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Cobra is the number one brand in the domestic radar detection market. Other products include CB radio, power inverters, marine products, and mobile navigation. They were unable to compete successfully with the likes of Garmin (GRMN) in mobile navigation and wrote off a lot of their investment in the area at the end of 2007. They will continue to compete in certain niche areas. It closed Friday at 3.12, a substantial discount to its tangible book value of 5.69. At a price to sales ratio of .13, and projecting a return to profitability in 2008, the stock is attractive as a value play, given the brand recognition factor. Most years it trades above tangible book at some point, so it could double from its present price.
Longterm Debt/Equity stands at .3, with a price to cash flow of 3.5. Noting the quick ratio of 2.2 and current ratio of 3.8, I see a small and sturdy company with brand name recognition on their primary product.
I originally started to follow it because I was interested in mobile navigation and figured if they were able to penetrate the market growth would be spectacular. It never got low enough for me to buy it, and then they had to admit defeat and take the write-off. However, the radar detection business is not going to go away. They sell mostly to retailers, and their sales are seasonal, heaviest in the fourth quarter. This company is small - 132 employees.
It traded 4,800 shares on Friday. I placed a market order for 4,000 shares, which under the Marketocracy system filled only 160 shares at 3.10. I am planning a small position here, which could take a while to fill. In my personal portfolio, I also plan to build a position, using limit orders. I like the Marketocracy system on a case like this because otherwise you could go crazy trying to buy much of it without driving the price up.
This is part of a strategy change, going back to what worked for me in the past. Over the years, I have had some success on smaller companies where nobody pays too much attention, particularly when I could get margin of security based on tangible book value. In this case, after abandoning the attempt to get into mobile navigation, the remaining product lines should be profitable and the radar detection is supported by name brand recognition. COBR would make a nice acquisition target at any time, but the payout from owning it would most likely come late this year or early next, if and when it become apparent that the remaining businesses are profitable.
Tom
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