Friday, April 29, 2011

JG Boswell Revisited: Beware of the Message Boards

I've owned and covered mysterious under-the-radar cotton farming giant JG Boswell for several years now. Time was that no one knew about, or discussed this highly illiquid pink sheet company. There was good reason for that, too. Although publicly traded, Boswell behaves more like a private company, and keeps information close to the vest. You'll never see an earnings release, company guidance or any other communications associated with many public companies. The fact is that Boswell is not required to file with the SEC because it has fewer than 300 registered shareholders. Even annual financial data is somewhat difficult to find.

Owning such companies is risky. This is a risk that I'm willing to take, because I believe that the company is worth significantly more than it's current $780 million market cap. But I am taking a lot on faith; not the least of which is the belief that the company will ultimately convert valuable assets, such as water rights, into cash. But there are no guarantees this will happen.

Lately, the message boards have been hopping with activity related to BWEL. For years, there was nothing. Now, there are some fairly wild claims being made about the company and it's ultimate value; claims about the value of the land, the water rights, and other assets that I'm not certain the company even posesses.

Don't get me wrong, I am long this company and believe there is value there. But the true value of the land, and even the size and scope of the water rights is unknown. I've seen claims of $100 earnings this year due to higher cotton prices (BWEL earned $31 per share last year), that the dividend will be raised, that a special dividend will be paid, that shares are worth $10,000 or more. Don't get me wrong, there are few that would be happier if BWEL was truly worth $10,000 per share, but I'm certain that much of this is being perpetuated by one or more individuals, and I'm not sure where they are getting their "facts".

The bottom line is to be careful what you read, and what you believe.

*The author has a position in JG Boswell(BWEL). This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.

Tuesday, April 05, 2011

Net/Nets Becoming Rarer than a Blue Moon

Just when you think that the ranks of net/nets can't get any smaller, they do just that. This site was originally dedicated to the identification and research of companies trading below net current asset value, and at the time of launch in 2003, was the only site, at least that we were aware of, that covered net/nets.

Since then, interest has grown, and there are several websites that now cover net/nets. All of this coverage has brought the concept more into the mainstream. Ten years ago, net/net was a foreign term, even to some value investors. That's not so much the case any longer.

We believe that all of the additional coverage along with rising markets, have acted in tandem to reduce the universe of net/nets.

At ths writing, we can only identify 2 net/nets with market caps above $100 million, ADPT Corp (ADPT) and perennial net/net Audiovoxx (VOXX).

It's not much better between $50 million and $100 million. There, we find Myrexis (MYRX), Gencor Industries (GENC), Parlux Fragrances (PARL), Heely's (HLYS), Integrated Electrical Services (IESC), Trans World Entertainment (TWMC), and Planar Systems (PLNR).

We are starting to sound like a broken record, but that's the fewest number of net/nets we ever seen above $50 million in market cap. This will change. When? We don't know.

*The author has no position in the companies mentioned. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.