This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

November 13, 2009 - Stein Mart Inc. (SMRT-NASDAQ) operates retail stores, which provide fashion merchandise for men and women in the United States. The company's stores offer apparel, accessories, gifts, linens, and shoes. As of January 31, 2009, it operated a chain of 276 off-price retail stores in 31 states and the District of Columbia. The company was founded in 1908 and is headquartered in Jacksonville, Florida.

The last 2 years, the company reported losses. First a negative 11 cents in 2007 followed by a minus $1.72 (probably why the stock cratered to $1 a share). But this year, analysts see black ink needed to report the earnings. Consensus from 2 analysts for 2009 is 51 cents a share, then 77 cents next year (fiscal year ends in January). The third quarter should show the last negative number at minus 7 cents (earnings will be reported on November 19). For the fourth quarter look for 17 cents a share. Things appear to have turned around.

That's because management cut operating expenses, in stores and at corporate headquarters. Inventories in stores was down 22% at the end of the July period compared to the same time last year. That saves money up front from purchasing the merchandise, then further helps by reducing the amount of goods requiring clearance sales. It also makes for better regular price sales and improved turnover which gives better operating margins.

The company isn't expecting a quick change in consumer attitude or spending habits. It will continue cutting costs, looking to improve margins. However, if the economy begins to rebound, it has the flexibility and the financing available (there's $45 million in cash and no debt) to expand inventories quickly. It's also expanding marketing efforts.

New promotions are in the works, not only to keep its regular customers coming back, but to attract newer, younger shoppers. Beefing up its television budget, new spots will offer incentives to come down and shop. Management is also utilizing social networks such as Facebook and Twitter to reach a younger crowd. It's also a much lower cost way of marketing.

More numbers: Price to sales is .34. Price to book is 2.11. Book Value is $4.82. Operating margins and Return on equity have been negative due to losses. Cash per share is $1.05. There is no debt. Current ratio is 1.97. Beta is at the extreme end: 2.8 so buckle up if you get on this ride. In the last 52 weeks, the stock is up 446%. There are 42.81 million shares outstanding with a float of 25.8 million. Insiders own 39.32%. Institutions have 46.6%. There is no dividend.

Stein Mart should appeal to aggressive investors, especially if they feel the recession is about over. Management is preparing for the worst but has the flexibility to capitalize on any change in consumer sentiment. Check out more of SMRT's story. You should like what you read.

- Company Web site: www.steinmart.com

 Ted Allrich