Free Stock Pick: Cheapest Dividend Stock of 2020

Last month, I shared the name of the cheapest stock I came across in the last 10 years. When I discovered Adams Energy (AE) its market cap was only $132 million and its annual operating cash flow was $21 million. It was extremely cheap because it had no debt and $130 million in cash. Basically you could have bought this entire company for $2 million net of cash. Adams Energy shares jumped after I published my analysis and today its market cap is $165 million. It is no longer the cheapest dividend stock. Today, I am going to share the name of the cheapest dividend stock of 2020. Again, this is a free stock pick. If you like the performance of our stock picks and would like to receive them before they are shared with our free email subscribers, please subscribe. Right now we have a [promotion going on](. You can subscribe to our monthly and quarterly newsletters for only $449/year, a discount of $100. Your subscription comes with a 6-month, no-risk money-back guarantee when you use the link above to subscribe.  If, after spending a little time absorbing our past record, our current recommendations and our new recommendations over the next 6 months, you aren’t convinced Insider Monkey’s newsletters will change forever how you invest your money, you can tell us within the next 6 months and we’ll refund your money, no questions asked. We love investing in stocks with hidden assets. Last month, we brought Adams Energy (AE) to your attention and the stock gained 25% in one month. In this report we are going to talk about another deeply discounted stock with large hidden assets. Most investors don’t know Allan Mecham or [Arlington Value Capital](. He used to have $80 million in assets under management back in 2012, but after [this Marketwatch story]( which dubbed him as “The 400% Man” he started to raise some capital. Today, Arlington Value has around $1.5 billion under management. We noticed a micro-cap stock that Allan Mecham had in his portfolio in 2012 when he was managing only $80 million. He never sold out of this position over the last 8 years. It is now a $61K position in a concentrated portfolio of 15 positions totaling $1.5 billion. This explains how Mecham delivered 400% gains early in his career, but it is intriguing to see such a tiny position, 0.004% of Arlington Value’s AUM, in a large hedge fund’s portfolio. If this stock returns 1000% tomorrow, this will increase Arlington Value’s total return by only 0.04% which rounds to zero. This company has $13.1 million in cash and cash equivalents, $24.4 million in publicly traded stocks, owns real estate, manufacturing plants and equipment worth $30.2 million. Also its net working capital, the net value of its raw materials, inventory, and accounts receivables, is $53.9 million. Best of all, it has no debt and its market cap is ONLY $45 million. If you have $45 million, you can buy this entire company and immediately get back $37.5 million of your money back ($13.1 million cash + $24.4 million in stock holdings). Basically you are paying $7.5 million for a business that costs $30 million in plant, property, and equipment and another $54 million in net working capital to create. Effectively you are buying this $80+ million business for only $7.5 million today. There is one problem though. You can’t really buy 100% of this business even if you wanted to. Its Chairman and majority shareholder Richard Pui Hon Lau is aware of how cheap the stock is and in November paid $2.60 per share and bought more than 100K shares. In recent months and years he increased his stake in the company from 40% to above 50% through these types of insider purchases. We expect this stock to generate $2.4 million in operating income in current fiscal year, and $4.1 million in passive financial income for a total of $6.5 million. The stock we are talking about is Deswell Industries (DSWL). Since DSWL is generating a lot of cash and has more than 80% of its market value in cash and other liquid assets, it currently pays a dividend yield of 5.6%. Today, Fed’s manipulation of interest rates forced income investors towards expensive dividend stocks because they have no other alternative. The average PE ratio of a utility stock is 22 and none of these stocks have 80% of their market caps in cash. DSWL is trading at less than 7 times expected earnings. I think the market is completely ignoring this company’s $37.5 million in cash and liquid assets when valuing this stock. If we add this amount to Deswell’s current market cap, we arrive at a per share price of $5.00, a potential upside of 80%. It also seems like the company is intentionally hiding the fact that it has more than $24 million in equity holdings as it buried this fact deep in its annual SEC filings. That’s how Chairman Richard Pui Hon Lau is able to acquire the half of the company on the cheap. I believe Deswell Industries is a deeply undervalued dividend stock and I don’t mind getting paid 5.6% in annual dividends while waiting for the stock price to go up. That’s why I bought this stock in my retirement accounts. You can find my detailed write-up about this stock in the latest issue of our monthly newsletter. Right now we have a [promotion going on](. You can subscribe to our monthly and quarterly newsletters for only $449/year, a discount of $100. Your subscription comes with a 6-month, no-risk money-back guarantee.  If, after spending a little time absorbing our past record, our current recommendations and our new recommendations over the next 6 months, you aren’t convinced Insider Monkey’s newsletters will change forever how you invest your money, you can tell us within the next 6 months and we’ll refund your money, no questions asked. This is a limited time offer and expires soon. [Sign up NOW]( and receive our best stock ideas before everyone else. Our stock picks returned 80% in 34 months and outperformed the S&P 500 Index by 37 percentage points.  Best Wishes Inan Dogan, PhD Research Director Insider Monkey   Manage your InsiderMonkey account You received this email because you signed for an account on Insider Monkey. This is not a solicitation for the purchase or sale of securities. Readers are encouraged to conduct their own research and due diligence, and/or obtain professional advice, prior to making any investment. We periodically share free investment reports in our subscribers area. To make sure you received the most recent reports please check My Subscriptions Page in your account here: [( If you would rather not receive free reports, email alerts, or special discounts from Insider Monkey, you can let us know by visiting [( or [Unsubscribe here](. 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