LJ just dropped KPMG and hired Gruber & Company LLC as their accountants. To keep this short winded here is Everything on LJ International (JADE) at I.Q.

What has happened recently? The stock has been plummeting and just yesterday alone it was down 20% to close at $2.97. Going off the most recent financials(which haven't been very recent) I think book value is around $3 a share.

I swear it was in a Motley Fool Article, "5 Stocks Approaching Greatness" on October 17th. Without credibility from management with the recent long delay of the audit it is hard to call what should be a stock closing in on a rough liquidation value a bargain. If I were to speculate on the floor for the stock I would say it is no lower than the cash and diamonds in its inventory which is likely around $3. Surely, there is a lot of uncertainty with the future of the business but they have grown over 20% a year.

I saw the company as low risk and high fear when I took the small position and continue to hold out because of the businesses long-term prospects. As far as I know, it is an actual company and the books weren't cooked. The SEC has been doing its job with JADE. On that note, has the SEC been doing its job with China in general or in a couple years when their market crashes will widespread accounting fraud reign? As the stock falls so does the risk in buying it below intrinsic value. But we are uncertain of intrinsic value? How does one factor the uncertainties? Will this be the perfect contrarian play?

http://enzo-jewelry.com

full disclosure: long JADE
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I was looking for hidden gems days ago and I came across Himax Tech. (HIMAX). After taking a brief look at them I was pretty excited about it and tucked it away to analyze later. Since then it is up about 14%. They aren't in the best business, semiconductors for flat panel displays but there are some interesting things going on here. It is also re-assuring when your looking for an undervalued stock to see a company announce that they are going to buy back shares. It is even better when you run a screen days later over thousands of stocks and only one stock pops up! Guess what stock that was? Himax. That screen was for companies with a


PEG (price to earnings/growth rate) < 1
net margin > 1
current ratio > 1
Last EPS Surprise (%) > 5


Again, hello Himax. PEG = .43, Net income = 8%, current = 2.8, eps surprise = 37%. Ok, you say what is the point of getting sucked into a mediocre commodity type business like semiconductors? Aren't their great companies selling for GREAT prices out there? Those types of home-runs only come around so often. There are more good companies at great prices, especially in the small-cap arena. It is still wise to be cautious. What is to like about this company?

Net revenues grew 37% year over year for the third quarter. Third quarter gross margin increased to 22.5%, the fourth consecutive quarter of improvement. Net income for 2006 grew 22% year over year and they are raising estimates. Here is some potentially good news from the conference call.

"On October 12, we announced plans to spin-off our TV and monitor chipset operation, which will be named Himax Media Solutions, Inc., a wholly-owned subsidiary of Himax Taiwan upon its establishment. Himax Media Solutions, Inc. will be focusing on expanding market share in the global TV and monitor chipset market opportunity. We have identified certain strategic investors and have planned to invite them to partner with us in the future. We’ve already had a good working relationship with these partners, with our chips designed into several of their LCD TV and monitor projects. We believe this new company structure will allow us to better focus our resources for the global TV and monitor chipset market opportunity."

Other companies that jumped out in the low PEG catogory with Return on equity over 20% and debt to equity ratio below 1.

Quality Systems Inc. (QSII)
American Eagle Outfitters Inc. (AEO)
Aeropostale Inc. (ARO)
Coach Inc. (COH)
Genentech Inc. (DNA)
DirecTV Group Inc. (DTV)
Ensco International Inc. (ESV)
Kohl's Corp. (KSS)
Joy Global, Inc. (JOYG)
Anixter International Inc. (AXE)
Best Buy BBY



full disclosure: no position in Himax Technologies (HIMX)or any above





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In late March of this year I was thinking about beverage companies.

In Slumping Softdrinks,

I layed out the decreasing trend of traditional soda sales and was looking for what was taking its place. I knew Hansen had its Monster Energy drinks but I overlooked the shares because they looked fully or overvalued. At that time Hansen was trading in the $30's. Now, it is near 52 week highs at $65 and a $5.9 billion dollar company. Their Monster energy drink is one of the best in my opinion. It gets its name for good reason. The drink is about 2 times bigger than Redbull and has a good variety of tasty flavors. I'm bringing up this update on them because I was pretty surprised they kept up the huge growth in what seemed to be and still is a new, competitive business.



full disclosure: no position in Hansen Natural (HANS)
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Iconix is a $1.2 billion dollar clothing holding company that has such brands as Candie's, Bongo, Badgley Mischka, Joe Boxer, Rampage, Mudd, London Fog, Mossimo, Ocean Pacific, and Danskin. They have grown extremely well as you can tell from the chart. I know most of these brands like Joe Boxer,Rampage,Mudd,Ocean Pacific and Mossimo pretty well and they are all quality brands with good niches. They generate some fat free cash flow and the balance sheet is sound with a current ratio of 7. Their free cash flow grew 103% from 2005 to 2006. They just killed earnings guidance by $.04 a share coming in at $.28 for the 3rd quarter, 55% year over year.

They should grow at least 20% a year for a couple more years. Right now from a price to earnings valuation they are trading at 21 times this years earnings and 16 times next years of $1.34, which should easily be met. A small growth stock like this should be worth at least its growth rate so the shares should trade at 20 times earnings. Next year, trading at only 20 times earnings would give us a stock worth $26 a share then. The street, in an ideal world would value them like that or even higher depending on the mood. You can see as earnings grow how the stock keeps rising. This will continue. Many companies trade for twice their growth rate and they are way bigger and much slower growers.

Iconix sells for $21 a share now. It rose 20% after they released earnings to $24 a share and fell 7% yesterday. As they continue growing at this rate there is value in the shares at or below $20 a share this year.



full disclosure: no position in ICON



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On a different note, I now own the domains stockpursuit.com and huntingstocks.com. They are partly domain squatting but I am probably going to use one of them to replace IQ over the next several months or sooner. I just saw to much value in them and had to pick them up when they came available. Their name better fits what this site is about, specifically the word stock. Feel free to let me know what you think. I really like stockpursuit.com and I think I was lucky to pick it up. I may use one for a collaborative effort with at least one other featured writer. Eventually, all of the entries would be in-depth, good quality type pieces like you see under featured articles on the right column and my pieces at College Analysts or even better. Don't worry, nothing dramatic is going to happen anytime soon, rather, I am just keeping frequent readers up to speed.

Nyer
They operate 18 pharmacies in the suburbs of Boston, Mass. They have two subsidiaries ADCO Surgical Supply, Inc., South Medical Supplies, Inc. that sell surgical and medical supplies. They had $.14 in diluted earnings per share for the years end. Revenues for the pharmacies were up 13.9%. They can and have spit out a little bit of free cash flow. So, what could the potential value be in Nyer? With a current market cap of about $6.2 million and net current assets of $6 million it could be that rare NCAV stock like Eternal Tech.(ETLT) NCAV bargain? that after I wrote on went on for a 26% gain. The difference which could be big is Nyer unlike Eternal which had a balance sheet full of cash has most of its working capital in receivables and inventory full of drugs and supplies.


http://nyermedicalgroup.com


There have been daily updates. Scroll down. Don't miss the recent entries earlier this week and last month. I think I'll put up an entry with the highlights at the end of each month.



full disclosure: no position in Nyer (NYER). Long Eternal Tech (ETLT)

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