Danier Leather Inc. seeking strategic alternatives

Apr 17th, 2015 – 3 Comments

If you are bound and determined to follow through on your investment thesis that DL offers the opportunity to generate a multiple bagger then pick away at the offers to build your position.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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DL LOGO

Hey Lou,

What do you think of Danier Leather? Great brand that is fairly well known but is going through some tough times. Think it could be a multi bagger here over the next 18-24months. What do you think?

Thanks,

Nate

 

Hey Nate,

 

Thanks for the assignment. This will be my first examination of Danier Leather Inc. (DL TSX). The company is vertically integrated and sells exclusively through its 90 stores. Full disclosure  Jeffrey Wortsman, President and CEO of the company, was a classmate of mine at the University of Western Ontario in the late 1970′s. During one summer break he studied for the Canadian Securities Course which I found very impressive. In addition I am a satisfied owner of a Danier Leather coat.

The first thing that my research surfaced is that in a February 06, 2015 news release the company announced that it was exploring strategic alternatives. Management is looking at all possible outcomes which include the usual options such as raising equity or debt, a sale or merger, or other options that might meet the organization’s objectives.

Generally when I see the exploring strategic alternatives flag out on the track it is a call for further and better particulars. A reading of the Q2 2015 results tells the tale of declining revenue due to shifts in the market. Retailing has never been an easy game and its gotten a lot tougher since 2008.

An inspection of the charts will inform my opinion on the stock.

 

DL

The three-year chart provides a number of features worth noting. The first is that decline that started in March of 2013 when the shares were trading close to $14.00. The next was the breach of support along the 50 day moving average in April followed by the breach of support along the 200- day moving average in May. Finally a death cross formed in June of 2013 alerting the astute investor that selling pressure could be expected to increase.

By November of 2013 DL broke below support at $11.00 sending the stock to a 52-week low of $2.97 by February of 2015. What is also evident from the chart is that trading is thin. The average daily volume over the last  thirty days is only 1,692 shares. In conjunction with a market capitalization of $13.91 million you would be well served to place your interest in this company into the speculative portion of your portfolio.

 

 

 

 

 

 

DL2

The six-month chart provides a close-up of the thin trading in the shares and the aggressive decline that followed the release of Q2 results in early February. If you are bound and determined to follow through on your investment thesis that DL offers the opportunity to generate a multiple bagger then pick away at the offers to build your position.

Next time I will probe the charts for SunOpta Inc. (SOY TSX) for Malcolm.

Make it a profitable day and happy capitalism!

 

Categories: Consumer
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