The Value Investing Congress is always fun, and I’ll be trying to learn plenty that I can share with you in the weeks ahead (and, hopefully, become a better investor myself in the process), but this year I decided to spend a bit more time in New York and take in the pre-Congress seminar as well.
This is where Glenn Tongue and Whitney Tilson, who together have run T2 Funds but now manage their portfolios separately, talk up some of the ideas they have invested in (or not) and their rationale, with the goal of inspiring some discussion about valuation and analysis. They presented their thoughts on more than a dozen companies, including both short ideas (stocks they think will go down) and long ideas, and — though I have two phone book-sized piles of notes and handouts to go through — there were a few that stood out for me.
The first is the small teen retailer Delia’s — or as they prefer, dELiA*s, ticker DLIA — this is a stock that has caught my attention in the past as a value idea because it has often traded at or near their cash balance, which usually gives me at least some reassurance that the stock can’t go to zero. Or at least, that it can’t go to zero very quickly.
For a while, it looked like Delia’s was trying pretty hard to get to that zero stock price — the shares got down to a dollar last Winter, before “bouncing” back to where they are now near $1.40. What’s to like? Well, you could have easily argued that they were circling the drain six or eight months ago, but they had a stupendous quarter last time out that is giving some folks religion. I still would prefer to see them do well for more than one quarter, but at this price I’m starting to think it’s worth a speculation now.
The short version of the story is that new management came in, brought in some expert sourcers and a new fashion person, and they’re essentially going to mimic Forever 21 for a younger set — with very fast changes to inventory, a new set on the floor of the store each month, and focus on quickly following trends instead of trying to set them. That’s all well and good, but what has Tongue and Tilson especially interested ...