from $37.5 million to $35 million (5) they just landed Travel Centers of America as a Fuddrucker franchisee, now tallying a total of 111 franchise locations.

The company indicated they plan on being bottom line profitable in the second half of their current fiscal year, so things must be looking up, as the Board just extended the CEO's employment contract an additional year. They also rewarded him with a $225,000 cash bonus for his outstanding achievements.

There seems to be a robust pipeline in the company's culinary service segment, as it was revealed in the latest earnings conference call, they were in late discussions with a large hospital operator to handle several of their locations. Institutions must like what they see too, as 13f filings reveal that both Ancora Advisors and Hodges Captial Management beefed up their holdings considerably with Hodges bulking up by 254,340 shares, to a total holdings of3,158,565 shares. Luby's is scheduled to report its second quarter results next month. Look for the company to top expectations, by increasing its top line by 1% to $92 million, and generating a break even bottom line, versus a 5 cent loss.

Price Target: $9

Krispy Kreme Doughnuts (NYSE:KKD): Anticipate these folks to surpass some very conservative 4th quarter expectations when they report next month. Higher coffee sales and lower food costs will enable them to earn 26 cents, on sales of $136 million. In addition, an average analyst target price of $20, represents a significant reward to patient investors.

Price target: $24

SuperValu (NYSE:SVU): the company's third quarter report was disappointing, even though they met their bottom line guidance of 16 cents. The collapse in the shares was unfair and overdone, especially considering the value that could be unlocked from the spinoff of their Sav-A-Lot operations. Even the Motley Fool Chimed in with their defense of the grocer. The shares are now trading at a forward multiple of just six, and their range on analyst price targets, runs from $6 to $10, implying tremendous upside potential.

Price target: $8

Coffee Holdings Co. Inc. (NASDAQ:JVA): The Coffee purveyor recently released its fourth quarter results and they were lackluster at best. The company will report its first quarter report next month, and look for them to produce a slight increase in sales, with 4 cents falling to the bottom line, versus 1 cent. It will then be out of its quiet period, and finally be permitted to buy back its own shares in the open market. This should create demand for the stock, and give it a solid floor.

Ancora Advisors has become one of coffee roasters largest shareholders, as they increased their position another 71,800 shares to 176,000 shares. In the meantime, JVA's CEO gave an enlightening interview with the Wal Street Transcript, that is worth the read.

Price target: $8

Bottom Line: One man's trash is another man's treasure ,and in the case of this bunch, I still insist there is plenty of treasure to be had. The fact is, all of these components sell near or below book value, have decent balance sheets, and are priced at less than annual sales. They all rate very high on the Walter Schloss Investment Screen (a Benjamin Graham Value disciple) and should offer shareholder's big returns.

Disclosure: I am/we are long LUB, SVU,KKD,JVA AND BRID.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.