I haven’t written much about Mark Skousen in recent months — at least partly because he hasn’t been using teaser emails very aggressively, or at least not ads that tease specific picks of his that he thinks will soar.

So I’m delighted to see that he’s returned to tease us again — this time, he’s pushing an ad through as an “Urgent Buy Alert” … here’s how the pitch begins:

“Buy This Dirt-Cheap, Red-Hot Stock TODAY.

“With 48% of its Outstanding Shares Held by Insiders — They MUST See BIG Profits Coming… GET IN NOW!”

The pick is for his Skousen High-Income Alert, and if you subscribe I’m sure he’d be delighted to share it with you … he says he picked it back in November and used some options play that made 71% in 13 days for his subscribers, and that he’s looking to do “even better” this time.

Of course, this is one of the most expensive income letters out there — $995 for a year at the “on sale” price. So if you just want a stock idea, well, your friendly neighborhood Stock Gumshoe is on the case … just read on …

So who is he teasing? Let’s look at the clues:

“Recently, a well-known billionaire began heavily buying this stock to the tune of $90 million. He has purchased so much of this stock that he now owns more than 10% of the company!

“But he’s not the only one. The founder and CEO himself owns more than 16 million shares in his own company. AND… roughly 48% of the outstanding shares of this blockbuster company are owned by various insiders!”

OK, so that’s the insider ownership. How about the valuation and that all-important dividend?

“This stock is dirt-cheap, selling at roughly book value, only 20% of sales, and currently yields 5.5%. In short… this is the ultimate contrarian pick for right now.”

All very good — some more clues to get a bit more specific?

“These huge insider transactions are taking place as the company continues to make big waves in their industry. Already a leader in their field, they’ve just developed a new product that they can’t keep on their shelves because of its explosive demand….

“This company holds many first place titles among their field including being one of the nation’s largest chains with more than 800 stores across the nation and owning one of the most-visited Web sites.

“The stock was recently sold off due to management’s announcement that holiday sales didn’t meet expectations, but don’t expect for that to continue for too much longer.”

OK, that ain’t half bad for a nice meal of teaser clues … throw it all into the mighty, mighty Thinkolator and we can only conclude that this stock is …

Barnes and Noble (BKS)

There are 775 retail stores under the Barnes and Noble umbrella, including their eponymous superstores but also the Bookstar and B. Dalton brands, and they also own and/or manage another 600+ college bookstores, so that’s a match. The shares do have a dividend yield of about 5.4% at the current $18+ price.

And insiders, including the founder of the modern company (not the founders of the original NYC bookstore, who really were named Barnes and Noble), do control the firm with massive ownership — Leonard Riggio owns just under 16 million shares and is by far the largest shareholder, though there are several other officers and boardmembers who each own more than 100,000 shares, including Stephen Riggio. Leonard stepped down as CEO a number of years ago and somewhat controversially passed the CEO seat down to his younger brother, Stephen, but the elder Riggio remains a pretty active Chairman.

It’s worth noting that although there is this massive insider and “beneficial owner” ownership, the insiders have mostly not been buyers on the open market — most of their purchases were classified as “Non open market”, which in many cases means the “purchases” were effectively stock grants from the company, and at least some of the other insider ownership was built through stock options grants. Not that there’s anything wrong with that, but it doesn’t convey the same kind of insider optimism and enthusiasm as would be indicated by the officers and directors going out and buying the stock at the market price with their own money. The last big open-market purchases by insiders were by Leonard Riggio, who bought a couple million shares in Jan-Mar 2008 at much higher prices, in the high $20s and low $30s — over the last few months the real insiders have been doing a lot more selling than buying, though that often doesn’t mean anything specific about the stock or their sentiment (at least, it doesn’t have the predictive power that insider buying does).

The biggest buying pressure lately has been from a large owner, but not an insider — the buyer is Ron Burkle, through his Yucaipa Cos. investment firm, and he now owns almost 6.5 million shares, about 10% of the company and second only to Leonard Riggio. You can see the Barron’s article about his acquisition here if you’re interested — they aren’t agitating much at the moment, but there seems to be the potential that they’ll be pressuring the firm to make some changes. And Burkle seems somewhat concerned about the cozy nature of the acquisition of the formerly stand-alone college bookstore chain that was sold by Leonard Riggio and his wife back to the the company a few months ago.

Short interest is also very high (30% of the float, according to shortsqueeze.com), though the short interest has been coming down lately — perhaps because the stock is off the pre-holiday highs. BKS got to $24 or so around Black Friday, on enthusiasm for the Nook and for general recovery of the consumer, I imagine, before faltering on disappointing holiday sales results.

But to be honest, I hadn’t looked at Barnes and Noble in a long time and I was surprised how healthy the shares looked — they don’t have much debt, and the market cap is down to about $1 billion now, which does mean that they’re getting down close to book value (trading at 1.16X book value right now, according to Yahoo Finance), and the shares trade at a fairly ordinary PE in the mid-teens. Of course, it’s not growing much and had a rough time in the recession, and analysts guess that they’ll grow just 8% a year (revenue peaked in 2004, since which point they’ve remained in the same general range and Amazon’s revenues have tripled) … but I guess I had been half-listening to the disaster that is Borders Group and assuming that Barnes and Noble would be in similarly tough shape — which isn’t true.

Barnes and Noble is far less profitable than Amazon — their operating margin is 3%, Amazon’s is 4.5% — but it is profitable, and they do have a hot product in the Nook e-reader, even if there seems to be some significant risk that the Amazon Kindle has already run away with that market and/or will be fighting it out with Apple’s new whatever-they-call-it, and that the Nook and the other nascent e-book devices might end up as afterthoughts (or Zunes).

And there is that dividend — one of the nice aspects of having a controlling family ownership is that they often keep pressure on to pay a solid dividend, so for now investors are getting $1 a year back in dividends. Coverage of the dividend is a bit iffy at the moment, however — we don’t know what the January quarter earnings will look like, but it accounts for essentially all of the profits in any given year and analysts think that when the fiscal year tallies in April BKS will have earned about 75 cents for this year, and will earn about $1.15 in the year to come. Not unreasonable, perhaps, for this share price, but it makes it tough to justify a $1 annual dividend.

So is this a good one to buy? It’s certainly contrarian — analysts largely tell you to hold or sell this one, and the short interest is huge, so any short term performance would probably come from a surprisingly good earnings release next month and the ensuing short squeeze. Over the long term, they’re in a very competitive business but have shown their ability to manage pretty well and stay competitive. I’d probably be more willing to take a chance on this contrarian pick over what I think is the woefully overvalued Amazon, but, to be honest, I have no personal need to invest in this particular business at all.

So what do you think? Want to follow Mark Skousen into what I expect must be his pick of Barnes and Noble? Like the dividend or the Nook and think it’s really “Red Hot,” or fear the Amazon? Let us know what you think with a comment below.

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