Anybody who traded back in 1998 might remember this name as a poster child for the excess of the dot com era. It literally went from $3 to $48 in two days after it announced it would sell its products on the internet. That’s right, two days! I actually had a friend short it on the first day after it went from $3 to $12. His broker closed the position at a huge loss. However, that was then and this is now. The stock looks extremely undervalued and should be much higher.
The stock I am talking about is called Books-A-Million Inc. with its memorable ticker symbol “BAMM.” According to Yahoo! Finance, BAMM operates as a book retailer in the southeastern United States. The company operates superstores and traditional bookstores that offer a selection of hardcover and paperback books, magazines, and newspapers. It also offers other merchandise, including gifts, cards, collectibles, magazines, music, and DVDs, as well as coffee, tea, and other edible products.
Third Fiddle
The company has become an afterthought to Amazon.com and Barnes and Noble, but the value here cannot be ignored. The stock trades at only 0.87x book value, which means if the company sold all of its assets and paid back its liabilities, you would have about 14% more than the company is valued at today. BAMM is profitable and only trades at 7x trailing estimates. I can’t find any analyst estimates, but that could work in favor of the speculator here as there is big potential for pricing inefficiencies of the stock. I also love the fact that it pays a hefty 3.2% dividend yield, an uncommon trait for a speculative pick.
It recently reported third-quarter earnings which were not terribly impressive, but the fact that they are rolling out new toy, gift, and electronics departments certainly caught my attention. These new product introductions could be the catalyst to propel the shares higher. The company is also generating positive operating cash flow and free cash flow.
As always with these speculative picks, tread with caution. I don’t like the fact that the stock only trades 23,000 shares per day. This makes it almost impossible to daytrade, so if you are so inclined, buy some with risk capital only and let it sit for a year or so. It is definitely undervalued, but others have to recognize that for it to go up and that could take some time. The good news is that it has very little debt and you will get paid to wait. I think this stock is worth between $9-$10 right now.
Speculation Station: This Stock is Ridiculously Cheap is an article from: 
