I first wrote about Tandy Brands (TBAC) over a year ago. The company is the definition of both a perenial net-net and a value trap- always cheap on an asset basis, but horrific performance constantly dug into the asset level, crushing the margin of safety and the stock price.
That is, it had historically been a value trap. The company just reported blow out second quarter numbers that caused the stock to skyrocket 80%.
Most of the time, an 80% pop would wipe out any margin of safety you had. But in TBAC’s case, I’m not so sure. Based on the press release, I’m calculating net working capital at just under $3.00 per share, and tangible book is coming in ~$4.50 per share. With the pop taking the stock ~$1.90 per share, there still could be significant upside to the company.
However, there are still risks to the company- Barelkarsan discusses some here. I’m currently staying away, as I think I can find safer net nets (AEY, for example, reports next week and has a great history of increasing value), but the stock is definitely starting to look more and more interesting now that the company appears to be stabilizing.
Disclosure- Long AEY. No current position in TBAC.
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