Sunday, January 29, 2012

Iran, President Obama, and Spy Toys.

The title of this post pretty much sums it up... Iran is sending a toy model of our country's recently crashed spy drone to President Obama. In doing so, they are trying to emasculate the president by sending him a toy that is pink. There is definitely a difference of culture being displayed here; what seems to the Iranians to be a huge slap in the face to the President, has actually become quite funny...



You just can't make this stuff up.

Full Disclosure: I agree with Ron Paul in regards to Iran (before you dismiss it, take a look at the video, and give it an objective viewing).

Thursday, January 26, 2012

Sometimes, It's Best To Take A Pass (1.5): Signature Eyewear

As I have previously discussed, Signature Eyewear is a company that has a lot of potential and seems cheap, but has horrendous communication with shareholders... I have continued to follow the company, but was just updated to the present situation there by a shareholder (thanks RP!).

Now, the company trades on the pink sheets, rather than the OTCBB. Interestingly, the only thing that we have heard from the company since this summer, came in late September. They said the following in a late filing notice for their 10Q:

The Company anticipates reporting a net loss of undetermined amount for the quarter ended July 31, 2011, as compared to net income of $115,000 in the comparable period of 2010.


Generally, when companies make NT 10Q filings, it is because they will be a just few days late in making a filing. This has happened in the past with SEYE, but, generally, they got the filing out within a week or so. Now, it is approaching 4 months. In that amount of time, they would need to make ANOTHER quarterly filing! Without giving shareholders the information that they need to deduce the value of the company, how can one comfortably allocate capital in the direction of the company? Is management trying to suppress the stock price in an effort to take the company private? There are a lot of questions to be asked here.

Stuff like this gives me very little incentive to own the stock. It seems to me that if shareholders would step up to the plate and exercise their rights, that the owners of the company (and likely, the stock price) would be a lot better off. Interestingly enough, the company always touts how many consecutive quarters it has been profitable. With the streak snapped, that may have bruised some egos. That certainly seemed to be the case when they lost the Bebe license agreement. However, this is no excuse for not letting the owners of the business know the operating performance of their company.

Disclosure/Disclaimer: I have no financial position or interest in any regard, to any of the entities mentioned. This is not advice of any kind. Always do a ton of your own research before contemplating doing anything that I say, do, write, or so much as think about.

Wednesday, January 25, 2012

Sometimes, It's Best To Take A Pass #3: The Problem With FCCC Inc.

Often times, when looking at nano-cap companies, I come across some real shitty companies that trade at what strike me to be absurdly high prices. FCCC Inc, is almost certainly one of those.

FCCC Inc is a shell company, that is a nano-cap of nano caps. Here is it's most recent 10K.

When reading though, you come across a very few positive things... Mainly, a little bit of cash, no debt, and a pretty fair amount of net operating losses; there are over a million dollars worth of them.

You also come across a ton of negatives: The executive makes way too much money for what he does. Roughly $24K a year for doing to nothing (from what I can tell). This is part of an agreement that was struck in 2003. Have there really been no opportunities for the company in nearly a decade? Legal fees almost constantly make up $12K. Additionally, last year, the directors made $300 per meeting which totaled $1,800 dollars. Furthermore, the company is burning through ~$50K a year in book value with no sign of slowing down... At this rate, shareholders will be left with nothing in just a few years.


It seems that being public is a large expense for the company as well... Audit fees are $7.5K per annual report and another $2,000 per 10Q. This confuses me a little bit, as the company is presently wasting this and other monies by being public... that is, unless they actually do believe that they are going to do something with the company. Regardless, it seems that a whole lot of these little leaks are going to sink the ship.


If this isn't enough, the company more or less says that it won't be doing anything to start up business again:
It is anticipated that opportunities may come to FCCC’s attention from various sources, including its management, its stockholders, professional advisors, securities broker-dealers, venture capitalists, members of the financial community, and others who may present unsolicited proposals. At this time, FCCC has no plans, understandings, agreements, or commitments with any individual or entity to act as a finder in regard to any business opportunities for it. While it is not currently anticipated that the Company will engage unaffiliated professional firms specializing in business acquisitions, reorganizations or other such transactions, such firms may be retained if management deems it in the best interest of the Company.

So, by my reading, they are hoping that someone just brings them a golden goose and sits it in their lap... Even Warren Buffett engages companies to bring him ideas- and everybody knows that he is looking to buy!


The CEO does own ~16% of the stock, so, it isn't like it wouldn't be in his best interest to try to do something with the company. At this point, it almost seems as if management and the board are counting on bleeding the company dry, then doing some sort of reverse merger, which due to the change in control, would destroy the NOLs that (I would assume current buyers of the stock think) give the company a good chunk of it's value. Using a whole lot of debt seems to be the only way to do much in the acquisition realm and with the debt markets as they are, I would hope that these guys are well versed in issuing seller's paper. The could issue stock, but, there again, you lose the NOLs and the CEO gets diluted out. Who knows...

All of this said, I was lucky to leave the tab in my browser containing their 10K open long enough that I had totally forgotten the market cap of the company... As such, when I finally got the chance to go to my favorite bagel shop and read some of their filings, I thought to myself "Well, if I somehow had control of the company to ensure that they would buy something (at this point, almost anything would be better than what they are presently doing), it might be worth, ohhhhhhh, call it a quarter of a million bucks. Since I don't, and the executives seem Hell bent on sucking the company dry and letting the NOLs get destroyed, I wouldn't pay (much more than) a cent for it. If I thought that they were actually trying to buy something (and would do so in the next few quarters), it might be worth as much as net cash... In which scenario, I might be willing to buy in if it were trading for, say, $50K. But, I would have to be able to 13D them at that price and then become way more than a beneficial owner just so it would make up enough of my portfolio to even matter to me. That would then constitute a change of control in the view of the IRS, and would destroy the NOLs, which would make my then very large stake in the company be worth a lot less!"

So, I sat back in my chair, took a sip of my tea and a bite of my bagel. Just for the sake of my own curiosity, I decided to look at the market cap of the company. An astounding $593K! For this much doubt, it seemed freakishly expensive.

Disclosure/Disclaimer: I have no financial position or interest in any regard, to any of the entities mentioned. This is not advice of any kind. Always do a ton of your own research before contemplating doing anything that I say, do, write, or so much as think about.

Tuesday, January 24, 2012

Firecrackers, Shareholder Activism, and Gadflys.

Here is a story on smaller shareholders becoming activists that I found interesting. I found it through Frank Voisin's blog.

Frank is very skeptical about smaller shareholders doing much to change things at the companies that he owns. Honestly, I am with him. It doesn't seem that people are willing to do much to rock the boat; after all, they are the people that help to make up the collective "Mr. Market" who tends to get frazzled by the slightest of changes. As an example, I thought that Sardar Biglari had a great case against Cracker Barrel, but, he didn't get anywhere close to getting 1 seat, which made up less than 1/10th of the board! And this is a guy that has what can only be described as a fantastic track record for making things happen.

I am skeptical that much will happen in the future, and I think that Ben Graham sums up my thoughts pretty well (he almost always seems to do my thinking for me!):

"the only way to inspire the average American shareholder to take any independently intelligent action would be by exploding a firecracker under him."
Disclosure/Disclaimer: I have no financial position or interest in any regard, to any of the entities mentioned. This is not advice of any kind. Always do a ton of your own research before contemplating doing anything that I say, do, write, or so much as think about.

Monday, January 23, 2012

Rand Paul, Detention, & The TSA.

It's probably going to get me on some sort of watch/black list, but, the TSA really screwed up in their treatment of Rand Paul. They couldn't have picked a worse guy to do this to either... as he is one of the most articulate guys in the Senate and doesn't mind getting a lot of attention, I hope that Rand does a good job making changes to the messed up system that we have.

I wish that he would have been on his way to Washington for a vote... That would have brought up some interesting constitutional issues, as Senators can't be arrested on the way to a vote... granted, this was a form of detention and a touch different, but, still would have been interesting.

Oh, wait, the TSA doesn't give a shit about the constitution, as they treat us like criminals every time that we fly. Honestly, I am kind of upset that they don't trust the people of my state to elect officials that are not terrorists, who don't pose any sort of threat to national security...

God bless you, Rand Paul. We in Kentucky are privileged to have you representing us.


 

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EDIT: Here is a link to a opinion piece that Rand Paul wrote. It's pretty good and will likely get some traction.

Sunday, January 15, 2012

Ackman and Candian Pacific.

If you have come across my site, then it should probably go without saying that you also read "My Investing Notebook." While it's literally not "my" investing notebook, it is a great site that is certainly worth reading. An email correspondance between Ackman and the Chairman of Canadian Pacific was recently posted...

As is always the case with Ackman, the message is well put and just rambunctious enough, without going so far as to be over the top. I think that the response from Cleghorn is on the verge of being comical... I can't fathom being the chairman of a board, and referring to the other members as "my board." They are not his board, they are the shareholder's board. Furthermore, I think that the phrase "advances the best interest of the company" is suspect. After all, it is the interests of shareholders that need to be furthered. While this may be me reading to much into phrasing, with Canadian Pacific's track record (which truly is pathetic), I would imagine that it is quite telling of the governance of the company.

While I have no investment in regard to this, as a by-stander (with no plans of investing in Candian Pacific), I hope that Ackman gets what he wants.

...


To: John Cleghorn
From: Bill Ackman
Subject: War and Peace
7:22 a.m. Wed., Jan. 4, 2012


John:

I woke up early this morning thinking about my favourite Canadian railroad and it is causing me to become more interested in military history. We have had what historians will likely call a border skirmish. Not clear who fired the first shot, but a few people have been hurt, some egos have been bruised and the arms dealers, the media, are calling for and attempting to ... a fight. They of course sell more papers if a fight occurs. Their motives are clear. When a border skirmish takes place some times it leads to full-out war and other times things die down, borders are redrawn and peace can remain in both lands. The choices from here as I see them are:

1. Representatives from our side and your side sit down and work things out promptly, working out in my view a quick addition to the board of true reps from our side. Hunter's hiring as CEO.

2. We will be forced to launch a proxy contest at upcoming annual meeting where we will seek to replace a greater number of existing directors with extremely highly regarded business execs who share our belief that management and board changes are necessary at CP.

In the proxy contest as a first step we will take the largest public hall available in Toronto and we will make a presentation to the shareholders and the public that will be simulcast on the Internet about management board failures over the last 10 years at CP. We will examine management's and the board's track record and history at CP and in previous career experiences. Among other issues, we will go into detail on the real reasons behind Ed Harris’s departure and compare with what the company said publicly at the time.

We will only do this in the most high-minded manner possible. We will not make any ad hominem attacks on anyone. The process is inherently an uncomfortable one for all parties involved. It is also expensive in time and money and a distraction for management particularly at a time when their focus is needed on operations, most importantly when it is snowing or flooding.

The proxy process will not go well for the board and Fred. The track record is very poor, shareholders are very disgruntled. We are offering an alternative with a legendary reputation. Analysts at Morgan Stanley, your adviser, are now writing a big super-bull case if Hunter is hired. Attached is a copy of the report to this e-mail. We will win the election by a landslide vote – don't rely on my opinion on this, just ask your proxy advisers. Based on yesterday and my not receiving a return call from you, the probability of war occurring has gone up meaningfully. War is not my preference. It has been extremely rare for us – we have only had two proxy contexts in 25 or so active engagements with public companies in the last eight years. War is also not inevitable. I think the failures so far have largely been ones of communication. ...

My impression of you when we met personally was quite favourable – you seemed like a solid good man. I would like to resolve this amicably in the best interests of shareholders. ...

Let’s avoid having a border skirmish turn into a nuclear winter – life is too short. Please call me when you can.

From: John Cleghorn
To: Bill Ackman


Bill thank you for your e-mail and for your phone message. Let me reiterate that we would like to reach an agreement which advances the best interests of the company. As you will appreciate I will be discussing your e-mail with my board.

Source: The Globe And Mail




Disclosure/Disclaimer: I financial position or interest in any regard, to any of the entities mentioned. This is not advice of any kind. Always do a ton of your own research before contemplating doing anything that I say, do, write, or so much as think about.

Thursday, January 12, 2012

Salesforce.com & A Very Young Mr. Market

I love this video... (h/t to Sheldon)






Disclosure/Disclaimer: I own no financial instruments in regard to any of the companies mentioned. Always do a ton of your own research before contemplating anything that I say, do, write, or so much as think about. If you buy any of the things that I link to, I will get a small commission, but, it doesn't raise the price you pay by a single cent.

Wednesday, January 11, 2012

Steak 'n Shake & David Letterman...

Steak 'n Shake has a new store in NYC, right next to the Ed Sullivan Theater, which is also home to The Late Show with David Letterman.

To fully appreciate the magnitude of this, one might want to read this book Selling Steakburgers: The Growth of a Corporate Culture. In it, you learn a lot about the history of Steak 'n Shake and it's die hard fans... Through other sources, such as the article I posted, you will learn that Indianapolis native, David Letterman also loves the chain (and does sketches on the show in reference to Indiana based events and things). You think that this might give them a hint of free advertising by Letterman mentioning them on the show? After all, Rupert has probably been buoyed by Letterman for sometime.

How do you think that this will bode for Steak 'n Shake, given their previously stated plans to have over 1,000 franchised units in the coming years? When you couple that with the fact that they sell a burger AND fries for a paltry $4 bucks, even in NYC, I am guessing that it will go quite well.

Somehow, I doubt that happened totally by chance when Sardar Biglari and company were looking at opening the store.

If you want employment as a traffic counter for the unit, you might want to start with this:

http://nyctmc.org/google_popup.php?cid=421



Disclosure/Disclaimer: I own no financial instruments in regard to any of the companies mentioned. Always do a ton of your own research before contemplating anything that I say, do, write, or so much as think about. If you buy any of the things that I link to, I will get a small commission, but, it doesn't raise the price you pay by a single cent.

Tuesday, January 10, 2012

Padlocks, Lowes, & How People Make Their Lives Too Hard.

Here is a post that I wrote a month or so ago, but, didn't post. Enjoy. It's along the same lines at this post, but with a much more unfortunate ending...

As a small time landlord, I have a lot of interesting interactions with people that often leave me baffled. Today was no exception; when offering a piece of advice that would not only have made a fellow landlord's life easier (and actually, would make the vast majority of home owner's lives easier) I was totally ignored.

It happened when I was standing in the return line at my local Lowes store. I overheard a conversation at the return desk. A man was talking to the cashier about how a Master Lock brand padlock had rusted up on one of the sheds at a rent house he owned. As a result, he wanted to exchange it for one that was of better quality.

Hearing this, I thought "Hey, this is something that I actually know a lot about... maybe I can help this guy out..."

I decided to open up a conversation with him as he was waiting for the cashier to finish the return:

Me: So, it sounds like you are having a time with that lock at your rent house...

Him: Yeah, look at this; the thing rusted up in just a few weeks on me. I need to get a new one.

Me: Yeah man, I can relate, I've got some rent houses too... What I have done with all of my padlocks, is gotten really nice almost totally weatherproof padlocks that are made to be keyed with a kwikset style key, rather than the ones that Master has which you lose all the time. I have had real good luck with them; I think that they would really help you out.

Him (looking really excited): Oh, really? What are they?

Me: They are made by Abus and like I said, the best part about them, is that they use a kwikset style key (here are the ones for Schlage, if you prefer a slightly nicer setup), so, I can key them to the same key that I give to the tenants, or, I can key them to the master key that I use for all of my properties... (pulling out my surprisingly small key ring for effect) Here is the master key that opens every lock that I have; and I can key them so that the tenants each have a different key too... Like I said, it's pretty conveinient to not have to keep track of a bunch of keys.

Him: Are they weather-proof?

Me: Yeah, pretty much. They are plated in a heavy duty chrome... I have had really good luck with them so far; if you really like the Master brand, they make one that is coated in a heavy plastic. But, you have to go to this place down the road for them. They are great; much better than anything they sell here; I have gone through quite a few from here, due to the same problem you had, actually.

Him: Well, I was just going to go to the hardware section here and ask them what they recommend...

Me: Ah. Ok. Well, have a good one, man.

He then turned around and walked to his fate... To be doled out by a person who is paid to sell him on what Lowes sells- not what is best for him.

So, here is what I find interesting. I basically told this guy how to not only get a lock that would preform better than what he was going to buy (I challenge ANYBODY to cut through one of the Abus locks with bolt cutters- I don't see how you could do much to them short of using a bad ass sawz-all, and even then, it would take a decent bit of work, I would bet that any thieves would be better off to cut through the latch itself), but, I also gave him a way to consolidate his rent house keys and save him a ton of money (not to mention, time) so that he would never have to pay to re-key his houses ever again. Furthermore, I was going to gain absolutely nothing (other than the utility I gain) from helping him... If anything, I was helping out a competitor of mine.

And what did I get in return for this free and help filled advice? He more or less brushed what I said off, gave me a terrible look at the end of the exchange, and went about his way, making his life much more difficult than it needs to be. For example, if he would have been inquisitive enough to ask about my master key system, he would have found out that rather than pay a locksmith $15 or $20 bucks a lock to get them rekeyed, you can buy a rekeying set for under $40 bucks and rekey dozens of locks to any key that you want in less time than it takes to drive the locks to your local hardware store. Plus, you get the add on of being able to have a master key for everything! (I went with the cheaper set, though, I wish I would have paid the extra money for the one that is color coded... trust me, color coding is a really nice thing when dealing with parts that differ in size by less than a millimeter)

Some might say that re-keying is hard to figure out... False. You can learn how to take the locks apart on YouTube. Hell, I learned how to rekey the locks while I was recovering from a pretty major surgery; it isn't like there isn't a PDF on the internet to show you how or anything... Literally, I was so worn out and drugged up on Roxicet during my recovery that I passed out sitting at my uncle's kitchen table while learning the trade. If I can do so just a few days after having a surgery that would warrant that sort of reaction, then anybody can.

Getting back on track...

I think that this lesson can be applied to investing. Often times, people don't want to do any leg work of their own, and as a result, lead a much more challenging and less rewarding life. Along these lines, I was, and to some extent, am still surprised that nobody had ever published the information that I did in regard to Syms' real estate (oh yeah, I forgot to mention that the post and majority of the research were done while recovering from the same surgery that I mentioned earlier). This type of thought is also evident from a post I made a while back on people watching a series of Warren Buffett videos.

Maybe his lack of faith in my suggestion that I was relatively wet and covered in mud from doing some work to correct the problem of a water logged crawl space. Maybe it was the fact that I hadn't shaved in a few weeks due to "Movember". Maybe it was the dirty and old clothing that I wear when I work on houses, which I know makes me look like a bum. Maybe it was the fact that I am a pretty young guy...

Who knows.

....

Oh yeah, if you hate keeping track of keys for your padlocks and just want the lock on your shed, garage, crawlspace entrance, barn, bike lock, or whatever (I even use them to chain my canoe to trees when I'm making my way around the Kentucky River) to be keyed to the same thing that your house is, use the links I posted and go buy some! Yeah, I get a little bit of the sale price, but it doesn't raise the price you pay by a cent. Plus, the least you can do is use my link, as I did turn you on to something that will likely make your life a bit easier.
Disclosure/Disclaimer: I own no financial instruments in regard to any of the companies mentioned. As things may go sour between you and somebody that has a key to your house, they might use your key to steal your lawnmower or something, so, I can't say that this is advice... But then again, you probably shouldn't have picked such a shitty person to give your house key to. Always do a ton of your own research before contemplating anything that I say, do, write, or so much as think about. If you buy any of the things that I link to, I will get a small commission, but, it doesn't raise the price you pay by a single cent.

Sunday, January 8, 2012

Ideas...

Due to a belief in not over diversifying and not finding many new stocks, I presently have a lack of new stock ideas that I feel worthy of an in depth post. Feel free to send some my way... The odder the better. It doesn't even have to be a long idea, a neutral or short position would be interesting as well.

If you have an investment thesis, send it my way, and if you want, I might put it up as a guest post! If you want to remain anonymous, that is just fine with me- Let me know.


Wednesday, January 4, 2012

Gatewood Galbraith Is Finally Set Free.

Gatewood Galbraith, my favorite political figure ever, who was (unfortunately, never elected to office in my Commonwealth) passed on last night. The world has lost a gem, not to mention a great person.

Get his book here... Any proceeds that I get from your purchase, will be donated to a cause in which he supported. It is stuffed full of great Kentucky antidotes, knowledge (both worldly and other, and is one of my favorite reads ever.

The last free man in America has been set free... Gatewood, sir, you will be missed.

Tuesday, January 3, 2012

Ron Paul and Iowa.

Because the media doesn't really care about Ron Paul... Here is a good speech. He is so cheery, that it could almost make you sick... I am glad to hear that they guy is moving on to other states and primaries. After all, he presents a point of view that the country needs to seriously consider. Even if he doesn't get elected, he gets good ideas, that should be thought about, out there. In Iowa, he did more than 2x as well as he did 4 years ago; which is saying something!

By the way, if you look in the background,  of the video, you will see Rand Paul. If there was a call option (say, on intrade) where I could buy the chance that he will run for President in the near future (say, a decade) and stand a chance of winning, I would certainly be interested.. It seems like a near inevitability to me...