The Deep Value Week #4 – 2024/43
The Deep value Week is created in the spirit of Shelby Cullom Davis who wrote a market letter (on insurance) that “no one read”, and when questioned on the why they were writing it, answered that they wrote it for themselves, as a form of self-reflection on their activities – helping them refine their thoughts, test their theories and maintain discipline.
Companies mentioned:
· Alico (ALCO)
· AXT (AXTI)
· Bridgford Foods (BRID)
· Charles & Colvard (CTHR)
· Flexible Solutions International (FSI)
· Hurco Companies (HURC)
· Natural Alternatives International (NAII)
· Strattec Security (STRT)
· Village Super Market (VLGEA)
ALICO – NEW ANALYSIS. Alico Inc. (ALCO) (PT/B 0.74x) is an agricultural company and the largest publicly traded citrus grower in Florida, with 48,000 acres of farmland. The company faces challenges from declining citrus production but aims to boost revenue through a new contract with Tropicana and eventually by converting some of its land for residential development. This week, Value Degen published an analysis of the company- Four Manhattans of Florida Orange Groves selling for 60% of Resale Value.
AXT – NEW ANALYSIS. AXT, Inc. (AXTI) (P/TB 0.62x) is a manufacturer of semiconductor materials, particularly focused on compound semiconductors such as gallium arsenide, indium phosphide and germanium substrates. These materials are mainly used in high-tech applications such as fiber optics, 5G, data centers and medical devices. This week, MarketGyrations published a new analysis of the company on Seeking Alpha.
BRIDGFORD FOODS – NEW MARKET REPORT. Bridgford Foods (BRID) (P/TB 0.64x) produces and distributes a range of packaged products such as meat snacks, sandwiches, and frozen dough products. The market for frozen dough products is expected to reach a value of $41.9 billion by 2032, according to Global Market Insights Inc. This segment includes products like bread, pizza, pastry, and cookie dough. The frozen dough foodservice segment is projected to grow at a CAGR of approximately 6%, valued at $14.2 billion by 2032. Frozen bread dough is estimated to reach $13.4 billion with a growth rate of over 5.6%.
CHARLES & COLVARD – LATE 10-K. Charles & Colvard (CTHR) (P/TB 0.12x) manufactures and sells lab-grown gemstones, particularly moissanite, for the jewelry industry. The company has received a non-compliance notice from Nasdaq for failing to file its annual report (Form 10-K) for the fiscal year ending June 30, 2024. The report was due by September 30, 2024, but the company filed for a delayed submission on October 1, 2024. Nasdaq has given the company a 60-day grace period (until December 17, 2024) to regain compliance or submit a plan to achieve it. The company states it is actively working to complete and file its annual report as soon as possible to regain compliance.
FLEXIBLE SOLUTIONS INTERNATIIONAL – FORM 144. Patricia J. Lee (Member of the immediate family of someone of the managers / insiders) plans to sell 48,000 shares (market value approx. $169k and 0.40% of the outstanding shares) in Flexible Solutions International (FSI) (P/TB 1.38x). She has held the shares since 1998. FSI has an average daily volume of 30k shares, so Lee’s planned sales, set to begin on October 20, should at most have a marginal impact on the stock price. FSI has seen significant gains in recent months, and trading volumes have been strong – Lee´s shares are by now likely sold. This was the first insider transaction for the year.
HURCO COMPANIES – ”POISED TO PIONEER THE FUTURE OF MANUFACTURING”. Hurco Companies (HURC) (P/TB 0.68x) designs and manufactures computer-controlled machine tools for metalworking, primarily targeting the machining industry. The company has outlined its vision for autonomous machining centers, focusing on AI, mechatronics, motion technology, and simulation solutions. The goal is to drive automation and connected systems in response to labor shortages. By standardizing components and optimizing resources, Hurco aims to reduce costs and its energy footprint while working toward long-term sustainability. The company intends to expand its product portfolio, particularly in robotics and AI, as well as build strategic partnerships and potentially acquire other players.
NATURAL ALTERNATIVES INTERNATIONAL - CARNOSYN® BRANDS ANNOUNCES NEW U.S. DISTRIBUTION AGREEMENT WITH B&D NUTRITIONAL INGREDIENTS. Natural Alternatives International (NAII) (P/TB 0.36x) develops and manufactures dietary supplements and nutritional products, including custom and proprietary solutions primarily for the health industry. The company has entered into a distribution agreement with B&D Nutritional Ingredients to launch its new carnosine booster, TriBsyn™, in the U.S. market across dietary supplements, functional foods, and beverages. The product is based on a patented technology that enhances the bioavailability of beta-alanine while eliminating the tingling side effect often associated with higher doses of beta-alanine. TriBsyn™ targets a broad consumer base, including older adults, vegetarians, and vegans who seek to increase their carnosine levels to benefit muscle, heart, and brain health, as well as overall wellness. No specific revenue figures were provided for TriBsyn™, but overall revenue from CarnoSyn® products, including TriBsyn™, amounted to $8.4 million in fiscal year 2024 – out of a total sales volume of $114m.
STRATTEC SECURITY – AGM & INCENTIVE PROGRAM. Strattec Security (STRT) (P/TB 0.80x) designs, manufactures, and distributes lock and security systems for the automotive industry, including products like key systems, door locks, electronic access systems, and anti-theft systems. At the annual general meeting on October 23, 2024, all proposals were approved. The amendment to the company’s bylaws, which eliminates the classified board in favor of annual elections of board members, was approved with 72.84% of the votes. All nominated board members were also elected. New to the board is Matteo Anversa, CFO at Logitech and with experience in the automotive industry.
Shareholders also voted in an advisory capacity on executive compensation, which received 78.55% support, and approved the 2024 Equity Incentive Plan with 61.10% of the votes. The incentive plan includes stock-based rewards for management. The company subsequently filed a Form S-8 to register 550,000 shares of common stock to be issued under the company’s 2024 Equity Incentive Plan, which extends to 2034. This is set against 4.1 million outstanding shares, meaning the plan could result in substantial dilution for current shareholders. The specific performance targets for the incentive plan were not disclosed, but if fully utilized, management could own up to 12% of the company within 10 years. Generally, however, incentive shares are often sold upon issuance. At registration, the shares are valued at an average price of $40.75 per share, totaling $22.4 million.
This plan marks a significant shift in STRT’s historical “dilution culture.” Over the past 20 years, the number of outstanding shares has remained largely unchanged, though there has been minor annual dilution since the financial crisis.
Lastly on STRT, Sidoti & Company released a new analysis of the company this month with a target price of $40.
VILLAGE SUPER MARKET – INSIDER SALE. Kevin Begley, a board member of Village Super Market Inc. (VLGEA) (P/TB 1.04x), sold a total of 9,300 shares in the company between October 23 and October 25, 2024. The transactions were executed at an average price between $29.886 and $30 per share. After these sales, he directly holds 51,961 shares in the company. Begley also sold shares the previous week, totaling 5,133 shares at prices between $30.55 and $30.99 per share. This was the fourth insider sell transaction for the year.
The writer may own shares of the companies mentioned. This communication is for informational purposes only.