We reported on December 12 that renowned value investor Seth Klarman bought a 16.92% of stake in biotech Targacept (TRGT, Financial) after its stock price dropped 60% following a drug trial fail. While the stock was probably cheap then, it is now even cheaper as the stock price dropped another 35% lately. Targacept now has a market cap of $167 million. If we take a look at its balance sheet, as of Sept. 30, 2011, the company has more than $210 million in cash and short-term investments, and almost no debt. With about 33.38 million shares outstanding, the cash per share is about $6.2. This means that Targacept, at its current stock price of $5, is traded 20% below its cash value.
Seth Klarman bought the stock as a cigar butt investment, meaning poor companies at very low prices. With net cash higher than its share price now, the stock is now a Ben Graham net-net. Buying a basket of net-net worked very well for Ben Graham. You can see the current list of Ben Graham net-nets with our Net-Net screener.
Our writer Matt Blecker has done a detailed analysis on Targacept. He concluded that the company will have $8 per share of net cash by the year end, which means that the stock is even cheaper than it looks now.
Will you buy the net-net stock Targacept now at a 30% lower price than Seth Klarman has paid?
For more net-nets, check out our Ben Graham Net-Net screener.
Seth Klarman bought the stock as a cigar butt investment, meaning poor companies at very low prices. With net cash higher than its share price now, the stock is now a Ben Graham net-net. Buying a basket of net-net worked very well for Ben Graham. You can see the current list of Ben Graham net-nets with our Net-Net screener.
Our writer Matt Blecker has done a detailed analysis on Targacept. He concluded that the company will have $8 per share of net cash by the year end, which means that the stock is even cheaper than it looks now.
Will you buy the net-net stock Targacept now at a 30% lower price than Seth Klarman has paid?
For more net-nets, check out our Ben Graham Net-Net screener.
