 |
| Dow | Nasdaq | About Us | Disclaimer |  |
RSS Feed |  |
Follow us on Twitter |
|
Featured Advisors |
Tuesday August 03, 2010
Insiders read up on Barnes & Noble (BKS)
by Mark Skousen, editor High-Income Alert  Every once in awhile, I like to return to stocks that we’ve traded before, especially if we get a chance to buy them much cheaper than we sold them last time. And that’s definitely the case with Barnes & Noble (BKS), which owns and operates the nation’s largest chain of bookstores, with more than 1,300 stores in 50 states. BKS also owns one of the Web’s most-visited websites, bn.com. Between its stores and website, Barnes & Noble sells more than 300 million books a year. It is also a leading book publisher and the nation’s second-largest coffeehouse. 
The company also is making waves with its new electronic reader, The Nook, although it is getting stiff competition from Amazon’s Kindle and Apple’s iPad. Barnes & Noble sold off a few weeks ago due to management’s announcement that the company will invest heavily in electronic publishing and e-readers and, therefore, earnings this year and next will be lower than previously forecast. The sell-off has created an appealing opportunity. Billionaire Ronald Burkle is a heavy buyer of the stock. He now owns approximately 18% of the company. Founder and CEO Leonard Riggio owns 16 million shares, too. (In fact, 67% of outstanding shares are in the hands of insiders.) Burkle currently is fighting Riggio in court over a poison pill adopted by Barnes & Noble to prevent a takeover. Burkle has made no secret that he wants to buy more shares and intends to wage a proxy contest to elect three new directors. Expect plenty of fireworks at the annual meeting on September 30. It’s also worth noting that more than 40% of the float has been borrowed and sold short. In order to close out their positions, these short-sellers must buy back their shares of Barnes & Noble. That means any favorable development could cause a massive spike in the stock. History shows that when insiders and short-sellers disagree, the insiders are usually right. After all, they have access to all sorts of material, non-public information that is unavailable to the short-sellers. Plus, this stock is dirt cheap, selling at three quarters of book value and only 13% of sales. The yield is an appetizing 7.9%. So buy Barnes & Noble and place a protective stop at $10. If you prefer to play this one more aggressively, try the October $14 calls. Learn more about this financial newsletter at Mark Skousen's High-Income Alert. |
News Flash
|
|