Joel Greenblatt, in one of my favorite books on investing, said the following: “The reason why major corporate restructurings may be a fruitful place to seek out investment opportunities is that oftentimes the division being sold or liquidated has actually served to hide the value inherent in the company’s other businesses.”
It was with this basic scenario in mind that I began studying Barnes and Noble a few months ago.
The Case For BKS
I think Barnes and Noble is significantly undervalued and likely worth somewhere between $20 and $30 per share. Although there are industry headwinds in the traditional book business, Barnes and Noble has a strong brand name, significant insider ownership, strategic partners in Liberty and Microsoft, a clean balance sheet, and best of all—the core business trades at just 5 times the average pretax earnings from the past 15 years and 4 times the trailing year’s pretax earnings.
— Guru Focus