Wednesday, August 09, 2006


Finlay's Fortuitous Fate?

Up 0.5 percent today thanks largely to a continued surge in ENPT. Although I still think ENPT has a lot more room to run, I decided to play it safe and sold half my shares at $2.92.

I also started a new position in FNLY. Finlay is an interesting company in many respects. The company is profitable and the stock is trading at about 50 percent of tangible book (and book value will increase further when the company realizes a $20 million benefit from the sale of property and inventory next quarter). The stock also trades at a very low ratio of price to sales and price to gross profits.

But what really got me interested is the large inside buying from a private equity group. Could this be a precursor to a buyout? Perhaps. Given that the private equity group has already bought millions of dollars worth of stock on the open market, I doubt we'll see the sort of games one often see with microcaps, where a potential buyer shorts the stock into oblivion and then offers a "generous" premium to the closing price (which, incidentally, is what I suspect happened to MARSA).

Obviously, not all is rosy at Finlay. The company has lots of debt (always a bad sign) and I have serious concerns about the long-term feasibility of their business model. Still, I think the risk-reward picture here is compelling enough that I want to participate. I'm in for 1500 shares.

Congrats on getting a good price on ENPT. Always nice to be up strongly on a down day. If you have the time, could you give your short and longer term views on the general market? Thanks.
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