Hey, remember how I ragged on people for updating everyone on their goals, even though nobody cares? And yet it’s apparently somehow different when you start a vanity project like trying to beat the market even though nobody really cares about that? Well, let’s just say how I TOTALLY GET IT, YOU GUYS.
When we lasted visited the Uproar Fund, I was adding 800 more shares of MRRM (original write-up here), to bring my total investment in the company to about 5.5% of the Fund. A bit has happened in the meantime, and it’s not exactly positive.
Reader Andrew emailed me to tell me about the news, and then I never emailed him back, like a big jerk. Does this count as an email back? Anyway, he had some news about the company’s attempts to find someone to buy them out:
The third-party detailed assessment concluded that at this time, the cash flow and health of the business cannot support instituting a regular dividend, a share buy-back program, or a going private transaction.
This is one of the risks of investing in a company like MRRM. Management is sitting on more than a third of the company’s market cap in stocks and bonds. There’s no reason a publicly traded company should be doing that. Either use that money to pay down debt, invest it in new businesses, or give it to shareholders. Paying somebody to manage that money is just silly. And since the Chairman controls 60% of the company, there’s nothing shareholders can do. You’re more screwed than a guy nicknaming his girl bubbles.
I’m still positive on the company, even after this setback. I’m just not as positive as I was. I’m happy to hold my position, and I think that management does turn the thing around. This is the type of investment you tuck away and wait for a catalyst.
Original purchase price: $3.1988
Current price: $3.59
To review, I paid $6.295 per share for Reitmans, and it makes up 12.6% of the fund. How’s it been doing?
Actually, quite good. The stock was chugging along, hitting highs of nearly $7 before it came out with recent earnings. They were, in a word, craptacular. Is that only one word? Let’s go with it.
Shares immediately fell close to $1 each, before recovering slightly. These days, the share price is $6.02, which represents a small decline.
I still really like Reitmans, and I’d buy more if it wasn’t already 12.6% of the Fund. Management is rock solid, and they own a bunch of the company. Famed value investor Prem Watsa owns a bunch of shares too. Like MRRM, this is the kind of company you buy now, and tuck away for a year before checking it again. Short term events — like crappy earnings, which they blamed on the weather — will just drive you nuts. It’s really easy to punt a company like this because of stuff that won’t matter in five years.
The ladies tell me that the company’s stores are doing a better job filling the racks with clothes that are a little more hip, so I’m excited about that. Underperforming stores continue to get closed down, but there won’t be many of those left. Management knows what to do, it’s just that these types of turnarounds take time.
Purchase price: $6.295
Current price $6.02
Dividends received: $0.05
Total gain/loss: -3.57%
There are several companies I’ve put on the watch list, which I’ll be profiling at a rate of about one a week for the foreseeable future. There are some interesting names, including a company looking to join the crude by rail party, a housing supplier, a newspaper, and a maker of canned goods. I’m about to vomit in excitement.