Natuzzi (NTZ) VIC Write-Up

There’s a very interesting Value Investors Club Article on Natuzzi dating back from 2002. While the company looks like utter crap right now losing money and facing tough times, the balance sheet is still very healthy and they do trade below net tangible assets. The furniture markets are very cyclical and are relatively tied to the housing markets. With a weak housing market in Italy, Natuzzi’s home turf, and as Natuzzi’s CEO says an even “softer US housing market”, the company isn’t doing that terrible. Perhaps that’s the problem. What if they don’t do that terrible for ten years — you have a company making 1 to 2% on their equity when profitable and will go on and off being profitable to non. Going back to the 2002 article the company had previously returned around 20% on their equity. Natuzzi is also a name brand and a household name to mom’s all over the world. You have good management facing tough times therefore you risk having dead money. As I see it and as Mohnish Pabrai would say in his book The Dhando Investor “Heads You Win, Tails You Don’t Lose Much”.

The article to the Value Investor’s Club write-up can be found here. Article Link