There is one long-time holding in the Contra the Heard portfolio - Nashua Corp. (NSHA - Nasdaq) - that rates high on the mundane scale.
Just how boring? Well on the Yahoo Message Board, the last posting was in early July. Who could know that so many people could be so silent on a corporation with annual revenue north of $265-million (U.S.)?
The Nashua, N.H.-based company manufactures labels and specialty papers. Most years it makes a bit of money, although there has been the odd slippage into the red. Under the stewardship of the previous chief executive, Andrew Albert, the firm was lacklustre. Lately though, with new CEO Thomas Brooker at the helm, a major shakeup is happening.
One of Mr. Brooker's first actions was to sell the marginal toner and developer business. Real estate in New Hampshire also bit the dust for $9-million. These moves helped prissy up the balance sheet so the firm offered to purchase up to 1.9 million shares of its stock for $10.50. Some investors found this to be worthwhile, but only to the tune of 750,000 shares. That knocked the shares outstanding to about 5.5 million. However insiders still appear to believe the price is a bargain, as a number have bought shares ranging from $10.55 to $12 recently. Mr. Brooker himself paid $31,200 in September for 2,600 shares at $12.
The bottom line supports their confidence. While revenue only increased slightly to $67.7-million in the second quarter of 2007 from $65.5-million in 2006, the enterprise swung from a loss of $1-million to a profit of $1.3-million. EBITDA jumped to $3.3-million from $200,000. Purchased for the Contra portfolio in 1999 for $6.63, the 10-year price record at that point saw this stock spend many years above the $25 level and broach the $30 mark. We set our target price at a conservative $15.31, but given that this was almost a decade ago, it would not surprise us if this mark is downright old school and the stock will climb back to old levels.
Over each of the past 15 years, at least one company in the Contra the Heard portfolio has been taken over. Though there are no pursuers that we know of, Nashua could be had by a larger organization for a relative song. If they offer $15, a nice premium from the current value of $11.40, they could swallow up this firm for about $82-million.
This column first appeared on GlobeinvestorGOLD.com.