“Free Money #3 — An Easy Triple!” Sosnowski

By Travis Johnson, Stock Gumshoe, August 7, 2008

And, as promised, the steadfast Gumshoe continues his rounds, digging up the 13F favorites of Ann Sosnowski that she believes will generate “free money” for intrepid investors such as yourselves.

This time, we’re talking electronics … a taste for you:

“This stock is a world leader in electronics, including the explosive mobile electronics market. They just secured the exclusive rights to market the Energizer Battery products in the booming Mexican and South American markets. Most people haven’t caught on to this yet, but top Wall Street investment tycoons Irving Kahn and Seth Klarman are buying shares… and you should do the same. The stock is currently trading at $11. And I believe we’ll see it hit $30 in the next year. After that, the sky’s the limit.”

That’s all we get here at Gumshoe headquarters — thankfully, with the massive Thinkolator on the case, it’s enough.

This stock is …

Audiovox (VOXX)

See, sometimes I can resist my tendency to bloviate and just come right out with it!

Don’t get used to it, however. This is a one-time treat.

Have you heard of Audiovox?

Sounds kind of familiar, doesn’t it? Like maybe they made a phone you had, or a pair of headphones? Yep, they make just about every single kind of low-margin mass-produced electronic gadget and accessory you could imagine, including, as of a couple months ago, Energizer batteries South of the border. They also own or make products using the names of a bunch of other brands, including Jensen for car audio, the bygone superstar of home audio and video RCA, and more.

And they are held by those investors — you’ll see Seth Klarman show up as the Baupost Group, which owns about 10% of VOXX, and Irving Kahn is one of the folks behind the moniker Kahn Brothers, an entity that owns a bit less than 9% of VOXX. They’re both value/contrarian investors.

Are they right on this one? Well, they’ve got a lot of cash sunk into their positions, and one assumes that they’ve done a lot more research than I have. I’m not particularly crazy about VOXX, but I will stipulate that it is at least a contrarian pick — the shares have been slowly trending down over the last five years, though they did have a bit of a recovery recently after dipping as low as $8. They’re still not up at Ann’s $11 mark, but they were there back in June (fell to $8 last month thanks to some weak earnings, then recovered to the current $9+).

And the future? Beats me — they’re just barely profitable at this point, and are predicted to have a forward PE of about 16 … but before you put too much stock in that, note that this forward PE depends on the estimate of just one analyst, and he (or she) has been wildly wrong for the past several quarters.

In all honesty, I can’t get myself all that excited about a company that has mid-market brands in extremely competitive industries, even if there’s the potential that it might be undervalued. Recent profit margins have all had a decimal point in front of them, which means you’re just scraping a little bit of copper (or zinc, I suppose) off the penny as it passes through your hands … and I don’t know enough about the company to see anything better than that in the future. If you do, or if there’s some hidden value that you’re aware of deep in the bowels of VOXX filings, something to get Baupost and the Kahns excited, feel free to take off those X-Ray specs and share it with the rest of us.


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