A Company I Have Been Researching And Really Like Potentially Being Bought Out

Ark Restaurants Being Bought Out

Over the past couple weeks I have been researching and discarding dozens of companies to write articles on and potentially buy into.  Of those dozens of companies I decided to do further research on seven of the companies.  I ended up valuing three of the companies.  Of those three I ended up doing in depth research on two of the companies reading 5-10 years of annual reports and doing various other research so far.  One of the companies I am still doing research on and plan to write an article about.  The other was Ark Restaurants mentioned in the Readers Investment Ideas and Analysis Page above by reader DTEJD1997.

After discarding a bunch of other companies I remembered ARK being mentioned on the blog after I found them in a screen I did, found information that looked promising and started doing my normal in depth research on them.  I actually ended up starting to write an article about them, as I really liked their operations and management, and found them to be undervalued currently.  Valuing the business at 8X EBIT, adding cash, cash equivalents, short term investments, and $1 per share of NOL’s, and subtracting almost $1 per share in debt got me to a value of $26.91 per share which is the estimate I use for its intrinsic value.  This is the base estimate of value I was basing my article around.  So overall I thought very highly of the overall business as a potential investment.

I decided to scrap the article for now and wait to write the article and potentially buy into the company until the share price dropped though because I found ARK to be overvalued by my worst case scenario which estimated what I think the company would be worth if it dropped back down to its profitability levels from 2009-2011 when the company was struggling more.  Using the same basis as above, I found at 8X EBIT that ARK would be worth $10.13 in that situation, which is actually 20% higher than the low it reached during 2009-2011, as its EBIT % was only 2.23% on average over those three years.  In comparison this year ARK’s EBIT % jumped back up to pre-recession levels at 7.2% in 2012.

Got an email from DTEJD1997 this morning with this news that the company is potentially being bought out by Landry’s for $71 million or about $22 a share so it looks like I have missed out on this potential opportunity.  Actually I think that is a bit low and the buy price should probably be in the $23-$26 range for a truer intrinsic value but it is still a 22% premium to what the stock closed at yesterday.

Congratulations to DTEJD1997 on the find and hopefully the company can push for a little bit higher purchase price if they decide to sell.  For now I am off to keep researching another company I found but if you have any ideas you would like to share please feel free to post them in the Readers Investment Idea page above.


My Plan for Deliberate Practice, fixing a problem, and free books

I first mentioned a problem I have been having about how to budget my time in this post at the beginning of August.

I have been doing a lot of thinking and reading lately and I wanted to share my thoughts here to see if anyone has any input.

After my post on Aceto, which is now an article on Seeking Alpha for those who want to follow the discussion in the comments section, I went straight into evaluating another company.  It has been my first time in truly trying to evaluate a bank, and about half way through its annual report, I quickly realized that I did not know enough about banks or the banking industry to fully evaluate its prospects properly.

I finished up reading its most recent annual and quarterly reports, did a P/B valuation where I found the company to be fairly priced, and was going to do a full valuation and analysis write up like I have been doing. However, my evaluation up to this point is pretty poor, and I realized I need to learn more about banks and the banking industry before I do the write up.

I have been seeing a lot of sites lately talking about deliberate practice and how to constantly get better, and I have been trying to figure out how best to personally accomplish my goals, and here is what I have come up with so far.

My Plan For Deliberate Practice and How to Fix My Time Budgeting Problem

Here are my ideas so far.

  1. I look at multiple companies as potential investment ideas on a daily basis, but I am fully committing myself to completely evaluating at least one new company every two weeks.  By fully evaluating I mean researching the company and its competitors, valuing the companies, evaluating its investment potential at this time, and writing an article about the company.  I think this will help me become a better investor on several levels: Thinking about and bettering my investment process, becoming better at putting my ideas into writing, better and more thorough investment write ups, and this will enable me to learn more about new industries and companies. Originally I wanted to fully evaluate a new company every week but that left little time for learning new things, which gets me to my second idea.
  2. I have known for a while now that I have a lot to learn still but after my foray into the banking industry, I realized I needed to set up some more time where I would specifically be learning, instead of trying to write an article or research another company.  The remainder of the two week period after I have finished up my article(s), I will spend learning: New techniques, new industries, reading books, finding better ways to think, etc.
  3. While I am researching and learning, I will again be posting more links that I think we all could learn from.
  4. I would also really encourage you the readers to post some ideas on The Readers Investment Ideas and Analysis Page.  If you are not comfortable doing an entire write up, I would be fine with your stating which company you have researched and giving a few points on why they are a buy or sell at this time in your opinion.  Again, I do not care if you are a beginner or have advanced knowledge, all ideas are welcome.  Also the free book giveaway is still in tact so the first person to put an idea on the page will receive a free book from my collection, and I will also continue to give free books away to other investment ideas that are put on the page as well. That page is also for any questions anyone might have.  I want us to all learn from each other, and since I am relatively new to investing I hope some of the more experienced viewers give some of their advice.
  5. I am giving you my email here as well if you would like to contact me for any reason.  I would be extremely excited to meet new people and discuss ideas or address any questions you might have in the privacy of email if you are not comfortable posting them on the site.  JMRiv1986@gmail.com

So far these are my ideas and I would like to hear your feedback on them.  I will be adding to, and tweaking the list periodically when I come across something that I think will help this process.  I will stick to the time frame as best as I possibly can, but will allow for some flexibility if some kind of issue, good or bad arises.

I am excited to see what kind of feedback I get as lately I have felt that my investment process has been lacking something that I cannot quite put my finger on.  I do feel that I have been getting better with every article I write and I am hopeful that I will find whatever it is that I think I am missing though my version of deliberate practice.

In the meantime I cannot wait to hear from you and to discuss your ideas and thoughts.