The 12% surge in the Dow over the last three trading sessions was certainly welcome but has hardly alleviated the level of anxiety felt by most investors as it could easily turn out to be a bear market rally. It is interesting to see from the adjacent table by Paul Kedrosky that out of the 13 biggest two day advances in the Dow Jones Industrial Average that have occurred going back to the stock market crash of 1929, 11 of them took place during the great depression and 5 of these occurred before the Dow hit its bottom in July 1932.

In this uncertain environment it is easy to find companies not only selling at low single digit P/E ratios (with earnings in jeopardy, investors are looking at low P/E ratios with a wary eye), but often below tangible book value. A quick stock screen I ran brought up 2,181 companies that are trading below book value. However there are only a handful of companies that are trading below book value, have little or no debt and are actually trading below the cash they hold on their balance sheet. One such company is our portfolio holding Towerstream (TWER), a provider of commercial wireless internet service, which we featured in the July 2008 edition of our investment newsletter.

The stock has lost nearly half its value since then but interestingly enough the story has hardly changed and if anything has gotten better. The stock with a market cap of $23.5 million not only sells for below book value of $35 million, it is selling at a discount to the $25.4 million in cash it holds on its balance sheet after removing $2.6 million in debt.

Towerstream reported third quarter 2008 results earlier this month and almost every single metric improved year-over-year with the exception of average revenue per user (ARPU) for new customers, which decreased from $748 in Q3 2007 to $733 last quarter. Gross margins increased from 63% to 64%, ARPU per customer increased from $694 to $827 and churn rate dropped from 1.26% to 1.22%. Towerstream has consistently maintained low churn rates and from what I have heard, customers who have initially purchased an internet line from them as a backup or load balancing solution have often made it their primary internet connection.