My Ship Comes In

With all my moaning over Amazon.com (I shorted it), more than a few of you have become concerned for my solvency. Actually, I place such relatively small bets that no one of them, however ill-conceived, is likely to sink me. (Conversely, no one of them will make me rich, either.)

Still, I was not having a lot of fun watching my shorts climb to the sky. And just when things seemed bleakest, with Amazon at $145 a share, my ship — a ship nearly four years out to sea — finally came in.

The company is called DEP (symbol: DEPCC), and it makes brightly colored hair gook. When first I heard of it, DEP had fallen from $15 a share to $6, the result of a disastrous acquisition it had been too eager to make. (With eagerness comes sloppiness — they had not scrutinized it adequately.) But management had been at this game for decades, had most of its own family fortune tied up in the stock, and with time, I figured, might work their way back out of the mess. (They might also collect $40 million from a lawsuit they had filed against the seller of the disastrous acquisition — but as it turned out, they did not.)

So I bought 500 shares at $5¼.

And then a bit more at $4½ and a good chunk at $3 — well, for one thing, the company was about to file for bankruptcy protection, which tends to depress a stock — and a lot more at 2-and-change and a boatload last year at 1-3/8. (By then, it had emerged from bankruptcy.) And still people bought brightly-colored hair gook.

At 1-3/8, the entire company, divided into about 7 million shares, was being valued at barely $10 million, yet it had sales of around $120 million. Imagine if it could one day struggle back to the $1-a-share in earnings it had had before that disastrous acquisition! It would take a while, because it had $50 million or so in debt, much of it taken on to make the acquisition. But I was in no rush.

A few weeks ago, it was announced DEP would be bought by a large German company at $5.25 a share. The stock now trades at just a few pennies under $5.25; the German company hopes to have it all wrapped up in a few weeks.

I raise all this partly to brag, gloat, and just generally dance a jig on the dining room table — finally! But also to suggest that there remains a place for the boring school of backwoods stock picking. I recognize that hair gook pales in significance beside high-tech innovation. The rapidly evolving future of the human species will have little to do with hair care products. But high-tech stocks hardly lack for enthusiasm; relatively few languish unconsidered or on the bargain block. When was the last time you read a research report on a boring $100 million hair gook company?

I raise all this also because I was fascinated to read, in the last few months, some of the small-investor dialog concerning DEP on Yahoo. Tomorrow I will offer you a sample of those messages and show you what I mean. Thursday I will suggest another totally obscure, ridiculous (and highly speculative) stock that could conceivably follow the same script as DEP (but that, given my luck, doubtless will not).