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Barel Karsan
Barel Karsan

Universal Power Group: Really Cheap Now

August 12, 2011 | About:

Universal Power Group (UPG) is a distributor of batteries and other power-related accessories. While it has been cheap for a while, it just got really cheap as a result of the market turmoil and recent results that the market didn't appear to like.

But this remains a profitable company trading at about a 50% discount to its net current assets. No doubt, there are a few concerns about this business, as outlined in this article from a few weeks ago, to which the company responded here. But its price was 50% higher then. A cheap price can make a lot of negative factors less relevant!

We also had not seen how flexible the company's cost structure was, as we knew revenues to a large customer were about to fall, but we did not know how that would affect the income statement. We found out in the most recent quarter, however, as UPG's sales to ADT fell 86% and yet the company remained profitable.

As discussed here, when other investors are selling out of fear, now is the time to deploy that cash to strike. Buy the falling knives on the cheap, and sell them back to Mr. Market at fair value when he's back and in a hungry mood.

Disclosure: Author has a long position in shares of UPG

About the author:

Barel Karsan
Charlie Tian, Ph.D., is the founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

Rating: 2.4/5 (5 votes)


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