Thursday, March 29, 2012

Update.

All,

The lack of posts (and more specifically) the lack of returned emails have been due to me working 15+ hour days for majority of the past month on a single real estate deal that I was on contract to buy, but just exercised my right to void the contract on. Over the coming weeks, I will try to return all the emails that have been sent to me, post some new ideas that I am tossing around, and will even try to make a multi part post on the 125-126 unit apartment complex that I just walked away from. It has been a hell of a month and it should make for an interesting story that I think you value investors might find of interest.

Regards,

Jeff

Monday, March 19, 2012

ITEX Repurchasing Shares?

This is one of the most interesting press releases that I have read in a while... Basically, ITEX is offering to repurchase up to 1 million shares of it's own common stock at prices up to $4.20 per share. It's an amount that equals roughly 25% of the outstanding shares of the company...

From here on, this post is almost completely my own opinion...

First, in the last proxy contest, the company bought back shares, but, retained the voting rights on them so as to aid in the defeat of the Polonitza Group (it certainly seems that way, anyway).

Now, it seems ITEX's board stands ready to strip the company of the majority of it's cash in an effort to buy out shareholders that are reluctant owners... Who knows? It might be a way of trying to publicly greenmail Polonitza? However, I doubt that he will sell his shares, simply because of his purchase history and lawsuit against the company. To further complicate things in this matter, the company stated the following in an SEC filing:


The following directors and executive officers of ITEX have indicated their non-binding intention to tender up to the following number of shares, which represent 25% of their current holdings: Eric Best, a director, 6,250 shares; John Wade, a director and ITEX’s Treasurer and Secretary, 14,250 shares; and Steven White, ITEX’s Chairman of the Board of Directors and Chief Executive Officer, 144,421 shares, provided however, that the persons described above have indicated that in order to grant priority to other stockholders they will not tender any of their shares in the tender offer if: (a) 1,000,000 shares or more are properly tendered by other stockholders, or (b) as a result of their tender there would be proration of the shares tendered by all stockholders in the tender offer. 


The whole situation strikes me as a little bit odd. Don't get me wrong, on the face of things, repurchasing shares seems to be a fair move from the company, as it's shares seem undervalued, but it could potentially sway future annual meetings. Does it seem that I am reading too much into this? Well, this is likely a big shift in ITEX's thinking... While the company does have a history of repurchasing shares (getting ~14% of shares outstanding in a nearly 8 year period) this is a huge amount of shares for any company to try to buy back. Plus, check out what was said at one of the annual meetings by the company's general counsel, as remembered by an astute value investor named Sanjeev Parsad.

I remember the general counsel for ITEX telling me that there are several studies that show share buybacks don't actually benefit shareholders signficantly in the long-run, and then I had to explain that was because most corporations paid any price for their shares, rather than only buying them back when they were well under intrinsic value.
Furthermore, under the right circumstance, the repurchase could potentially trigger the poison pill that the company put in place and would make it much harder for activists to do their thing... Again, a very odd situation. I'm not going to come out and say that the managers at ITEX are bad guys, but, there certainly does seem to be a whole lot of smoke and mirrors here... It is almost as if they are offering to sell back some of their personal shares to give the illusion that they are sacrificing with shareholders? But, why would they sell their own shares, if they thought that they were undervalued? If they aren't undervalued, then why should the company buy them back? It wouldn't be a stretch to think that they are doing this, just so they can get a ton of shares from other shareholders in some sort of bait and switch tactic.

This continues to be one of the most fascinating situations that I can think of... In one corner, we have management that seems hell bent on holding onto a cash cow of a company, in the other, are a host of activists that seem to have a pretty solid case that they are running on.

Disclosure/Disclaimer: I own no shares of ITEX. Though, I am getting tempted to buy some shares... Also, I am generally sympathetic to the cause of most activist investors and in this case, the Polonitza Group... This is not advice of any kind and is solely my own opinion. Always do a ton of your own research before contemplating doing anything that I say, do, write, or so much as think about.

Wednesday, March 14, 2012

The Internet Re-Wiring Our Brains.

From here:

Noted science-fiction writer Isaac Asimov predicted that one day, we'd "have computer outlets in every home, each of them hooked up to enormous libraries where anyone can ask any question and be given answers, be given reference materials, be something you're interested in knowing, from an early age, however silly it might seem to someone else," and with this appliance, be able to truly enjoy learning instead of being forced to learn mundane facts and figures. His insight has proven to be amazingly accurate, as we now live in a world with the Internet, where nearly the entire wealth of human knowledge can live at our fingertips or even in our pockets. Such an amazing feat, of course, doesn't happen without impacting our lives, and scientists have begun to note that the Internet has not only served to fulfill our brains' curiosities, but also rewired them. So what exactly is the Internet doing to our brains? Read on to find out.


Disclosure/Disclaimer: I use the internet a lot... 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, March 13, 2012

Berkowitz Outperforms (Finally!)

Here, we read that Bruce Berkowitz is now sitting on one of the best funds, after being one of the worst funds. It has been a long time coming and I am genuinely happy for the guy. While I have never invested along side of him (in anything, to my knowledge) I have respect for the guy, simply because he is so damned contrary. Anyone that can go in to some of the situations that he has invested in is either insane or incredibly smart and ballsy (just for being able to go against everyone's opinion!). I think it's the later for Berkowitz.

To the people that redeemed on him at the wrong time: congrats, you now look stupid and are probably mad at someone other than yourself for what was solely your mistake.


Disclosure/Disclaimer: None that I know of... 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.

A Smart Kid...

Here is a story from NPR about a 14 year old that bought a distressed house in Florida. Apparently, she is a wheeler dealer, who will trade things and do random services to raise money. As a result, she was able to buy a house on the cheap in Florida.

As a landlord, I can assure you, that even if one would use 100% financing on a $24K property, have to do a ton of work on it, and then rent it out for $700/month, that person would do freakishly well with that piece of property (and that is without knowing a single thing about the neighborhood or value of the house). She split it and paid cash for it with her mother, who is going to gradually be bought out... With the kind of cash flow that this thing will provide her, it won't take her too long either.

As a side note, I totally relate to her being a landlord that is younger than the tenants that she rents to; in my experience, it will occasionally make for some very odd interactions. I wish Willow nothing but the best in her landlording and business ventures. If the NPR story is indicative of her as a person, she is a lot smarter than I am and I look forward to someday reading about her on the home page of the Wall Street Journal.


Disclosure/Disclaimer: I am long various types of real estate, but do have a few houses for sale... 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.



International Baler Continues To Impress!

WOW... Not only did International Baler post really good numbers in their most recent 10Q, but they also actually paid money to send out a press release which, I can't remember them doing as long as I have been a shareholder. It seems that they are pretty confident in their financial footing, as they have historically been very frugal with their funds.

Items of note:

*The lawsuit for the wrongful death of an employee was dismissed, though, it could still come back through an amended complaint. Even so, it looks like the company's insurance will take care of this.

* The backlog of sales has significantly swelled... From just under $3.3 million to $7.8 million- and in just 3 months at that! WOW!

*PP&E went up a little bit, indicating that the company is spending on the facility. I won't be a bit surprised if they take on a large renovation of the facility in the not so distant future. After hearing the sort of efficiencies that they would get by doing so, I think that it would be prudent to do so.

Anyway, having been long the company since the depths of the Great Recession, I am still a happy long of this great little company!


Disclosure/Disclaimer: I am long shares of IBAL... 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.


Sunday, March 4, 2012

Scut-Scut-Scuttlebutt...

This is what happens when you drive over 7 hours to central Virginia (and then back an hour or so to Roanoke) to do some scuttlebutt for a few days on one of your favorite nano-caps... An inch thick stack of deeds and real estate fliers on top of your kitchen table... That, plus a whole lot of pictures of the real estate that is (or was) owned by the company, as well as some that are owned by the CEO. I will be honest- I am impressed with the situation out there.




More to come...

Disclosure/Disclaimer: I am long shares of Sitestar... 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.