Boss Holdings (OTCBB:BSHI.OB) is selling at less than its net current asset value, making it potentially attractive for investors who look to purchase stocks selling at low valuation relative to assets.
Boss Holdings operates in three lines of business: 1) protective work gloves and protective wear, 2) promotional and specialty products and 3) pet supplies. The work gloves and protective wear segment is the company's largest and accounted for 68% of sales in 2007. It sells gloves, boots and rainwear products to both consumer and industrial users. The promotional and specialty products segment sells balloons, balls and other inflatable products through a network of 10,000 distributors. The pet supplies segment sells non-food pet supplies under the brand names Warren Pet and Boss Pet Products.
Net Current Asset Value Play
As of June 30, Boss Holdings is selling at 61% of its net current asset value, which is calculated as the total amount of a company's current assets minus total liabilities.
|Current Assets||$ 27,651|
|Total Liabilities||$ 6,318|
|Net Current Asset Value||$ 21,333|
|NCAV Per Share||$ 10.57|
|Price Per Share||$ 6.46|
|Price To NCAV||61.1%|
The concept of owning a portfolio of stocks selling below current net asset value was popularized by Benjamin Graham, who thought it provided a margin of safety to investors when owning a stock. Graham advised purchasing at two-thirds of a company's net current asset value. The theory is that the company can be liquidated by selling all the current assets and using the proceeds to pay off all liabilities, leaving a large amount for shareholders. Other stocks selling below net current asset value include Chromcraft Revington (AMEX:CRC) and Avatar Holdings (Nasdaq:AVTR). (For more reading on Ben Graham, check out The Intelligent Investor: Benjamin Graham.)
Investors also need to know that Boss Holdings is profitable, but sales and earnings have been flat for two years. Also, in the first six months of 2008, the company earned only 6 cents per share versus 15 cents in the first six months of 2007. Although some of its lines of business are seasonal, the weakening economy is clearly impacting its business. Other companies hurt by the economy and slowdown in consumer spending are Corning (NYSE:GLW), which reported a slowdown in sales of Liquid Crystal Display (LCD) glass for use in televisions, and Ford Motor Co. (NYSE:F), which has been hurt by the slowdown in auto sales.
Boss Holdings is a smaller reporting company under rule 12b-2 of the Securities Exchange Act of 1934. This is defined as a company with public equity float of less than $75 million. If the public float can't be calculated, the below-$50 million-revenue threshold is used to determine whether a company qualifies. The Securities and Exchange Commission (SEC) requires much less disclosure for a company that qualifies as a smaller reporting company. This status might make it more difficult to analyze the company's financial results. (For more information on the SEC, see Policing The Securities Market: An Overview Of The SEC.)
Boss Holdings also trades on the Over-The-Counter Bulletin Board (OTCBB). This reduces liquidity and makes the stock more difficult to trade. The average daily volume for the last three months is only 225 shares.
Boss Holdings' low valuation relative to its assets makes it an attractive company for investors who look for stocks selling below net current asset value.