Two Hidden Gems: Adams Golf, Boss Holdings

A hidden gem is a small company with good fundamentals and a lot of potential. They might also not have the best fundamentals but a good outlook and a severe undervaluation. Tons of analysts haven't started following the stock yet. If a company has a good profitable business but sells for less than its discounted future earnings and cash flows or less than its liquid or tangible assets, I'm interested.

Adams Golf Inc. (ADGF) makes golf clubs. They just moved to the Nasdaq last month. They are a $53 million company that turned around and became profitable in 2003. They have tangible assets per share of $9.84 and a current price of only $8.60. That's interesting, but these next points are fascinating: Over the last five years they grew revenues at a 20% compound average growth rate and have consistent profitability. They have a good balance sheet and zero long-term debt. They generate double-digit return on equity and assets without using leverage. Management is consistently growing shareholder equity year over year.

Their five-year gross margins average 45%. Right now the stock has a PE of 6 (TTM). It was up 900% in 5 years and it still looks cheap.

Boss Holdings (BSHI) sells gloves, boots, rainwear products and pet supplies. They've been in business since 1893. The stock was up 800% in about 3 years. This isn't the best business, though they are profitable. The play is the stock sells for 76% of its liquid current assets less total liabilities. That doesn't seem justifiable given the company's very strong balance sheet and cash flow and earnings power.

You can find gems anywhere. Talk about hidden; both of these stocks had their big runs on the less-traveled Over the Counter exchanges. That is where you are told not to invest. Go figure.

Comments

[granger:]

thanks for the ideas. Check out PETS and RBI. RBI is not well known yet.

2008 Apr 12 09:23 AM

[golfer:]

How great to see some interest in BSHI and the reasons for it. I became invested in this stock years ago when I held another stock (Vista 2000) that disappeared from the radar and emerged as shares of BSHI. It has really been fun to watch, and I have never lost faith in it. I think I'll meander off and check on Adams Golf Now!
Thanks so much for the information.

2008 Jun 09 08:23 PM