Coffee Holding JVA Less Than Half of NTAV
Wholesale coffee company JVA is trading at a deep discount to net tangible assets
I’ve been looking at deep value stocks since around 2006. The investing strategy was popularized by famous investor Benjamin Graham.
A deep value stock is a company that is trading for less than net current asset or net tangible asset value. They can also be called quick liquidation value stocks or as Graham would call them cigar butts. They could be expected to give one last puff so to speak. In the 1930s and 40s it was easier to find good or decent stocks this cheap. So, his criteria for a buy was if it was less than 2/3 of net current asset value.
In modern times they are much more infrequent, so I pay attention to good ones even slightly below net tangible or net current assets. Most investors hold a big basket of these to limit risk as usually these are small or micro-cap stocks.
The track records of portfolios of these type of stocks is good at asset management firms that ran this strategy like Tweedy Browne in decades past. The American Association of Individual Investors or AAII has run a model portfolio of these type of deep values with specific criteria for many years that has outperformed the major stock market indices.
I want to mention Coffee Holding Co. ticker (JVA) today. It has been in and out of deep value land for many years. I first noticed it years back below net tangible assets and that later served as a floor for the stock. The company results have been inconsistent and the stock has struggled for many recent years. They have had many profitable quarters in the past and grown sales though. But, there is risk the past repeats or this proposed merger with Delta doesn’t go well or doesn’t go through. I’m just looking at JVA through a quantitative lense.
The company has net tangible asset value of $19.4 million and a market cap of $8.4 million with the stock currently at $1.47. So, it is trading for less than half of net tangible asset value. I wish most of working capital was in cash of course but the bulk is in inventory.
The most recent quarterly report came out recently and they grew revenue 6.5% year over year and EPS was positive at $.06 per share vs a slight loss of $.09 last quarter. Shareholder equity increased slightly. What little long-term debt they have at $3k was decreased to $2k. Cash decreased by about $300k which isn’t great. But at $2.4 million cash is exactly where it was at the end of July 2023.
What prompted me to do this post is the recent quarter results and the momentum the stock price has been getting. Anytime a company with a potentially good business model shows top and bottom line growth and trades at such a deep discount to assets I feel compelled to point it out. These kinds of things are somewhat of an anomaly in strong bull markets like we are in now.
The analysis I did of the chart is interesting too as it has technically bottomed and is rising over levels. It just broke over another level hurdle around $1.40. This pattern has been reliable after the 2022 correction as a lot of stocks regained footing.
For disclosure I hold a small position in the Coffee Holding (JVA) under $500 USD and may buy more or sell in the future.
I came across a savy investor Dimitri who runs Pantheon Insights which specializes in generating actionable research in geopolitics, markets, and economies to give business leaders a competitive edge for navigating the political economy of the new global paradigm. Check out his Substack Pantheon Insights