How about LKI

**vik589** Wed Jan 18, 2006 4:51 pm

How about LKI
Hi Blast
How about LAZARE KAPLAN INTL INC (LKI) seems like at the moment it is trading below its net net working capital therefore it qualifies as a very low valuation stock. Yahoo did not have much info on the financials but www.zack.com has its price/book=0.67. Any thoughts. Thanks

**blast_investor** Wed Jan 18, 2006 9:35 pm

Hi vik589

I do not like this stock. LKI debt is going up every year and its cash flow is negative. I would avoid it.

**teenvestor2** Sat Jan 21, 2006 8:52 pm

Re: How about LKI
I have a quick write-up here, http://rightpriceinvesting.com/resources/Lazare-Kaplan+write-up.pdf

**blast_investor** Sat Jan 21, 2006 11:43 pm

Yes, LKI qualifies Ben Graham's criteria Net Net, which means that its stock price trades significantly below Net Current Asset Value.

But the Ben Graham NCAV criteria only works in group, not in individual stock pick level. In other word, given
a large amount Net Net stocks, say a 100 such stock picks, the group as whole will out-perform market. That was the method Ben used and it worked. But in invidual stock pick level, many would die and go down to zero for various reasons, some stocks would double triple and quadrouple. The gain from winners would compensate loss more than enough.

Now let's get back to this stock LKI, in individual stock pick level, this stock is suspicious and could haunt investors down the road.
Its balance sheet is fishy. For example, for one year ending May of 05, its earning statement said that LKI earned 5 million income, but if we carefully look at this cash flow, it actually had negative 22 million of loss and it borrowed 33 million more debt in the same year.

LKI earning is suspicous. This company relies on borrowing to survive. Current asset portion of its balance sheet has lots of inventory or Net Receivalbles, very little cash there. Inventory may not be worth that much, and Receivables can be subject to cheating.

Maybe I am too negative on this stocks. I do not know the management of this company that much. Maybe this stock is fine and the company is clean. But my past decades of stock market experience tells me that this stock is dangerous. Investing into this could be like playing with fire. I see potential land mines there in this stock Lazare Kaplan (LKI).