BKS

From Whitney Tilson:

You might not believe this in light of this morning’s news (Barnes & Noble, Inc. (NYSE:BKS) has roughly doubled, but this is what I wrote over the weekend but hadn’t yet sent:

For only the fourth time in our 13+ year investing history, we’ve gone long something we were previously short.  (Given how well it’s worked out the three previous times with Fairfax, General Growth Properties and Netflix, we should do it more often!)  In the past, there’s been some period of time between our switch, but in this case we went from short to long Barnes & Noble on the same day last week.  Such a rapid shift in opinion is unprecedented for us, but when we encounter new data/analyses that convince us that we’re wrong, we act quickly.

BKS had been a profitable short for us and we were already thinking of covering when two things caught our attention: we saw that Jana, a firm we know well and respect greatly, took a big stake, and read the write-up below on our favorite value stock idea web site, Value Investors Club.  We largely agree with the analysis in the VIC write-up: that the base business is worth almost the entire current stock price, so you get a nearly free call option on the Nook, which is doing much better than we expected.  Plus with more than 2/3 of the stock controlled by insiders and, according to Yahoo Finance, 67.2% of the float is sold short (87% if you include Jana’s new stake), even a hint of good news will likely trigger the mother of all short squeezes.

Also you can find the VIC analysis here.